Everything seems to be getting more expensive. Food, gas and housing prices are on the rise while paycheques are slow to keep pace.
The CBC News series Priced Out explains why you’re paying more at the register and how Canadians are coping with the high cost of everything.
Over the past several months, mortgage agent Rasha Ingratta has fielded a flood of queries from clients worried about how rising interest rates will impact their mortgage payments.
“People are in a panic,” said Ingratta, who works with Mortgage Intelligence in Windsor, Ont. “They’re thinking, ‘Oh my God, what is the interest rate going to go up to?'”
For the past two years, Canadians have enjoyed access to extremely cheap credit thanks to rock-bottom interest rates. However, to help curb soaring inflation, many economists predict the Bank of Canada will begin hiking its benchmark interest rate — starting with a hike of 0.25 percentage points on Wednesday.
The bank’s rate influences the rate creditors charge for consumer loans and mortgages.
The question now is, how high will interest rates go, and will indebted Canadians be able to handle it?
Rasha Ingratta, a mortgage agent with Mortgage Intelligence in Windsor, Ont., started a private Facebook page to help counsel clients worried about rising interest rates. (Darrin Di Carlo / CBC)
Ingratta advises her clients not to panic, because she believes any increase in mortgage rates will be slow and incremental. To help allay her clients’ fears, she set up a private Facebook page where she offers advice.
“I go on there and I can calm their nerves.”
But Toronto-based bankruptcy specialist Doug Hoyes says he’s concerned about Canadians already struggling with their finances.
“I’m absolutely worried about everybody living paycheque to paycheque.”
Hoyes notes that prices have climbed recently for household staples such as food and gas. So for some people, he said, a rise in rates — and therefore a hike in loan payments — could tip the scales.
“How are you going to be able to increase what you have to pay on your debt when you also have to pay more for food and transportation and everything else?” said Hoyes, who works with the firm, Hoyes, Michalos & Associates.
At the same time, Canadian households have been racking up more loans, adding $51.6 billion of debt in the third quarter of 2021, a near-record high. Mortgages make up the lion’s share of that debt.
On top of that, the debt-to-disposable income ratio is now at 177.2 per cent. That means Canadian households owed an average of $1.77 for every dollar of disposable income.
Many Canadians are feeling the pinch. Of the 5,000 Canadians Angus Reid surveyed online in January, one quarter said an increase in interest rates would have a major negative impact on their household finances.
Roy Graham of Shrewsbury, Ont., said he worries about the impact of rising rates on his $150,000 home equity line of credit. (CBC/Zoom)
Roy Graham of Shrewsbury, Ont., said he’s worried about the impact of rising rates on his $150,000 variable-rate home equity line of credit.
People with variable-rate mortgages or other types of debt, such as lines of credit, will likely be impacted first if the Bank of Canada raises its benchmark rate. Those with fixed-rate loans won’t experience any changes until the term of their loan expires.
Graham, a 66-year-old retired emergency response worker who lives on a fixed income, is concerned how higher debt payments will affect his already stretched budget.
“Your hydro is going up, your water bills are going up, your taxation is going up, so it just compounds everything. It’s just — it’s like the straw that broke the camel’s back,” he said.
Graham said his biggest stressor now is not knowing how high interest rates will rise.
“It’s the unknown that bothers you, like, you watch the news, you read the newspapers, you watch it online, and you just don’t know where this is going to bottom out.”
‘Not so bad’
Back at Mortgage Intelligence in Windsor, Ingratta offers what may be a comforting calculation.
She provides as an example a $400,000 mortgage with a 25-year amortization and a variable rate of 1.45 per cent. With a 0.25 per cent rate increase, monthly payments would rise to $1,636 — an increase of just $47, she said.
“When I start punching these numbers into my computer and telling [my clients], you’re paying this much, and if it should go up to this much, this is what you’re going to be paying, they’ll say something like, ‘Oh, okay, that’s not so bad.'”
But bankruptcy specialist Hoyes said he’s concerned about potential consecutive rate hikes.
“If it is the start of a series of increases, that’s where it becomes a problem,” said Hoyes. “You could be in for a big shock to your monthly budget.”
Watch: Bank of Canada urges Canadians to prepare for rising rates:
Canadians told to prepare for rising interest rates
1 month ago
Duration 1:54
The Bank of Canada hasn’t hiked its core lending rate despite record inflation, but it urged Canadians to prepare for interest rates to rise over the next year. 1:54
The Bank of Canada signalled last month that interest rates will need to increase to control inflation, but it’s unknown at this point how fast rates will rise and how high they will go.
