How the Bank of Canada interest rate hike could impact Vancouver

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As Canadians reel from the latest Bank of Canada interest rate hike, what does this mean for Vancouverites?

The answer to that question depends on a variety of factors: Are you a homeowner? Are you a renter? Are you an hourly-wage worker? Do you have credit card debt?

While the hike will likely impact all Canadians in some way, people in Vancouver who are used to a higher cost of living versus the rest of the country could feel the pinch more than others.

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In case you missed it, the Bank of Canada increased the interest rate to 4.25%, back to levels we previously saw in 2008. But in 2008, we weren’t dealing with record inflation, crazy food costs, and other financial burdens.

We spoke to Elke Rubach, Principal, Rubach Wealth, and she gave us some insights on how this could trickle down and impact people on various levels.

She first reflected on how different things were between 2008 and 2022.

“The environment is a lot less predictable, and the government continues to spend.”

Rubach added that “it’s time to brace ourselves.”

Real estate impacts

Rubach says the news hurts people who are counting on real estate as a retirement plan.

“If you have to sell now, that’s a problem.”

@bankofcanada people will start losing their homes specially in Vancouver with these interest rate hikes. Our mortgage has almost doubled. Do you enjoy people losing homes?

— Mahdi (@mahdisalehi81) December 2, 2022

Those in Vancouver who are already spending an arm and a leg on their mortgage will also feel the effects of this rate hike, particularly those with variable rates, who will feel the impact of the rate hike almost immediately.

Rubach touched on something we’ve been hearing for years that could’ve made things feel like less of a financial punch in the gut.

“The problem is that construction is not anywhere near as fast as we need it.”

With Canada expected to welcome many immigrants, the lack of supply exacerbates the problem.

She also said that for many people looking at places to go internationally, “Canada continues to be a paradise,” and many people are looking at BC and Vancouver as the place to be.

Job losses

A reality that may exist for some is changing spending habits due to the rising cost of food and other commodities.

Rubach says this potential trend could have an impact on jobs.

“Do I feel like going out to a restaurant with my friends? Or should we do some kind of potluck, and we all bring in stuff, and we keep the cost down.”

Rubach says scenarios like that could mean fewer customers at Vancouver restaurants, and the hourly workers could be the victims. In addition, it could create a situation where one employee is doing the job of two people but is being paid the same amount because an establishment can’t afford to pay them more.

That scenario could play out differently, depending on the industry.

How to minimize the impact

One area where you’ll immediately feel the impact of the Bank of Canada is your credit card.

Rubach says carrying credit card debt at a time like this is a bad idea.

Another piece of advice Rubach offers is to eliminate any non-discretionary spending, which means things that aren’t necessary, like utilities, rent, or food. At least for the time being.

For some, making some sacrifices may be necessary. An example Rubach gave was instead of spending on hockey and soccer for your kids, maybe focus on one until things get a little less tumultuous.

Rubach also told us that some people don’t have to worry, like those who own fancy yachts.

Rubach says finding a financial planner isn’t the worst idea for the rest of us, and you can find one to accommodate your budget. However, she also says that your financial situation is specific to you, and your neighbour’s advice may work for them, but it might not be the best advice for you and your situation.

Are you changing your habits following this announcement?