Immigration may help Canada lower interest rates.
Rising interest rates across Canada will burden Canadians looking to borrow money for housing and make many other loan-based purchases. On October 26, the Bank of Canada (BoC) increased the policy interest rate by 50 basis points, up to 3.75%.
2022 has been a year full of continual interest rate hikes, as the BoC has been increasing its policy interest rate throughout the year in an effort to aggressively combat inflation in Canada. Initially, when first reported on January 26, the BoC’s policy interest rate started the year at 0.25%. Since then, the rate has increased by at least 25 basis points with every hike. A policy interest rate is a reference point, set by the Bank of Canada, that informs the interest rates charged to consumers on mortgages and lines of credit by banks across the country.
Savers: With the increase in interest rates, banks may now (although they are not obligated to) raise savings account interest rates proportionally to match borrowing interest rates, especially if competitive pressures are put on these institutions. Borrowers: As an example, homeowners are potentially due to see a rise in debt or they may struggle to acquire a new loan due to rising interest rates. For instance, a homeowner set to renew their fixed-rate mortgage could face more expensive monthly payments. Similarly, variablerate mortgage owners may see increased payments over time that mirror these new policy rates.
Why are interest rates rising?
Now that we’ve covered what is happening with interest rates in Canada, let’s talk about why. Simply, interest rates are going up to eventually bring inflation down. Essentially, this is an effort to stabilize the economy because higher interest rates will discourage consumers from borrowing money since it will now cost them more money to do so. The purchasing of goods will decrease accordingly, as will demand in general. Subsequently, consumers will become more likely to save money as interest rates on savings products also rise. These measures will slow down and stabilize the economy, for the betterment of all Canadians in the long run.
Are raising interest rates having a negative impact on Canadian immigration? Considering the impact that rising interest rates can have on the Canadian population economically, it may seem reasonable to expect this kind of economic uncertainty to discourage immigrants from coming to Canada, or at least give them a reason to think a little harder about their other options. Fortunately for Canada’s economic and social prosperity, this is not the case. After a period of slower immigration due to border closures and pandemic restrictions, Canada’s immigration numbers are starting to work their way back to normal. In fact, 2021 saw Canada welcome its highest-ever number of immigrants in a single year. The over 405,000 landed permanent residents cumulatively surpassed the previous record set in 1913.
In other words, Canadian immigration is not adversely impacted by rising interest rates, and things are looking bright for the country’s immigration future. This positive outlook is reaffirmed by Canada’s immigration targets over the next few years, which Immigration, Refugees and Citizenship Canada (IRCC) has laid out in the Immigration Levels Plan for 2022-2024. As part of that plan, Canada is now looking to welcome over 430,000 immigrants annually between now and 2024.
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