Borrowing money is getting more and more expensive in Canada

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It’s a rate hike that many had been preparing for. The Bank of Canada raised its key rate by 0.75% on Wednesday.

It now sits at 3.25%, and many people still took it as a shock.

“It’s scary for the average person, that’s for sure,” said Jenna Lahey, CEO of the Cape Breton Regional Chamber of Commerce.

Lahey said another key rate hike is bad news in an economically depressed region.

She added that if this is an effort to cut spending, it’s something we’ve seen before through inflation.

“If you have to pay more just to survive, whether it’s your mortgage, your groceries or your fuel, you’re spending less money on other things,” Lahey said. “So you’ll see entertainment costs go down. You’ll see companies that are in those areas maybe seeing fewer customers.”

Patrick de la Mirande, an economics professor at Cape Breton University, said while the central bank was raising its interest rate in an attempt to control inflation, the move came with its own set of problems.

“The biggest impact will be on some people’s debt,” he said. “The cost of loans will go up in the future. People may find it difficult to pay their mortgages and in the long term this could impact the ability of these people to stay in their homes.”

Leah Zlatkin, a Toronto-based mortgage broker, says people who already have a mortgage will see an increase in their monthly payment or time remaining on their term.

Zlatikin has some advice for first-time home buyers.

“Some lenders will still allow you to use yesterday’s qualifying rate to qualify today,” she said. “So if you want to buy anything in the next 90 days, submit your requests today.”

Experts say that while some had already budgeted for the key rate hike, others will suddenly be forced to reassess their spending habits, which is particularly difficult for low-income people.

Still, there may be good news.

“The latest Bank of Canada interventions can be expected to have an impact on the market,” de la Mirande said. “So we can see inflation stabilizing.”

De la Mirande added that there are already signs of this, but for those feeling the financial strain now, it can be cold comfort.

He predicts that while the inflation rate may decline in the not-too-distant future, it may take two to three years for interest rates to do the same.

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