As the Bank of Canada has pushed up interest rates to 2.5 per cent, officials at Synergy Credit Union are saying to manage your debt.
CEO Glenn Stang says interest rates are returning to pre-pandemic levels as the BoC has pushed it up by a full percentage point. He feels that the target is the larger metro areas where housing prices have been hot.
Stang calls for people to examine their debt management strategy.
“So what we advise people is if they have debt, to take a look and see if they can lock in the term of their debt for a longer period of time at lower interest rates. If they believe interest rates are going to go up again long term or be in that upward cycle.”
Stang notes there is continuing pressure on prime lending rates and there could be more interest rate increases over the next year.
Other leading financiers have also raised their prime lending rates from between 3.7 to 4.7 per cent.
The Bank of Canada interest rate move is aimed at rolling back runaway inflation which is at a four-decade high of 7.7 per cent at the end of May.
“Inflation coupled with rising interest rates just puts the squeeze on most households that they actually have to make more informed choices about how they spend their money. So because of that they actually will start to spend less which will actually drive down demand for products and services and therefore start to curb inflation,” says Stang.
The move also comes on a day that the Euro has fallen to parity with the US dollar for the first time in 20 years signalling the impact of higher energy prices, record inflation and the impact of Russian sanctions with the fallout from the war in Ukraine, according to EU officials.
Stang addresses the issue of whether reeling in spending will not increase recessionary pressure.
“If they wait too long to bring interest rates down does it put us into a deep recession rather than just correct the inflationary pressures. There’s a lot of moving parts that the Bank of Canada governor is trying to manage in this process. It’s a tough job.”