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MARIA SENAJOVA

INTEREST RATES ARE UP. NOW WHAT? The Bank of Canada has raised its key interest rate by a quarter of a percentage point, bringing it to 2.5%. It’s the first increase since July 2023 and a reminder that interest rates can change direction when the economy shifts. If you have a variable-rate mortgage, line of credit or other debt tied to your lender’s prime rate, your borrowing costs could increase. The effect will depend on your lender and the terms of your loan. Those with fixed-rate mortgages won’t see their payments change immediately, although higher rates may affect what they pay when renewing. The Bank’s decision comes as higher energy prices push inflation up. Rising fuel costs affect more than what you pay at the gas station. They can also increase the cost of transporting goods and running a business, eventually putting pressure on prices elsewhere. The Bank hopes raising rates will help keep inflation in check. For households already juggling mortgage payments, groceries and other rising expenses, this is a good time to review your budget. Look at how much room you have if borrowing costs climb again and try to avoid taking on unnecessary debt. The Bank has signalled that further increases are possible, although future decisions will depend on how the economy and inflation develop. For now, a little financial planning can help you stay prepared.

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