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.
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.
Bank of Canada governor on why key interest rate announcement came relatively suddenly
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.
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
Mortgage advice following Bank of Canada’s 1% interest rate increase
© 2022 Global News, a division of Corus Entertainment Inc.
How one Canadian family of five is coping with the highest inflation in years – CTV News
With inflation at a nearly 40-year high, Canadians are feeling the financial strain. In a six-part series this summer, The Canadian Press is speaking to people at different stages of life to see where they’re being hit the hardest. This story details the experiences of mid-career adults and their families.
Myron Genyk didn’t think much about the price of food a year ago.
But now the 43-year-old father of three is suffering from sticker shock as his family’s grocery bill balloons.
“No. 1 is the increase in food,” said Genyk, an entrepreneur from Mississauga, Ont. “My kids are growing, so they’re eating more, but food prices have also shot up.”
With inflation rising at its fastest pace in nearly 40 years, the cost of everything from food to gas has skyrocketed.
Canadians across the country are feeling squeezed, but big families with multiple children are at times shouldering much of the higher costs — and changing demographics and consumer patterns have left some of them more exposed to inflation than in previous generations.
Some face meteoric grocery bills to feed insatiable teens or are helping older kids pay for university or buy their first home.
Others face mounting costs related to helping aging parents.
Then there are those doing both — the so-called sandwich generation.
“Some still have kids at home and they’re also helping out with aging parents,” said Elena Jara, community engagement partner with insolvency firm Bromwich and Smith.
“Inflation only makes that harder.”
Middle-aged adults have traditionally had the benefit of entering their prime earning years, taking some of the sting out of inflation. But as milestones for many Canadians happen later in life, this pattern is changing.
First-time homebuyers are getting older, for example, with the average age now around 36.
That means mid-career Canadians are more likely to have a big mortgage, leaving them vulnerable to higher interest rates.
Canadians are also having children later in life. Over the past five decades, the average age of a first-time mother has been steadily rising, from 22.6 in 1969 to 29.4 in 2019.
Adult children are also living longer at home. New census data found almost half of young adults in Ontario cities like Toronto, Oshawa, Windsor and Hamilton were living in the same household as at least one parent.
That leaves parents in the roughly 40 to 60 age range potentially covering more day-to-day costs or unable to downsize.
“Having a larger household with many mouths to feed would definitely increase your spending on food and make you more sensitive to food inflation,” said Rebekah Young, vice-president, head of inclusion and resilience economics at Scotiabank.
Higher costs could also push Canadians in their prime earning years to curtail savings, potentially later delaying retirement to pay the bills, she said.
But inflation is even worse for low income Canadians as they spend more of their disposable income on essentials, Young said.
The situation has left Canadians feeling increasingly gloomy about their finances, according to a raft of recent surveys.
More than half of Canadians aged 55 and up said they’ve delayed retirement because of mounting inflation this year alone, based on respondents to a recent poll by Bromwich and Smith and Advisorsavvy.
Another survey by TransUnion Canada found 60 per cent of Canadians polled lack optimism about their household finances over the next 12 months, with almost a third concerned they won’t be able to pay their bills in full in the coming months.
For Genyk, who runs his own Bay Street asset management company, he’s hopeful high inflation will be a “temporary blip” on his financial path.
Still, he’s feeling squeezed by higher prices.
“I’m definitely spending more money this year than I was last year on basic goods,” said Genyk, CEO and co-founder of Evermore Capital Inc., a Canadian asset management company that focuses on accessible retirement investing.
“That is directly impacting how much I can save for retirement.”
Inflation is also shaping his consumption habits and even changing his vacation plans.
For example, the Genyk family is planning a trip to the Rockies with their three children, ages seven, 11 and 13.
A few years ago, the family flew into Calgary and rented a van for two weeks for $1,900.
This summer, the van rental quote was $8,000.
“We got creative and found if we flew to Edmonton, we could rent a five-seater SUV there for a much more reasonable price,” he said.
“Having a growing family, you also need more space. When you get a hotel room, the days of one room with a pop-up crib are done.
“All these things add up.”
This report by The Canadian Press was first published Aug. 10, 2022.
U.S. inflation shows signs of having peaked as rate eases to 8.5% in July – CBC News
The torrid increase in the cost of living showed signs of finally easing last month, with the U.S. inflation rate cooling to 8.5 per cent.
The U.S. Bureau of Labour Statistics reported Wednesday that the annual inflation rate eased from a 40-year high of 9.1 per cent in June to 8.5 in July.
