Canadian rate hikes may have lasting effects – research

Bank of Canada researchers find disposable income could decrease by up to 5% by 2027

Bank of Canada/Flickr

Recent Canadian rate raises may exert downward pressure on consumption well after the current hiking cycle ends, research published by the Bank of Canada finds.

“Rate hikes not only increase mortgage payments temporarily but also reduce the share of these payments that pay off the principal,” the authors explain. “A few years of higher rates will therefore lead to a household having a larger remaining balance to repay, negatively affecting borrowers’ consumption in the future.”

The staff

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