Record-High Canadian Gas Prices + 1.5% BOC Mortgage Lending Rate Could Mean Big Trouble
Two national trends could mean big trouble for the average Canadian consumer’s wallet.
- The Bank of Canada interest rate increases, and
- Record-high Canadian gas prices.
Let’s break those down further.
Canadian Interest Rates
Since July 2017, the Bank of Canada has increased interest rates from 0.5% to 1.5%. The 1.5% interest rate is the highest that it has been in nearly 10 years. Increased interest rates can affect all forms of unsecured debts, such as credit card payments, some lines of credit, unpaid bills, variable-rate mortgages, etc.
The increased interest rates can also affect your ability to get a mortgage (if you’re a first-time homeowner or buying a new home) and your current mortgage rate if your existing mortgage is up for renewal.
Increased interest rates can affect your gross debt service (GDS) ratio, which is the amount you spend each month on housing-related debts, and they can also affect your total debt service (TDS) ratio, which is the amount you spend each month on all debts. Lenders will use the GDS and TDS to determine whether you are eligible for a loan.
Canadian Gas Prices
In 2018, Canadian gas prices have hit record-high levels and they’re likely not going down any time soon.
In April of 2018, in B.C. the price of gas hit $1.619 per litre— the highest price point ever for North America. As of July 3, 2018, the national average price of gas in Canada was $1.37 per litre. Prices dropped slightly after that, but still remained high.
According to Dan McTeague, an analyst with GasBuddy, a prolonged gas price increase could translate into estimated costs of $350 to $550 annually for the average Canadian driver. If a family has multiple vehicles or a long commute, that figure could be even higher.
Canadian gas prices are expected to stay this high, or potentially even increase further, for the remainder of 2018.
What You Can Do
If Canadian interest rate increases or gas prices are hurting your bank account, you’re not alone — but there is something you can do about it.
Take a look at your resources. If gas prices are the issue, calculate how much you are spending each month on fuel. See where there is room to cut back — for example, carpooling. Consider a club membership, such as Costco, where members get discounts on gasoline, or fill up gas tanks when prices are lower.
If the fuel expenses are necessary and there’s no room to pare back anymore, look at the rest of your budget. Is there another expense category you can trim to make room?
If rising Canadian interest rates are keeping you up at night, there’s a solution for that, too. Make a list of all of your outstanding debts and their interest rates. Can you make a plan to pay off the highest-interest debts first? Or you could consider debt consolidation, where you take out a consolidation loan, pay off your outstanding debts, and then pay back the loan. With this method, you only have one monthly payment to make.
In either case, if there is no room in your budget for gas prices, or your debts are too high to manage, it might be time to consider other debt management options, such as filing for a Consumer Proposal or filing for Bankruptcy. A qualified financial consultant can help evaluate your situation and assess what options are best for you.
At Fuller Landau Debt Solutions, our experienced Licensed Insolvency Trustees will be your ally whether you’re planning for increased Canadian gas prices, increased interest rates, or both.
Contact us today for a free consultation. Call (416) 927-7200 or visit www.fullersolutions.ca.