How the Bank of Canada jump in rates affects you

The Bank of Canada's overnight rate increase impacts Canadians in many different ways.

For some who are looking to buy a home, it might mean you're looking in a slightly lower price bracket.

For others who are simply saving, interests rates might positively impact your finances.

Whatever situation you find yourself in, we asked Robert Oleksyn to break down what it all means for the every day Canadian.

"How it impacts you really depends on the specific terms of your mortgage and Mastercard and things like that," said Oleksyn. "For example, on your Mastercard, if you pay it off every month it's not going to matter to you at all because you don't pay any interest."

Oleksyn is a senior wealth advisor for Valley First, a division of First West Credit Union.

He said the first thing most people will notice is that any borrowing will be slightly more expensive.

He added that if you're in a five-year mortgage, then it's also not going to impact your payments, because the rate has already been predetermined.

However, people who are looking to buy a home, will likely notice the rate increase.

"If it makes it more expensive for you to borrow, you might not be able to borrow as much money as you thought you could before and therefore you might not be able to put a bid in on a house that you wanted to buy."

In general, he said it will have a "tightening" effect on how many purchases are available over that time frame.

"Is that bad? I don't know. I guess it depends on your financial specific situation."

Oleksyn said it depends on one's perspective, as even with the increased interest rate, the rates are still relatively low.

The graph below shows the interest rates from 1993 to 2017. As you can see, the interest rates over the past 10 years have remained at a significantly low rate.

"Interest rates versus 20 years ago are still very low in relative terms. So I mean interest rates are still going to be low, they're just not going to be as low as they were yesterday. You talk to anyone that's 70 or 80, they all can tell you about mortgages of over 12%. We're still at the historic low end of what interest rates would be in Canada."

Moving forward, the Bank of Canada has said that any change that gets made is made cautiously.

As many have suggested, Oleksyn agrees that by increasing the rates and therefore making it more expensive to borrow has allowed the Bank to slow down the rate of growth in the economy and pump the brakes on inflation.

"So if inflation continues to grow well I'm presuming that they'll continue to keep putting it up. If it works and inflation stays the same within their targets, it would stay the same," he said. "Right now they're just tapping the brakes a little bit to slow down the economic car."

Oleksyn said interest rates have been at record lows for such a long time that it was only a matter of time before they came up.

He added that whenever there's any sort of market change or personal financial change, it's a good idea to review your financial goals with an advisor.

"We're always expecting changes in the road, sort of like going from Kelowna to Oliver; you know generally how long it takes but sometimes you can make it a little faster and sometimes you can a little slower. The idea is just to keep checking and seeing that you're on track."

Valley First is a division of First West Credit Union and was founded in Penticton, B.C. in 1947. Valley First was established in 1983.