Dan Albas is the Conservative MP for Central Okanagan—Similkameen—Nicola. This constituency includes the communities of Kelowna (precise boundaries), West Kelowna, Peachland, Summerland, Keremeos, Princeton, Merritt and Logan Lake.
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Canadians woke up this week to the news that the Bank of Canada had once again raised its benchmark interest rate (also known as the overnight rate) by another 75 basis points, from 2.5% at 3.25%.
Since March, the rate has risen 300 basis points, which is the biggest increase in about 30 years.
For many Canadian households, the impact of this benchmark interest rate increase on your household budget will depend on a number of factors.
For those with a locked-in mortgage or who have a “fixed payment”, this may be of little concern.
For others who have a variable payment that increases with the cost of increased interest, this can be a very serious concern.
Some may have a variable rate mortgage where their costs simply rise or fall with the prime rate (plus or minus any negotiated discount) that follows the Bank of Canada benchmark rate.
Others with variable rate mortgages with a “trigger rate” can be contacted by their bank or lending institution, advising them that because rates have risen significantly, their expected payment amount must be higher. because the interest portion of their mortgage is now higher than the principal. Payment.
interest rates for a long time, these “trigger rate” increases are not common and those with this type of mortgage will likely experience “sticker shock” when they see the revised payment amount.
Conversely, for those with an interest-only line of credit or other forms of debt such as credit cards, there may also be a significant increase in payment due to this increase in interest rates. .
One of the challenges when trying to assess the impact on family households of these types of increases, on debt-related interest payments, is the lack of region-specific information.
Additionally, with many mortgage lenders in the market, the impact on some borrowers may be very different from others due to different lending practices.
While there is an Ottawa imposed “stress test” that is applied uniformly across the mortgage industry, as some citizens have pointed out, it does not take into account the increase in local property taxes which in many cases, are also well above inflation.
Additionally, for those living in condominiums, insurance costs have also increased with premium increases well above the rate of inflation.
For those affected by higher interest rates, let’s recognize that with less disposable income, there is less money to invest in our local economy.
My purpose in raising these concerns related to the interest rate increase is to ask you, is this something that will impact your household to the point of serious concern?
If your household has been or will be negatively impacted by these increased interest rates, or even if you are in a situation where you are not affected, I would appreciate hearing from you.
I can be reached at [email protected] or call toll-free 1-800-665-8711.
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