Bank of Canada Interest Rate Increase Goes to 1.5%

July 12, 2018

On July 11, 2018, the predicted Bank of Canada interest rate increase came true.

The Bank of Canada (BOC) announced that interest rates are going up to 1.5%.

This is the fourth time interest rates have risen in a year. They first rose from 0.5% to 0.75% in July of 2017, then to 1% in September of 2017, and most recently to 1.25% in January of 2018.

The global and Canadian economies, inflation, and changing economic makeup were all given as reasons for the July 2018 increase to 1.5%.

In the past, the Canadian economy relied more heavily on household spending and the real estate market, meaning that keeping interest rates low helped people spend more money and buy more real estate. But now the economy is shifting towards other economic drivers, including exports and business investments.

For the Canadian consumer, this means that the BOC is now trying to undo record-high household debt levels by increasing interest rates to curb spending. And it’s working.

According to the BOC, “household spending is being dampened by higher interest rates and tighter mortgage lending guidelines.”

But Canadians with high household debt could now be worse off financially. Every time the BOC interest rate goes up, so does the interest on floating, or unsecured loans, such as credit cards, some lines of credit, and variable-rate mortgages.

Two days before the July 11 announcement, BNN Bloomberg reported a study that said 28% of Canadians feared they would have to declare Bankruptcy if the interest rate increased again.

Whether you are in this position, or just want to get a handle on outstanding debt, there are some measures you can take:

  1. Assess your current debts and interest rates. Which ones have floating interest rates that will change with this increase? How much will they go up? Focus on paying off those debts or consolidating them into one payment.
  2. Consider debt consolidation options. There may be an avenue available for you to take out a debt with a fixed interest rate and use that loan to pay off your outstanding variable-rate bills. You would still need to pay off the new loan, but the interest rate would stay the same, so you could plan it and not be derailed by any further changes.
  3. If your consumer debt is too high to manage, seek professional advice. Your best option could be to file for Bankruptcy or to file for a Consumer Proposal if your debt is at an unsustainable level. Interest rates are only going to keep increasing, so if you can’t pay your debts now it’s unlikely to get better in the future.

At Fuller Debt, we can help you assess your financial situation and options. We’ll walk you through debt consolidation, filing for a Consumer Proposal, or filing for Bankruptcy.

Don’t let the Bank of Canada interest rate increase make your financial health worse. Contact us today. Call (416) 927-7200 or visit