Bank of Canada raises interest rate to 1.25% – the highest since 2009
It’s official – borrowing money in Canada has become a little more difficult.
On January 17, 2018, Bank of Canada announced the third hike since last summer in its key lending rate, raising it from 1% to 1.25% – the highest level since 2009.
The increase, however, is not a surprise. Many analysts and industry experts predict that the era of super-low interest rates is slowly coming to an end.
The national inflation and the uncertainty around the future of NAFTA (North American Free Trade Agreement) were the key-drivers to the decision, according to the Bank of Canada.
“Recent data have been strong, inflation is close to target, and the economy is operating roughly at capacity,” Governor Stephen Poloz said during the announcement. “However, uncertainty surrounding the future of the North American Free Trade Agreement (NAFTA) is clouding the economic outlook.”, he added.
Impacts in housing and consumption
Moving forward, the Bank expects the economy to experience a slower period, with a decrease in household spending and real estate investments.
Mortgage loans with fixed rates will not be affected by the hike until it is time for renewal. As for variable rate mortgages, HELOCs and lines of credit, the impact will be immediate, and they can expect an increase of 0.25% going forward.
On a more positive note, corporate investments and exports are expected to increase in 2018. “Business investment has been increasing at a solid pace, and investment intentions remain positive,” the Bank said.
Let us help you
For more information on how this increase will impact your personal and corporate affairs, contact Jay Dwivedi, VP of Corporate Finance – (905) 814-2462 | firstname.lastname@example.org
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