Key rate hike: “You’ve got to get used to tightening your belt”, fears trustee in bankruptcy

The Bank of Canada’s hike in the key rate to 3.25% on Wednesday will affect many households that already have to deal with high debt and inflation and rising living costs.

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“That’s a big pressure, especially since it’s not the first increase we’ve experienced since March. The difference on a $320,000 mortgage on a monthly payment is about $500, which is significant,” explained Pierre Fortin, president of bankruptcy trustee Jean Fortin & Associates.

In addition to having significant consequences, a large number of people are affected.

“Before the pandemic, about 25% of mortgage holders had variable rate mortgages. And since the pandemic, more than 50% have chosen the variable rate, because there is a big difference between the fixed and variable rate,” said Pierre Fortin in an interview with TVA Nouvelles.

Owners on a variable rate will see it go up almost immediately, while those on a fixed rate will see the change on renewal, which can happen within two years.

Pierre Fortin advises these people to start adjusting their spending and budgeting now by reducing their discretionary spending.

“We are used to 2%; There, we removed the availability of money. […] You should get used to tightening your waist,” he said.

This increase in spending is causing a lot of concern, but some cuts in spending are enough to bring relief to households.

“The pandemic has been difficult for everyone. We want to spoil ourselves, I think it’s human, I’ve experienced it myself. Maybe a little too much, there is joy that follows this sad and dark period, and there, we see the clouds appear on the horizon,” Mr. Fortin painted.