Younger, middle-class households to bear brunt of rate hikes

A newly released federal analysis says younger, middle-income households will feel the biggest impacts from the Bank of Canada’s gradual move towards higher interest rates.

The briefing note prepared for Finance Minister Bill Morneau examines the types of households—by income, age and region—most affected by the central bank’s rate-hiking path from extremely low levels.

Read: Effects for clients as interest rates rise

The September 2017 document obtained by The Canadian Press under the Access to Information Act puts a particular focus on how rising rates will boost debt payments for highly indebted households, which are described as those with debt-to-income levels of at least 350%.

The memo says 12% of all Canadian households carry these heavy debt loads and are most likely to be middle-income earners, young to middle-aged, mortgage holders, and live in Ontario and British Columbia.

Read: Banks raise prime rates after BoC announcement

The Bank of Canada recently raised its trend-setting interest rate for the fourth time in a year to bring the benchmark to 1.5%, its highest level since December 2008, but still low by historical standards.

The central bank raises its interest rate as a way to help keep inflation from climbing above its ideal target range of 1-3%.

Read: At 2.5%, inflation in June rises to highest point since 2012

The Canadian Press

The Canadian Press is a national news agency headquartered in Toronto and founded in 1917.