A rise in the key interest rate of up to 3%?

It was written in the sky that rates would go up one day. The economy is cyclical and the latest has broken all longevity records with its rates at the bottom. Now, we have to come back to earth and assume the increases to come. It is certain that these increases will hurt because the over-indebtedness of Canadians will have serious consequences for many.

The Bank of Canada has already taken too long to raise interest rates. Moreover, it now adjusts with what I consider to be inadequate increases. It would have been necessary this week to go there by 75 basis points for a strong signal. I am retired and inflation is my worst enemy. I also remember the 20% interest rate on mortgages in the early 1980s.

I hope the bank will raise its rates to at least 3%. Real estate prices have skyrocketed, partly due to low interest rates. Thus, it is made very difficult for our young people to have access to property. This increase will certainly have the effect of seeing housing prices fall. In addition, there should be an impact on the level of consumption, which should also decrease. It should, by extension, have an impact on manufacturing production. Thus, fewer GHGs in the atmosphere and perhaps a little respite from the lack of manpower.

This is the price to pay for trying to fight inflation. Much easier than paying 6%+ inflation that applies to everything, not just our mortgages and debts.

We are pleased with the rise in interest rates. Being retired, this will allow us to better manage inflation without going to dip into the money from our patrimony reserved for our daughter and our granddaughters.

Rising interest rates are already having an impact on the number of properties for sale. In our region, there were 395 properties for sale last December. There are currently more than 600. Before the pandemic, there were more than 1,000. So the market seems to be slowing down. If the key rate rises to 3%, there will be fewer buyers. Those who need to renew their mortgage will see their monthly payment go up, that’s for sure. In my case, the stock markets have been very volatile since January and my pension fund is falling very quickly. Enough to tell me that as soon as there is a lull on the stock market, I will go into safe investments which will yield less but which will allow me to receive regular returns!

How am I going to absorb a 3% rise in interest rates? Quite simply by having a good coffee and thinking of the people who will complain about this increase. In 1983, we, the young people of the time, paid 20% on our mortgages. People who were living beyond their means didn’t find it funny, and some had to put their house keys in the bank, others more low profile, simply have to lower the amount of their mortgage in order to keep the same monthly payments. It will be the same today. Young people want the big house, two cars, trips to the South, purebred dogs and they will find their pants on the floor, even if interest rates go up a few percentage points. Count yourself lucky, young people, that this future increase in interest rates does not reach the 20% of 1983. You are fat and you don’t even know it.

Our daughter bought a house on the heels of a horrendous overbidding that smashed the asking price by $150,000… Every time the interest rate is raised by 1%, her monthly mortgage payments go up by 350 $. With a 2% increase, we reach $700 per month. She has already reached, to finally obtain a house after having often lost before because of the buying frenzy, the maximum of her ability to repay. No question of unforeseen in such a situation. We had warned her but she remained confident that the possible rise would not occur. Who do you think will mop up the deficit to avoid bank default and financial repossession? Almost $10,000 a year with that interest rate hike to 3%, just to save the day. We are far from the $ 500 gift from Mr. Legault!