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