In the News – Interest Rate Raise

On September 6th the Bank of Canada increased the ‘over night’ interest rate to 1% (up by 0.25%). This means that the interest rate the Bank of Canada charges other banks for short-term money is now 1%.

What does it mean for Canadians?
– Interest rates will rise as banks pass on their higher costs. Canadian’s are borrowing at an all time high level – this may start to change
– The Lonnie has already increased to it’s highest level in two years (great for consumers, not so good for trade)
– Raising interest rates is a response to our strong economy
– Bond prices may rise as the cost of borrowing increases. This will make holding a diversified portfolio more attractive

What does it mean to millennial?
– Young adults typically have the most debt they will in their life time so all the impacts for Canadian’s will be greater.
– Student loan rates may increase – while a great investment in your future it may start costing you more.
– Raising interest rates is one way to cool the housing market – by making borrowing money more expensive it essentially makes by a house more expensive

Three things to watch for:
– An increase in your variable interest rates – the most likely short term impact is to your variable rate mortgage
– Increases to credit card interest rates – may be fewer promotions, or higher rates. Pay off your credit card debt now!
– Another interest rate rise later in the fall

Did you enjoy this article?
Signup today and receive free updates straight in your inbox. We will never share or sell your email address.