Rise in Bank of Canada’s Key Rate Puts Strain on Household Finances

The increase in the Bank of Canada’s key rate to 5% could be a very hard blow for many households, which sometimes struggle to make ends meet due to the general increase in the cost of living.

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Here’s what raising a mortgage might look like for someone looking to renew their mortgage.

A household that would have contracted its mortgage during the pandemic at a rate of 2% could suffer a major shock with an increase to 7%, depending on the financial products that could be offered to it.

Thus, people with a mortgage of $400,000 were paying $1693.80 per month. With a rate of 7%, they will have to pay $2801.66, a difference of $1107.86 monthly, according to the Financial Consumer Agency of Canada.

The many people encountered in the street by TVA Nouvelles found the increase in the key rate difficult to swallow.

• Listen to the interview with Clément Gignac, economist and Senator of Canada on the Alexandre Dubé show via QUB radio :

“I’m not happy, that’s for sure… I’ve just left the bank,” commented a woman I met in Montreal.

“I find it terrible, but I am saved, because I caught it in time, I renewed at 1.89% until 2026”, explains another lady.

This increase in the key rate is primarily aimed at calming inflation in the country.

“We don’t want to repeat the error of the 1970s when we let inflation take hold. We had lost a decade and we had recessions all the time. This time we are serious, we are on the right track. The economy is doing well, there are still 60,000 jobs created last month, 300,000 since January. The rate hikes are complete. Inflation is no longer at 7-8%, it is maintained at 3.4%. Next Tuesday we will have other figures, we are at the end of the rate hikes, ”believes the economist and senator, Clément Gignac.

***See the explanations in the video above.***