Financial experts offer tips as Bank of Canada hikes interest rates again to fight inflation

It’s uncertain financial times for many Canadians as inflation has already taken a big bite out of family budgets.

"I’m noticing that I’m [living] paycheque to paycheque," said Langford, B.C., resident Kaleigh Hargrove on Wednesday.

"The amount of costs for groceries almost doubled," said Yvonne Van Swieten who lives in Metchosin, B.C.

On Wednesday, another potential blow came for families. The Bank of Canada raised its key interest rate by 0.5 per cent to 3.75 per cent.

It’s the sixth time the key interest rate has been raised since March.

"The economy is still in excess demand, it’s overheated," said Tim Macklem, the governor of the Bank of Canada.

Canada’s central bank continues to wrestle with an inflation rate that nationally sat at 6.9 per cent for the month of September. A two per cent inflation rate is the central bank's goal.

"Where it’s really affecting people with these interest rate hikes is with variable mortgages," said Tony Zarsadias, CEO of Island Realm Real Estate.

Zarsadias says if you’re on a variable mortgage, you’ve already seen your payments increase and they will again after Wednesday's announcement.

If you're locked into a fixed mortgage, those payments haven’t changed, but there are worries when it comes time for many to renew.

"There are certainly people in jeopardy of not being able to qualify and I sadly expect people being under pressure for foreclosure," said Zarsadias.

Experts predict rents will increase as well, as property owners holding mortgages see their payments going up.

BUDGET TIPS

"My first go-to is to always just take a deep breath and understand that there are options out there," said Anne Arbour, director of strategic partnerships with the Credit Counselling Society.

Arbour recommends creating a budget.

"Understanding your numbers," said the credit councillor. "What is flowing in, and most importantly, what is going out and how has that changed."

Arbour says on the mortgage front, speak to your lender. Maybe it’s time to lock-in that variable mortgage in order to stabilize your budget.

As for credit card debt, consider consolidating your cards onto a lower interest line of credit. As well, if you have a credit card with an annual fee offering you miles, points or bonuses, look into changing that.

"Something as simple as moving down to a lower frills card that doesn’t have all those bits and pieces attached to it will take the interest rate down," said Arbour.

The Bank of Canada’s governor says more rate hikes are likely, making 2023 a tough year for many.