Home owners with variable rate mortgages have been taking a hit over the past year with the Bank of Canada increasing its key overnight lending rate eight straight times.
Last week the Bank of Canada increased its rate 25 basis points to 4.5 per cent, with the major banks following suit.
"Not too long ago we were talking about how many people were only $200 away from a serious financial hit in their family and with interest rates rising the way they have, we've seen people's payments jump by $200 or $300 a month in some cases," said Aaron Ruston with Purposed Financial. "I always tell people, some of the best investments you can make is often to pay down your debt because it can catch up on you very, very quickly."
Ruston believes the days of rock bottom interest rates has come to an end.
"The issue that we run into is the fact that we've got a generation that's grown up in a very low interest rate environment. They don't know what it's like to have the interest rates we're experiencing now overall. So it kind of comes as a shock and often what is happening is people have been spending against lines of credit, or using their credit cards, because interest rates were fairly low, but now is where the hit will be seen."
He notes relief could be on the way as inflation starts to slow down.
"There has been anticipated for a while now, that in the second or maybe even the third quarter of 2023, we might even see some contraction or pulling back of interest rates overall, which would be a wonderful thing. But right now, we're just hoping that we won't see more increases."
Ruston says there hasn't been much movement on long-term mortgage rates, while GIC rates have increased slightly.