Experts are warning the public to expect further rate hikes after the Bank of Canada interest rate increased a quarter of a point to 2.75 per cent on Tuesday.
"You have to be careful not to exceed your ability to repay loans at an interest rate that is more in line with what we expect to happen in a couple of years," economist David Hobden of Central 1 Credit Union told CTV News.
This is the second rate hike in the last two months. For a year and a half the prime rate was 2.25 per cent, but went up to 2.50 per cent in June.
Economists from the major banks surveyed on Wednesday said in the next six months the rate could jump to 3.25 per cent. By the end of next year the lowest forecast estimates the rate will be at four per cent, the mid-range estimate is 4.5 per cent and the highest is five per cent.
The new Bank of Canada rate immediately bumps up any loan tied to the prime rate. Other types of personal loans, such as car loans from banks, may also be affected.
"Variable rate mortgages, lines of credit, credit card debt are the main types of existing loans that are affected by it," Hobden said.
With a report from CTV British Columbia's Chris Olsen
