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The Impact of Interest Rate Hike on Canadian Households

If, as an entrepreneur, you haven’t been following the conversations and monitoring the rise in interest rates at least in the past year or two, you most definitely have been “sleeping at the switch.”  The Bank of Canada increases the interest rate to manage inflation. The central bank raised interest rates seven times in 2022 and has hiked the rates thrice this year.


Although inflation rates have been gradually stabilizing and are now at 3.3 percent (down from a peak of 8.1 percent in June 2022), they are still higher than the central bank’s target of 2%. Economic experts have been non-unanimous in their predictions of another interest rate hike in September. 

Black entrepreneurs in Canada know the unique challenges that can arise on their business journey. However, one challenge that can affect entrepreneurs of all backgrounds is the rise in interest rates. In Canada, as in many other nations, changes in interest rates can have far-reaching effects on businesses. Entrepreneurs must understand the relationship between interest rates, inflation, and business dynamics.

Understanding the Impact

One of the most immediate impacts of rising interest rates is the increase in the cost of borrowing. The cost of borrowing increases as the interest rates continue to rise, especially for borrowers with variable-rate loans or those considering new loans, such as mortgages, business loans or personal loans. Higher interest rates mean higher monthly repayments. The increase in borrowing cost can impact the ability to access funding, strain business and household budgets and limit disposable income for other essential expenses.

As we all know, a lack of funding, either debt, equity or grant, can slow down business expansion plans and increase the financial strain on any company.

Although mortgage interest rates have contributed to the rising cost of living, other factors, such as high grocery prices (which increased by 9% year-over-year in May), also play a role.

Adapting to the Changes

Canadian households have demonstrated resilience in the face of economic fluctuations. Despite concerns about making mortgage payments on time, the number of mortgages in arrears has remained low, reflecting the financial stability of many households. To cope with higher mortgage rates, many Canadians are opting for shorter-term fixed-rate mortgages and extending amortization periods to reduce monthly costs. This mortgage shift reflects the expectation that interest rates will fall within the next few years. The preference for longer-term fixed-rate mortgages has shifted, with terms between one and five years becoming more popular than the previously preferred five-year terms.

Navigating the Challenges

While the impact of rising interest rates on borrowers can be significant, there are strategies to mitigate these challenges:

1.      Refinance: Consider refinancing existing loans to secure lower interest rates, especially for fixed-rate loans.

2.      Debt Management: Prioritize high-interest debts, such as credit card balances, to minimize the long-term impact of interest rate hikes on your finances.

3.      Budgeting: Create a comprehensive budget that accounts for higher borrowing costs. Identify areas where you can cut discretionary spending to allocate more resources toward debt repayment.

4.      Fixed-Rate Loans: Opt for fixed-rate loans, when possible, as they provide predictability in monthly payments and protect you from future interest rate hikes.

5.      Savings Prioritization: Maintain a focus on building an emergency fund and saving for future goals, even during rising interest rate periods.


6.      Financial Advice: Seek advice from financial advisors or experts who can provide tailored guidance based on your circumstances.

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Rob G.C. Sobey

Board Member

Rob G.C. Sobey is a corporate director. Mr. Sobey was the President & Chief Executive Officer of Lawton’s Drug Stores Limited from 2006 until his retirement in 2014 after 25 years with Sobeys. He serves as a director of SeaFort Capital and the Institute of Corporate Directors. Mr. Sobey is Chair of the Sobey Art Foundation, a member of the Queen’s Smith School of Business Advisory Board and serves on several foundation and not-for-profit boards. For his work as an Honorary Colonel of the Canadian Army, Mr. Sobey received a Queen Elizabeth II Diamond Jubilee Medal. He holds an undergraduate from Queen’s University, a Master of Business Administration from Babson College, and the ICD.D designation.

Denburk Reid

Board Member

Denburk Reid is the founder of Montreal Community Care Foundation (MCCF). Its mission is to empower youth by developing their leadership skills by using programs, workshops, and events, and by building bridges between communities. As the founder of MCCF, he beliefs that the youth hold the key to Montreal’s future and over the past eight (8) years, its programs have helped hundreds of Montreal youth stay on track, perform community services as well as set and achieve academic and life goals. The organization seeks to empower youth to become engaged citizens and leaders in their homes, schools, and communities. For the past five (5) years, MCCF celebrates and promotes community engagement across Montreal through the Montreal Community Cares Awards.

Along with his role as the founder of MCCF, Mr. Reid is the Founder of Red Rush Basketball & Red Rush Basketball Leadership. He has a passion for empowering youth and meeting them where they are lends to a successful outcome.

Abdikhier Ahmed​

Board Member

Mr. Ahmed is a recognized community leader in the non-profit sector with specializations in immigration and refugee resettlement, poverty reduction, and community empowerment. A dynamic, highly motivated individual with extensive experience in program development and delivery, providing strategic visioning and leadership. Over 10 years’ experience managing programs for non-profit organizations and working with communities and people from diverse socio-economic and cultural backgrounds both locally as well as internationally. Fluently multi-lingual: speaks and writes English, Swahili, Somali and basic Arabic. This experience help guide Mr. Ahmed when he was in the role of Director of Policy at the Office of Canada’s Minister of Families, Children and Social Development.

Mr. Ahmed is currently the Executive Director of Aurora Family Therapy Centre. Aurora is a progressive, non-profit family therapy centre that offers family therapy on a sliding scale; sees clients through services funded by Manitoba Department of Families and Department of Justice; provides community building groups for Newcomers to Canada; hosts a Psycho-Social Settlement Needs Assessment program for incoming refugees; provides summer youth programming for many newcomer communities; supports its own staff and other agencies through vicarious trauma and resilience programming; develops supportive relationships with community partners, and engages in advocacy for accessible community-based therapy services for all. Aurora is in the process of becoming a Centre of Excellence in providing cross cultural therapy from a systemic lens with a special focus on psychological trauma & recovery and community development.