EDITORIAL: Inflation, rate hikes to hurt for years to come

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Things are going to get worse before they get better.

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That was basically the message from the Bank of Canada on Thursday — a sobering and frustrating one to say the least.

For a long time now, Canadians who have been looking to become homeowners have faced struggles when it comes to the surging price of housing.

But what was said Thursday will be concerning for all homeowners — or at least those who have yet to pay off their mortgages.

For starters, the Bank confirmed that interest rates will continue to rise. They’re doing this to cool inflation.

The goal of Bank of Canada economists is to keep inflation within the 1 – 3% window, that’s considered healthy and manageable. We’re now officially sitting at 6.8% inflation, although that’s just the top line number.

It gets much higher depending on the product, and groceries have gone up by 10%. Consumers know this already — they’re seeing it on the price tags and feeling it in their wallets.

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Here’s where things get wilder: “Higher interest rates at the time of mortgage renewal will significantly reduce the financial flexibility of some households, particularly the most indebted,” a report from the Bank of Canada reads. “Elevated inflation will erode the purchasing power of households if wages do not rise in tandem.”

Anyone who is renewing a mortgage in a few years from now is going to be paying a lot more on their monthly payments. An average middle-class family could be paying an extra $1,000 per month for their mortgage payments.

“Increasing monthly mortgage payments for more than $1,000 will be crippling for most families,” writes Brian Lilley in a recent column.

Then factor in the increase in groceries and gas and how not everyone is going to see their income rise during this period, and we have a recipe for disaster.

Why did the Bank of Canada keep interest rates so low for so long, effectively fueling bidding wars? Why did they print more and more during the pandemic, which only worsened inflation? Why is Prime Minister Justin Trudeau still dogmatically obsessed with increasing the carbon tax and bringing in another one?

These are just some of the questions that need to be answered.

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