Interest Rates are rising: How is it hurting your wallet?

As we know the higher interest rates can affect the cost of borrowing, investment performance and savings rates. To help you understand the effect  of Canada’s rising rates, please read below

As of this writing ( August, 2022) Canada is now moving through a phase of increasing interest rates as the Bank of Canada (BoC) manages higher inflation and other factors in the economy. Since the interest rate rose at the beginning of March 2022 — the first time in four years — the changes have begun to impact Canadian households in a variety of ways. Some of them may surprise you.

See below how the increasing interest rate affects your finances.

Mortgage Rates

Mortgage rates are often the first thing people think about once a rate hike has been announced. For both prospective buyers and existing homeowners, even a slight increase can have a significant impact over time. If you currently have a fixed-rate mortgage, you won’t feel the change right away. You’re still locked into the interest rate you negotiated at the beginning of your mortgage term and that rate won’t change until the term ends and it’s time to renew.

Inflation

Inflation measures how much the price for goods and services is rising, and it can be affected by a number of variables — including interest rates. When interest rates are very low, people tend to borrow and spend more which can disrupt the balance between supply and demand. When interest rates are higher, people tend to save more and spend less. Increasing the interest rate can therefore work to rebalance the economy, although it may also slow business activity for a period of time as both business and personal loans are impacted when rates rise.

Line of credit

As the interest rate increases, the interest on your line of credit might also go up. As the cost of borrowing goes up it might have a ripple effect on your interest on Line of credit. Talk to your bank and see how the increase in interest rate will affect your interest on your line of credit.

Canadians are dealing with a lot right now. In the last two years, we’ve had to manage a worldwide pandemic, inflation and ongoing geopolitical uncertainty. Higher interest rates may feel like an additional burden. If you need help building a plan that addresses your financial concerns, a wealthy professional may be able to help.