In January, the 30-year-old marketing and communications manager was paying about $1,600 per month for the variable rate mortgage she has on her downtown Toronto condo. Now, that monthly payment will be nearly $2,000.
“It’s been a big shock and a big change for me personally,” she told Global News Wednesday, shortly after the central bank’s announcement, which added about $200 to her payments alone.
“I’m also managing the mortgage by myself, so all of these payments come out from my paycheque.”
The key interest rate now sits at 2.5 per cent, a drastic shift from the 0.25 per cent rate seen at the start of the year, as the Bank of Canada tries to tame decades-high inflation that has sent prices skyrocketing.
The bank’s governor Tiff Macklem acknowledged Wednesday that higher interest rates will add to the difficulties that Canadians are already facing with high inflation, but said if inflation becomes entrenched it will be more painful for the economy — and for Canadians — to get it back down.
1:18 Bank of Canada hikes key interest rate by full percentage point in surprise move
Bank of Canada hikes key interest rate by full percentage point in surprise move
That comes as little comfort for Vijh. After being forced to adjust her budget to accommodate previous interest rate hikes earlier this year, she says she’ll once again have to find a new balance.
“Primarily it’s going to be cutting down on my day-to-day costs – dining out, groceries – finding places where I can basically cut costs. I’ll put more money towards my mortgage if I can, as well as through my savings,” she said.
“I’m also reconsidering my travel plans for the rest of the year, because travel is also extremely expensive right now, and I’m not entirely sure I can accommodate that given the mortgage rate increases.”
Wednesday’s one per cent hike — the largest single increase since August of 1998 — surprised most economists who were anticipating a 75 basis point increase in line with the U.S. Federal Reserve.
2:17 Bank of Canada governor on why key interest rate announcement came relatively suddenly
Bank of Canada governor on why key interest rate announcement came relatively suddenly The hike means a typical variable rate mortgage of 2.7 per cent on a home priced at the national average of $711,000 would see monthly payments increase from $2,845 to $3,168 — a difference of nearly $325 per month.
Although Vijh’s mortgage rate is slightly lower at 2.55 per cent, she’s says she’s still feeling the squeeze. She also has 23 years left on her 25-year amortization, leaving her with roughly $384,000 left to pay off.
The rising interest rates this year have already started to cool off Canada’s white-hot housing market, with home prices seeing their first declines in nearly three years. Royal LePage has slashed its annual market outlook to just five per cent growth by the end of 2022, down from a projected 15 per cent earlier this year.
But that still leaves new homeowners like Vijh making increasingly higher mortgage payments on properties that are now starting to dip in value along with the market.
Macklem said Wednesday’s oversized rate hiked reflected “very unusual economic circumstances” of “too high” inflation and increased consumer anxiety, which requires drastic action to reverse.
1:38 Bank of Canada projects ‘soft landing’ approach to addressing inflation
Bank of Canada projects ‘soft landing’ approach to addressing inflation
The Bank of Canada also signalled that interest rates would need to keep rising before the end of the current cycle.
In a note, CIBC senior economist Karyne Charbonneau said the Bank of Canada raising its key rate to a peak of 3.25 per cent is now more likely.
The continued hikes is concerning to Vijh, who says she’s growing increasingly worried about her ability to save for her retirement.
“In January, I was probably able to put a little more toward my RRSP,” she said. “Today, I may have to reconsider how much I’m putting towards retirement and instead put that into my mortgage payments, or save it and put it toward a prepayment for my mortgage.”
Vijh says she wants people of her generation who also bought into the real estate market during the pandemic to keep a close eye on their expenses, particularly as the potential for more interest rate hikes looms.
“I’m sure a lot of them took the opportunity, like I did, to get into their first home in 2020, 2021, and are now being faced with pretty steep increases in their mortgage costs,” she said.
“It’s going to be very important for us to re-examine how we spend and save, and get into these new changes.”
– with files from Global News’ Craig Lord
0:56 Mortgage advice following Bank of Canada’s 1% interest rate increase
Mortgage advice following Bank of Canada’s 1% interest rate increase
TORONTO – Restaurant Brands International Inc. reported net income of US$357 million for its third quarter, down from US$364 million in the same quarter last year.
The company, which keeps its books in U.S. dollars, says its profit amounted to 79 cents US per diluted share for the quarter ended Sept. 30 compared with 79 cents US per diluted share a year earlier.
Revenue for the parent company of Tim Hortons, Burger King, Popeyes and Firehouse Subs, totalled US$2.29 billion, up from US$1.84 billion in the same quarter last year.
Consolidated comparable sales were up 0.3 per cent.
On an adjusted basis, Restaurant Brands says it earned 93 cents US per diluted share in its latest quarter, up from an adjusted profit of 90 cents US per diluted share a year earlier.
The average analyst estimate had been for a profit of 95 cents US per share, according to LSEG Data & Analytics.
This report by The Canadian Press was first published Nov. 5, 2024.
ST. JOHN’S, N.L. – Fortis Inc. reported a third-quarter profit of $420 million, up from $394 million in the same quarter last year.
The electric and gas utility says the profit amounted to 85 cents per share for the quarter ended Sept. 30, up from 81 cents per share a year earlier.
Fortis says the increase was driven by rate base growth across its utilities, and strong earnings in Arizona largely reflecting new customer rates at Tucson Electric Power.
Revenue in the quarter totalled $2.77 billion, up from $2.72 billion in the same quarter last year.
On an adjusted basis, Fortis says it earned 85 cents per share in its latest quarter, up from an adjusted profit of 84 cents per share in the third quarter of 2023.
The average analyst estimate had been for a profit of 82 cents per share, according to LSEG Data & Analytics.
This report by The Canadian Press was first published Nov. 5, 2024.
TORONTO – Thomson Reuters reported its third-quarter profit fell compared with a year ago as its revenue rose eight per cent.
The company, which keeps its books in U.S. dollars, says it earned US$301 million or 67 cents US per diluted share for the quarter ended Sept. 30. The result compared with a profit of US$367 million or 80 cents US per diluted share in the same quarter a year earlier.
Revenue for the quarter totalled US$1.72 billion, up from US$1.59 billion a year earlier.
In its outlook, Thomson Reuters says it now expects organic revenue growth of 7.0 per cent for its full year, up from earlier expectations for growth of 6.5 per cent.
On an adjusted basis, Thomson Reuters says it earned 80 cents US per share in its latest quarter, down from an adjusted profit of 82 cents US per share in the same quarter last year.
The average analyst estimate had been for a profit of 76 cents US per share, according to LSEG Data & Analytics.
This report by The Canadian Press was first published Nov. 5, 2024.
