Many residents here in Kelowna-Lake Country woke up to the news last week that the Bank of Canada had hiked its benchmark interest rate a full percentage point.
It represents the most significant one-time increase since August 1998.
The governor of the Bank of Canada, Tiff Macklem, made clear the Bank was moved to take this historic step because of the inflation rate, which was announced this week to now be 8.1% - the highest it's been in 40 years.
Inflation, as everyone has noticed, is taking a hit on our wallets whenever we look to buy groceries, gas or even housing.
Many of you have written to me with alarm about what interest rate hikes will mean to mortgages and personal finances here in the Okanagan.
I wanted to provide some answers and explain what our Parliament should be doing to provide fiscal relief. It is always best to consult with those who work in the field to gain the best advice for your personal situation. Here are a few high levels points.
Those currently on fixed-rate mortgages will not see a change in their payments unless their fixed-rate plan is up for renewal. Those with variable mortgages, however, will be more immediately affected, with larger shares of their payments going to interest and potentially an increase in monthly payments.
Those with loans such as variable rate lines of credit, personal loans, or car loans will also see more of their payments going to interest. This is especially punishing, as increased or lengthier debt payments will compete with inflationary gas and grocery prices and eat into household savings.
Debt payments could also affect local small businesses, despite already being strangled by rising inflation, snagged supply chains, and onerous tax burdens. Let's all continue to do our part to support local small businesses.
Lastly, the Bank of Canada rate hikes will be particularly crushing for renters who are looking to get into home ownership. With Kelowna's average rental prices already among the highest in the country, this is punitive.
Many people ask how Canada came to an inflation crisis where the Bank of Canada needed to drastically hike interest rates. The root of our inflation crisis comes from a government too willing to spend public money.
Our last two federal budgets were unfocused, as even the Parliamentary Budget Officer's report noted much of the touted pandemic spending did not actually go to pandemic relief.
I have repeatedly joined colleagues in calling for the government to break free of its spending habits and to stop printing money. The Liberals attempted to deny that there would be an inflationary effect and then, as inflation increased, said it would be transitory.
Now in Summer 2022, with record high inflation stretching our wallets thinner than ever and with the looming weight of crushing debt, rent and mortgage payments overhead, the government insists on maintaining the course of unfunded spending.
They tout even more spending as the "solution" to our inflation crisis while passing the buck on their responsibility by suggesting Canada's inflation crisis is solely global.
Halting the practice of political money-printing and controlling discretionary spending will, of course, only be a start. In the short term, I continue to call for much-needed tax relief. Halting all scheduled tax increases and temporarily lifting the GST on gas to lower our prices at the pump will help with transportation costs, which make everything cost more.
These are measures I would have pushed the Prime Minister for in person had he come to the Okanagan this week to hear from residents and elected members. Unfortunately, as we learned, his visit was simply a photo-op, and local media outlets reported they were forbidden from asking questions.
I will continue making the case to Ottawa of leaving more dollars in your pocket and protecting the value of the money you earn.
If you need any assistance with programs or have any thoughts to share, feel free to reach out, at 250-470-5075 or at [email protected].
This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.