OTTAWA — The price of gas is going up. The cost of groceries is going up.
And now that the Bank of Canada has started to raise interest rates, the cost of borrowing is going up.
If you are worried about what that will mean for your finances, financial experts say, now is the time to do something about it, before the central bank raises rates any higher and you find yourself in trouble.
Taz Rajan of Bromwich+Smith says if all of your paycheque is already spoken for when it hits your bank account, it may be a warning sign that you need to make changes as the cost of living rises.
"It's a horrible perfect storm if you have a variable-interest mortgage rate or if you've got a line of credit or something that's based on that prime rate, you know your payment on that just went up," said Rajan, a community engagement partner at the bankruptcy trustee firm.
"Your interest rate went up and you're getting signals that just the first of many, and you're paying more at the pump, you're paying more at the grocery store, so right now is a very tough time for Canadians.”
The Bank of Canada's key interest rate is near its rock-bottom level even after it was hiked a quarter of a percentage point last week, but the central bank has warned there are more increases on their way.
Anyone worried about what that means down the line might want to be proactive and talk to creditors about the situation now, before things become a problem, Rajan said
"Talk to your creditors. Be proactive, see what they can do. They have resources you know at their fingertips that they can work with you on in many situations.
"It depends on your relationship with your creditor or the institution, but it is worth taking that as one step."
When the Bank of Canada raised its key rate target , the country's big banks responded by increasing their prime rates by the same amount. That increase raised the cost variable-rate mortgages and other loans linked to the benchmark rate.
Those with fixed-rate mortgages were unaffected by the increase, but rates are rising and when homebuyers today need to renew their mortgage in the future, they will likely face higher interest rates than what they currently have locked in.
Elke Rubach, president of Rubach Wealth, says many people have taken out big loans to get into the housing market and while their payments are affordable now, they need to be sure they will still be manageable in the future if interest rates are higher.
She says it is important to take a look at your budget and understand where your cash is going.
"How much are you spending? What is non-discretionary? What is discretionary and within the discretionary? Do you need to adjust?" Rubach said.
Rubach says people have a golden opportunity to get things in order now before rates become a problem because if you don't, you could face a cash crunch without enough money to meet your commitments.
Taking a careful look at your situation today and where it will stand when your costs rise can help you make changes to avoid problems in the future.
Rubach says you might not find any problems and that your budget will be fine, but "what if."
This report by The Canadian Press was first published March 10, 2022.
Craig Wong, The Canadian Press