When the Bank of Canada raised its overnight rate in mid-July, it signalled a shift in the bank’s policy towards managing the country’s economy. By raising interest rates for the first time in seven years — up one-quarter of a percentage point from 0.50 per cent to 0.75 per cent — the bank demonstrated that it feels the Canadian economy is performing well. But what does that interest rate hike mean for you?
Well for starters, if you have a variable rate mortgage or line of credit, that debt is now going to start costing you a little more. A rise in the overnight rate is going to mean a corresponding rise in variable rate debt, meaning your payments will increase accordingly. On the other hand, the cost of credit card debt isn’t likely to increase, as most credit cards charge a fixed interest rate. That said, it’s still wise to keep credit card debt in check because the interest rates charged on credit cards are substantially higher than other forms of debt.
One bright spot in the Bank of Canada’s interest rate announcement is that the savings rate will also be shifting upwards, meaning you will now be earning a little more on your savings as well.
If you have questions or concerns about what rising interest rates might mean for you, contact your neighbourhood Casera branch. We’ll be happy to work with you to help find your best options.