CIBC Capital Markets chief economist Avery Shenfeld predicts the Bank of Canada will hike its benchmark rate by about two percentage points over the next couple of years.
But he points out that interest rates plummeted during the pandemic, so a two per cent hike shouldn’t be too much of a shock for Canadians.
“The good news is that rates aren’t really going to be any higher at the end of the day, or materially higher than they were before the pandemic,” said Shenfeld. “We’ve had a taste of very, very low interest rates and I think the economy just doesn’t need so much of that now.”
TORONTO – Roots Corp. may have built its brand on all things comfy and cosy, but its CEO says activewear is now “really becoming a core part” of the brand.
The category, which at Roots spans leggings, tracksuits, sports bras and bike shorts, has seen such sustained double-digit growth that Meghan Roach plans to make it a key part of the business’ future.
“It’s an area … you will see us continue to expand upon,” she told analysts on a Friday call.
The Toronto-based retailer’s push into activewear has taken shape over many years and included several turns as the official designer and supplier of Team Canada’s Olympic uniform.
But consumers have had plenty of choice when it comes to workout gear and other apparel suited to their sporting needs. On top of the slew of athletic brands like Nike and Adidas, shoppers have also gravitated toward Lululemon Athletica Inc., Alo and Vuori, ramping up competition in the activewear category.
Roach feels Roots’ toehold in the category stems from the fit, feel and following its merchandise has cultivated.
“Our product really resonates with (shoppers) because you can wear it through multiple different use cases and occasions,” she said.
“We’ve been seeing customers come back again and again for some of these core products in our activewear collection.”
Her remarks came the same day as Roots revealed it lost $5.2 million in its latest quarter compared with a loss of $5.3 million in the same quarter last year.
The company said the second-quarter loss amounted to 13 cents per diluted share for the quarter ended Aug. 3, the same as a year earlier.
In presenting the results, Roach reminded analysts that the first half of the year is usually “seasonally small,” representing just 30 per cent of the company’s annual sales.
Sales for the second quarter totalled $47.7 million, down from $49.4 million in the same quarter last year.
The move lower came as direct-to-consumer sales amounted to $36.4 million, down from $37.1 million a year earlier, as comparable sales edged down 0.2 per cent.
The numbers reflect the fact that Roots continued to grapple with inventory challenges in the company’s Cooper fleece line that first cropped up in its previous quarter.
Roots recently began to use artificial intelligence to assist with daily inventory replenishments and said more tools helping with allocation will go live in the next quarter.
Beyond that time period, the company intends to keep exploring AI and renovate more of its stores.
It will also re-evaluate its design ranks.
Roots announced Friday that chief product officer Karuna Scheinfeld has stepped down.
Rather than fill the role, the company plans to hire senior level design talent with international experience in the outdoor and activewear sectors who will take on tasks previously done by the chief product officer.
This report by The Canadian Press was first published Sept. 13, 2024.
VANCOUVER – Mediated talks between the union representing HandyDART workers in Metro Vancouver and its employer, Transdev, are set to resume today as a strike that has stopped most services drags into a second week.
No timeline has been set for the length of the negotiations, but Joe McCann, president of the Amalgamated Transit Union Local 1724, says they are willing to stay there as long as it takes, even if talks drag on all night.
About 600 employees of the door-to-door transit service for people unable to navigate the conventional transit system have been on strike since last Tuesday, pausing service for all but essential medical trips.
Hundreds of drivers rallied outside TransLink’s head office earlier this week, calling for the transportation provider to intervene in the dispute with Transdev, which was contracted to oversee HandyDART service.
Transdev said earlier this week that it will provide a reply to the union’s latest proposal on Thursday.
A statement from the company said it “strongly believes” that their employees deserve fair wages, and that a fair contract “must balance the needs of their employees, clients and taxpayers.”
This report by The Canadian Press was first published Sept. 12, 2024.
MONTREAL – Travel company Transat AT Inc. reported a loss in its latest quarter compared with a profit a year earlier as its revenue edged lower.
The parent company of Air Transat says it lost $39.9 million or $1.03 per diluted share in its quarter ended July 31.
The result compared with a profit of $57.3 million or $1.49 per diluted share a year earlier.
Revenue in what was the company’s third quarter totalled $736.2 million, down from $746.3 million in the same quarter last year.
On an adjusted basis, Transat says it lost $1.10 per share in its latest quarter compared with an adjusted profit of $1.10 per share a year earlier.
Transat chief executive Annick Guérard says demand for leisure travel remains healthy, as evidenced by higher traffic, but consumers are increasingly price conscious given the current economic uncertainty.
This report by The Canadian Press was first published Sept. 12, 2024.
