The Bank of Canada’s sixth straight interest rate cut will provide relief to Canadians' finances in various ways, according to a financial expert.
The country’s central bank slashed the key rate to three per cent Wednesday as it projected stronger GDP growth in 2025 if the United States doesn’t get into a trade war with Canada.
Although the interest rate cut was expected, Paul Shelestowsky, an investment adviser, says he thinks “it’s going to provide quite a bit of relief” to borrowers or people looking to borrow.
- Top business headlines, all in one place
“It will continue to bring down mortgage rates, loan rates, if you’re on a variable rate loan, even credit card rates ... it’s going to be felt across for pretty much all Canadians,” Shelestowsky said in an interview with CTVNews.ca on Wednesday about the central bank’s decision. “It will provide that relief to Canadians to help with their cash flow.”
Shelestowsky expects Canadians will have more discretionary income since debt repayment will be less costly, even though the central bank’s rate cut won’t help much with the price of goods and services, as inflation is expected to be stable.
Canadians may see rates decrease for lines of credit immediately, Shelestowsky says, while it may take a while for credit card rates to follow suit. He adds that credit card companies will make changes based on a number of factors that aren’t aren’t necessarily tied to the Bank of Canada rates.
Those who invested in stocks and bonds may benefit from the central bank’s rate cut because those investments tend to do well in a falling interest rate environment, he said.
But it’s a different story for certain savers who put away money for non-risky investments like guaranteed investment certificates (GICs), as they will see their interest rates going down, which Shelestowsky cautions could mean less earning potential.
- The latest on inflation in Canada
Shelestowsky doesn’t think the BoC rate cut will hurt those who have a registered retirement savings plan (RRSP), a registered retirement income fund (RRIF) or a tax-free savings account (TFSA) and may even boost savings for those with well-balanced portfolios.
“Those tend to have a longer time horizon, meaning they’ve got a balance of stocks and bonds,” he said.
Would-be homeowners and current homeowners renewing their mortgages will also find relief, he added.
“I think it’s going to really make it easier for people to not only buy a house with a mortgage, but also renew their mortgage,” Shelestowsky said.
With files from CTV News' Mike Le Couteur