Who wins and who loses when the Bank of Canada raises rates
Economists are now calling for a hike as early as July. So get ready, here’s what it will mean for you
June 30, 2017, 1:51 PM EDT, http://business.financialpost....1a-8f46-25d2565ab308
TORONTO — Another month of solid growth for the Canadian economy in April and upbeat survey results from the Bank of Canada have strengthened expectations that the central bank will soon begin increasing interest rates for the first time in seven years.
Higher borrowing costs would have far-reaching implications for average Canadians, rate-sensitive industries and the broader economy. Below is a breakdown of some potential winners and losers.
With the Bank of Canada keeping its main policy rate near rock-bottom levels since the 2008 financial crisis, Canadian banks have found their net interest margins — the difference between the money they earn on the loans they make and what they pay out to savers — under pressure.
“As interest rates have continued to decline, they couldn’t lower their funding costs anymore,” says Barclays analyst John Aiken.
For example, the banks fund much of their lending via deposits, and they don’t want to reduce the interest rate on savings accounts to below zero, Aiken notes. Rising rates will alleviate some of that pressure on their net interest margins.