Earlier this week, the Bank of Canada rose their key interest rate to 1.75% but what exactly will that mean for local consumers?

John Tarnowski is the Executive Vice-President of Retail Financial Services with ATB Financial and digs a little deeper into what the rate hike means for borrowers.

(Photo Courtesy: Bank of Canada)

“Generally, the banks don’t go and start changing the rates on things like credit cards and other things. Anything that would be variable, whether that’s car loans, overdraft protection that you’ve got on your bank account, anything that has a fluctuating rate is where that would get applied.”

Tarnowski says that the biggest impact will be felt by those who currently have a variable rate mortgage.

The Bank of Canada has increased their key rate several times since the beginning of 2017 and Tarnowski said that more increases are inevitable.

“Right now it would price in over the next year, likely another two or three rate increases. We would anticipate, call it a moderate likelihood of one more rate increase this year.”

While many consumers might be calling for a quick drop in the interest rate, Tarnowski says that can do more harm than good.

“If we started to all of a sudden lower, we would actually, probably be asking the question as a country and as a province, what’s causing us to have to lower? And it’s probably going to be negative things. It’s going to be that job growth starts to fall off, certain things in terms of driving economic growth have stalled out and we need to stimulate the economy.”

Tarnowski says that having to increase the key interest rate actually shows signs of strength the economy and is a means to keep that economic growth in check.

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