Bank of Canada Hikes Interest Rates - What that means to you

Finally the time has come, Bank of Canada today announced its overnight interest rates hike from 0.5% to 0.75%.

Bank of Canada became first country after USA to announce the rate increase and it has done so after a big gap of 7 years since 2010.

Although its a good sign to showcase that Canadian economy is growing but also has some impact on credit holders in Canada. I have outlined few major impacts which common people will have after this hike announcement:

1. Mortgages

Most of the Canadians are under mortgage, those who are under a fixed term contract (Closed Mortgage) still have some time till their renewal to relieve but those who are under Variable Rate Mortgage will get impacted instantaneously.

Monthly mortgage payments will be higher for Variable Rate Mortgages.

2. Home Equity Line of Credit

People who use their equity built up in their home for borrowing money and use the same; will have to pay higher interest rates which means higher monthly payment for repayment.

3. Credit Cards

Well Credit Cards already have pretty high interest rates and are most unlikely to be impacted due to this rate hike.

So, good news here !

4. Lines of Credit

Canadians using Lines of Credit for borrowing will be paying higher interest rates.

5. General Loans

Other general loans like Personal Loan, RRSP Loan etc. will get impacted and bear higher interest rates.

6. Automobiles Loan

Already auto loans bear higher interest rates due to they being unsecured loans. After this rate change the interest rates will be more high.

7. Students Loan

Students are not required to repay their loans back until after 6 months of their graduation. People who have to start repaying their loans in near future will bear higher interest rates.

8. Saving Bank Account

Good news here is that Canadian savers who prefer to put their money in Savings Account will get higher interest rates hence more savings. Also TFSA rates seems to be impacted on a positive side.

9. CAD - USD Exchange Rate

Canadian Dollar seems to be progressing and might see a higher valuation against US Dollar. Hence people looking to visit US for shopping spree or luxury can plan their trips which will be more economical.

10. Foreign Funds Transfers

Immigrants from other countries living in Canada who remit money to their home country will get more value per Canadian Dollar as CAD is expected to rise in Forex market. So, some relief here too.

Let me know if you have any questions on above; I work in Capital Markets and have over 10 yesr of experience in same.

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