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The Bank of Canada has hiked its benchmark interest rate to 0.75 per cent from 0.5 per cent, its first increase in nearly seven years. What does this mean for the average Canadian consumer?

The move means consumers will likely pay more for borrowing such as variable-rate mortgages and lines of credit. Canadians with variable-rate mortgages will immediately feel the increase. For homeowners who have locked in a fixed-rate mortgage, nothing will change until the fixed term ends and it’s time to renew. Canadians who use their homes as a source of cash by borrowing against their home equity, also known as a home equity line of credit (HELOC) could quickly owe more now that interest rates have risen, as those loans are frequently variable rate.

In regards to credit cards, ”Credit cards generally charge interest at a fixed rate, according to Laurie Campbell, CEO of Credit Canada Debt Solutions. Although that fixed rate can be quite high, it won’t increase with the Bank of Canada’s overnight rate. Some credit cards do charge variable interest rates, so check the specific terms and conditions of your card to be sure.” CBC News

Other types of credit that could be impacted include lines of credit, student loans and automobile loans.

In an interview with CTV News, Pat White, Executive Director of Credit Counselling Canada encouraged all consumers to use this rate hike as a nudge to pay attention and be proactive with their personal finances, as rates are likely to continue to rise. Consumers can get help by reaching out to a local credit counsellor.

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