The Bank of Canada (BOC) has raised interest rates again. As of January 17, 2018, the BOC interest rate is now 1.25% — the highest it has been in nine years.
“Recent data have been strong, inflation is close to target, and the economy is operating roughly at capacity,” the BOC said in a press release.
“However, uncertainty surrounding the future of the North American Free Trade Agreement (NAFTA) is clouding the economic outlook.”
The BOC interest rate impacts all forms of debt, from mortgages, to student loans, to credit card debt. The interest rate was first increased in July of 2017, going from 0.5% to 0.75%. It rose again in September of 2017 to 1%. The January 2018 increase is the third hike in less than six months. The Bank of Canada says more increases are likely in 2018, though the Governing Council will “remain cautious” in determining future hikes.
The next BOC interest rate announcement is scheduled for March 7.https://www.spergel.ca/learning-centre/money-tips/what-is-a-licensed-insolvency-trustee/
Two factors the BOC cited as a reason for increasing interest rates again were the strong economy and job growth. However, while the economy may be doing well, Canadian household debt is still at record highs. Some Canadians were already feeling pressure from the previous increases, as Spergel trustee Gillian Goldblatt told The Globe and Mail in October.
“You can live in a bubble for a while until some event snaps you out of it,” Goldblatt told The Globe. “That’s when we have people come to see us.”
The BOC did acknowledge the high level of Canadian household debt, but indicated that higher interest rates and new Canadian mortgage rules would likely curb some consumer spending.
The latest BOC increase means that those already struggling with debt will have higher interest to pay on those debts. For some, it could be the difference between meeting monthly payments.
At Spergel, we can help you adapt to this BOC interest rate increase, and potential further increases. Our team of experienced financial consultants can help you explore your debt consolidation options and make a plan to move forward.
Want to talk to someone about dealing with debt that has become overwhelming?
Spergel is here to help. Call us toll-free at 310-4321.