P.E.I. homeowners, small businesses feeling effects of rising interest rates
CBC
The rising cost of borrowing is leaving some homeowners and small businesses on P.E.I. with a feeling of uncertainty.
In efforts to slow inflation, the Bank of Canada has increased its lending rate nearly five per cent in the last year and a half, meaning mortgage rates have shot up as well.
Charlottetown mortgage broker Kim Reddin said that has many of her clients worried.
"I'm getting emails in my inbox all the time. They're very concerned," she said. "Their mortgage is coming up for renewal in the next year. They're worried about maybe not being able to afford their house. I don't want people to panic like that."
Anyone renewing now, after a five-year term, can expect to pay about 30 per cent more each month, Reddin said.
Some with variable rates have seen their payments go up constantly. For those trying to break into the housing, the rising rates have also made things even harder.
"People who qualified for a certain amount before rates went up now don't qualify for that same amount," Reddin said.
"So they're struggling to find homes for what they're preapproved for, because rates are so high."
Businesses are also feeling the effects of rising interest rates.
A recent survey by the Canadian Federation of Independent Business shows borrowing costs are now the biggest financial constraint its members face.
"The arts and recreation, hospitality sector that were really hard hit during the pandemic, they're barely breathing," said Frederic Gionet, senior policy analyst with the CFIB.
"They were hoping for a good season, a good tourism season to prop that up. But one season may not fix the entire problem. And having these debts roll over into higher interest will just increase the cost of them doing business and put them in an even more precarious position."
Gionet said small businesses pay about 2.1 per cent above the prime rate, meaning their cost to borrow would currently be about 9.3 per cent.
In February 2022, a $50,000 loan paid monthly for five years would have cost $5,811 in interest. The same $50,000 loan today would cost $12,330 in interest over the same period, a $6,519 increase.
This First Person column is the experience of Shannon Flaman, who lives in Red Deer, Alta. For more information about CBC's First Person stories, please see the FAQ.
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