Borrowers, beware: Bank of Canada announces interest rate hike

Recently, Bank of Canada governor Stephen Poloz announced an increase in the interest rate from 1.25% to 1.5%. The increase comes as the Bank of Canada predicts a continued growth in the Canadian economy from exports and business investments. However, household spending may represent a smaller percentage of future economic growth due to the effects of a higher interest rate on consumers given that variable-rate holders may be forced to put their money elsewhere. An increase from the Bank of Canada usually comes with increased costs for consumers. If precedent holds, the rise could lead to financial institutions increasing their prime rate, which results in Canadians paying higher borrowing costs on financial products, such as variable rate mortgages. Financial institutions have raised their prime interest rates three times since last summer, which is in line with the Bank of Canada’s increase. This may raise concerns for Canadians, as a number of mortgage holders are…

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