Economists had been expected the rate to ease off, but the 8.5 per cent figure was softer than the 8.7 per cent they were expecting.
“The July CPI report might be the first clear indication that consumers are pushing back against high inflation in response to tighter monetary policy,” Sal Guatieri, an economist with BMO Markets, wrote in a note to investors. “It’s a sign that inflation is close to peaking, though the climb down the mountain will be slow due to rising wages and rents.”
Gasoline prices have eased significantly, which was a major contributor to the slowdown.
Guatieri also pointed to price reductions in airfare, hotels and car rentals.
“With many travellers now exhausting earlier pent-up demand, fewer people are willing to face hassles at the airport or pay the well-above pre-pandemic cost of flying, rooming at a hotel or renting a car.”
Food prices, meanwhile, continued to rise at a faster pace than the overall rate, with costs increasing by 10.9 per cent in the past year.
Statistics Canada is expected to report its inflation numbers on Aug. 16.
Commercial fishers and wild salmon advocates cheer large returns to B.C. waters
VICTORIA — The summer of 2022 is shaping up to be a bumper season for both pink and sockeye salmon in British Columbia rivers, with one veteran Indigenous fisherman reporting the biggest catches of sockeye in decades.
Mitch Dudoward has worked in the salmon industry for more than 40 years, and says fishing on the Skeena River in northwest B.C. has never been better.
“This is the best season I can recall in my lifetime with the numbers we are catching,” said Dudoward, who recently completely a big sockeye haul aboard his gillnetter Irenda.
Bob Chamberlin, chairman of the Indigenous-led First Nations Wild Salmon Alliance, meanwhile said that thousands of pink salmon are in Central Coast rivers after years of minimal returns.
The strong run comes two years after the closure of two open-net Atlantic salmon farms in the area.
“We had targeted those farms,” said Chamberlin, whose group wants open-net farms removed from B.C.’s waters. “We got them removed and two years later we went from 200 fish in the river to where we have several thousand to date. In our mind and knowledge that is a really clear indicator.”
Fisheries and Oceans Canada spokeswoman Lara Sloan said departmental observations indicated big returns of sockeye to the Skeena River.
“Test fisheries currently indicate that Skeena sockeye returns are tracking at the upper end of the forecast, with an in-season estimate of approximately four million sockeye,” said Sloan in a statement. “Sockeye populations returning to a number of areas in British Columbia, Washington and Alaska are returning better than forecast in 2022.”
The five-year average return of sockeye to the Skeena is 1.4 million and the 10-year average is 1.7 million, Sloan said.
Dudoward said the Skeena sockeye season ended this week, but it could have gone on longer.
“We should be fishing until the end of August when the sockeye stop running,” he said. “There’s plenty of them to take.”
But Sloan said the Fisheries Department was being careful about salmon stocks.
“For 2022, the department is taking a more precautionary approach toward managing impacts of commercial fisheries on stocks of conservation concern including smaller wild sockeye populations, chum and steelhead returning to the Skeena River,” she said.
The Fisheries Department also expects a large sockeye run to the Fraser River this summer, but returns of chinook, coho and chum to northern and Central Coast rivers and streams are expected to be low.
“The forecast range for Fraser River sockeye in 2022 is 2.3 million to 41.7 million, with a median forecast of 9.7 million,” said Sloan. “The median forecast means there is a 50 per cent chance returns will come in below that level.”
That is well above the estimated 2.5 million sockeye returns in 2021, according to Fisheries and Oceans Canada data.
The strong returns come amid debate over the future of open-net salmon farming in B.C. waters.
In 2018, the B.C. government, First Nations and the salmon farming industry reached an agreement to phase out 17 open-net farms in the Broughton Archipelago between 2019 and 2023.
The agreement was negotiated to establish a farm-free migration corridor to help reduce harm to wild salmon.
In June, federal Fisheries Minister Joyce Murray said the government will consult with First Nations communities and salmon farm operators in the Discovery Islands, near Campbell River on Vancouver Island, about the future of open-net farming in the area.
A final decision on the future of the farms is expected in January 2023, the minister said.
“That is such a key migratory route of all Fraser River salmon, in particular coho and chinook,” Chamberlin said. “If we are going to see Fraser runs return, we need to see removal of impediments.”
This report by The Canadian Press was first published Aug. 10, 2022.
Dirk Meissner, The Canadian Press
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