‘Life is hard’; Interest rate hike hits Canadians’ pockets

Even before the Bank of Canada’s latest interest rate hike Wednesday, many in Canada were struggling to stay afloat.

The central bank hiked its key interest rate by a quarter of a percentage point, bringing it to five per cent — the highest it’s been in more than two decades.

The Bank of Canada says the rate hike was prompted by elevated demand in the economy driven by strong consumer spending, as well as signs that prices continue to rise rapidly.

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“These decisions are difficult, and we did discuss the possibility of holding rates unchanged and gathering more information to confirm the need to raise the policy rate,” Bank of Canada governor Tiff Macklem said.

“On balance, our assessment was that the cost of delaying action was larger than the benefit of waiting.”

However, many are angry at the rise, saying they’re already paying enough in taxes and added costs due to inflation.

“We’re trying to make a living for our family, it’s ridiculous,” one commuter told CityNews Thursday morning, adding he’ll have to pay more on his mortgage and other debt, as the price of food, gas, and other good keep climbing.

“The costs are very high, very, very high. I’m merely surviving paycheck by paycheck. … Life is hard,” another commuter said.

One person CityNews spoke to says his bank account is so dry, he’s had to take on a second job just to make ends meet.

“I’m working seasonally, and my wife, she’s on a pension now, so, things are just drying up,” he explained.

“You can’t survive, so you gotta work,” another person told CityNews.

Forecasters believe interest rates will likely remain elevated for a couple of years, at least until 2025, while corporate profits also continue to increase.

“They’re making money, the government is making money, and they’re still sticking it to us, simple as that,” another man said of the rise.

The next interest rate hike could come in September, forecasters believe.

Rates won’t cool housing market, experts say

Meanwhile, as interest rates keep heading up, so do mortgage rates. But one real estate expert believes the real estate market will continue to rebound, as it did during the springtime.

According to Royal LePage, real estate prices across Canada are expected to continue to increase more than 8 per cent compared to a year ago in the fourth quarter of 2023, due to what it describes as “a chronic shortage of housing supply.”

The president and CEO of Royal LePage, Phil Soper, explains that the Bank of Canada’s interest rate hikes have changed where and how people live.

It’s pushed some hopeful buyers to choose less expensive housing or to move to more affordable markets.

Some sellers, Royal LePage explains, have become hesitant to list their properties, as they might be locked into a mortgage where they’re only paying 1.5 per cent.