The increase in the key rate to 3.25% by the Bank of Canada on Wednesday will affect many households that are already having to deal with over-indebtedness and the rise in inflation and the cost of living.
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“It’s a big pressure, especially since it’s not the first increase we’ve experienced since March. The difference on a mortgage of $320,000 on a monthly payment is regarding $500, it’s considerable,” explained Pierre Fortin, president of Jean Fortin et Associés, trustee in bankruptcy.
In addition to having significant consequences, a greater number of people will be affected.
“Before the pandemic, regarding 25% of mortgage holders had variable rate mortgages. And since the pandemic, because there was a big difference between the fixed and variable rate, more than 50% have opted for a variable rate,” said Pierre Fortin in an interview with TVA Nouvelles.
Owners with a variable rate will see it increase almost immediately, while those with a fixed rate will see the change upon renewal, which can happen within two years.
Pierre Fortin advises these people to start adjusting their spending and budget now, by reducing their discretionary spending.
“We got used to 2%; there, we have just removed an availability of money. […] You have to get used to tightening your belt,” he said.
These increases in spending cause a lot of anxiety, but yet, a few cuts in spending may be enough to relieve households.
“The pandemic has been difficult for everyone. We wanted to spoil ourselves, I think it’s human, I experienced it myself. There may have been a little excess, there was a euphoria that followed this sad and dark period, and there, we see clouds appearing on the horizon, ”imaged Mr. Fortin .
