The Bank of Canada has raised its key interest rate by a quarter of a percentage point , bringing it to five per cent. Forecasters were widely expecting the move as the economy continues to run hotter than expected.

Larry Short, a Senior Investment Advisor at Short Financial, a branch of IA Private Wealth in St. John’s, says inflation is driving the rate hikes. The Bank of Canada does not expect it to return to the two per cent mark for another two years, meaning another increase in September is possible.

If you recall during COVID, the price of building materials skyrocketed. Because of the labour shortage, Canada brought in one-million immigrants whereas it would normally have about 500,000 a year.

Not only do they all need housing but they buy appliances and other necessities and, as a result, inflation goes up. All of that sounds like good news but the supply chains have not yet been fully restored and, consequently, prices rise.

The people affected most are those with variable rate mortgages and who have taken out lines of credit. He recommends meeting with a financial advisor to see what they can afford and “…to do a cursory review of the rates because people can still get somewhere in the order of five per cent or slightly less than that.”