A third of Canadians fear rate hike will hurt
Roughly one third of Canadians think the Bank of Canada’s most recent interest rate hike will hurt their finances, just as nearly three-quarters say their living costs have increased over the past three years, according to a new poll.
The survey, by Forum Research, found that 34 per cent of 1,150 respondents said that the central bank’s most recent 0.25-per-cent rate increase “will have a negative impact on their finances,” with 12 per cent saying the effect will be “extremely negative.”
“A considerable number of Canadians are concerned about what the rate hike will do to their finances and they’re overwhelmingly in the middle categories,” said Forum Research analyst Gary Milakovic.
Some 44 per cent of respondents aged 35-44 polled said the hike will have a somewhat or extremely negative effect on their personal finances.
This anxiety was shared most significantly by those earning $60,000-$80,000, with 39 per cent agreeing, and by those earning $80,000-$100,000, with 41 per cent agreeing, that the effects of the hike would be negative.
“Given record levels of total household debt, it isn’t a surprise that some Canadians would feel that a rate hike could be onerous on their finances,” said David Hogan, chief economist at Richter LLP. “We’ve already seen some of the chartered banks increase their prime rate in anticipation of this rate change by the Bank of Canada. … For those who are financing large purchases such as houses, this makes the cost of that ownership more expensive.”
Currently, the increase in the cost of credit is slight, said Patrick Ercolano, portfolio manager at MD Financial management. Those with a $500,000 mortgage with a 25-year amortization, for example, would see roughly $75 added to their monthly payment. Those with fixed-rate loans would see the rate go up when the loans are renewed.
The good news, he said, is that higher interest rates usually signal a stronger economy.
How damaging that will be depends on “how tight (a family’s) budget is,” MNP insolvency trustee Joe Wilke said.
The Forum poll is accurate to plus or minus three per cent, 19 times out of 20.