Southern Albertans will have to drill deeper into their wallets after the Bank of Canada announced another interest rate hike Wednesday morning.
The rate jumped .25 per cent to sit at 4.75 per cent. This is the highest it has been since 2001.
“Raising interest rates are designed to make things more expensive, that’s actually the goal, the Bank of Canada wants to slow down spending, and help control inflation, but that makes literally everything you and I do that much more expensive,” said Trevor Lewington, CEO of Economic Development Lethbridge.
Relative to the rest of Alberta, Lewington sees Lethbridge’s diverse economy showing strength but, “from an economic development perspective, [there’s a] bit of a concern that we may see a bit of a pullback in investment and growth as companies try to navigate this higher interest rate environment.”
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Rob Roach, ATB Financial deputy chief economist, warns a lot of people will feel the pinch in one area specifically.
“It’s particularly painful if you have a large amount of debt relative to your income, for example, large house payments that might be going up, you might not have enough money as a result,” said Roach.
BILD Lethbridge president David Kunst said the increase will continue to negatively impact and slow down the housing market for builders and home buyers, especially when coupled with rising construction costs.
“A 2,400-square-foot home has an increase in $51,000 — $17,000 of that is in lumber and $34,000 is in non-lumber and to be noted there is another 26 per cent in labour costs,” said Kunst.
“I don’t know how a first-time home buyer can do it anymore.”
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Roach said ATB is hearing another hike could come in July, pushing the rate to five per cent.
“If we can avoid that, get inflation under control before the end of the year, and start to see those interest rates coming down, that will be a relief for a lot of people and relief for the economy,” said Roach.
Experts do believe the rate will come down starting sometime next year.
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