Students are disappointed after the Bank of Canada announcement that the interest rate will hold at five per cent.
The rate hasn’t changed since it was announced back in July of last year.
Because of the current rate of interest, which is considered to be high, borrowing will continue to be more expensive. This impacts those with low incomes more such as students, who tend to be more likely to be saddled with high debts, and carry a higher proportion of debt-to-income.
Scott Webster, manager of Sutton Group-Associates Realty, shared his view about students’ situation in the current economy.
“Students are already saddled with a huge amount of debt in the course of completing their education for the most part and high-interest rates serve to increase the burden and make it more difficult for students to achieve a high standard of living,” Webster said.
Students are already hit by inflation, which impacts those with low incomes more, as they spend more of their salary on essentials.
According to Statistics Canada, the average student who applies for student loans graduates with over $14,000 in debt.
Brady Cavanagh is currently one of those students who rely on student loans and he said that it puts a lot of pressure on him in terms of finding a job in the summer to help pay off any outstanding fees.
“You’re paying off school bills on top of phone bills, car insurance, gas isn’t getting any cheaper, groceries aren’t getting any cheaper, so it’s tough,” he said.
Santiago Helou Quintero, another disappointed student, said “A lot of students have to pay rent, have to buy food and are not in a strong financial position. Rising costs like these just put students who are already struggling further behind.”
That’s not all students have to worry about in terms of expenses.
“I live in residence so that’s a huge, huge bill right there,” Cavanagh said.
It costs $8,000 to live in residence, and on top of that, Cavanagh said that meal plans can cost from $2,000 up to $4,600.
However, the next announcement regarding the interest rate will be happening on June 5 and there has been a lot of discussion about the possibility of the rates decreasing.
In a news conference, Bank of Canada governor, Tiff Macklem, said that seeing a rate cut is in the “realm of possibilities.”
But for now, the five per cent rate is what society will have to deal with until then.
Another issue that this interest rate causes is that it creates a wealth gap. This happens because those with low incomes spend a higher proportion of their incomes on debt repayment.
“As the wealth gap widens it takes us back in time almost, our Western economy is built on the concept of a strong middle class which creates more balance and equity in the economy,” Webster said.
“Due to the economic factors that primarily have a detrimental effect on the poor it almost ensures the gap will continue to widen, making the rich, richer and the poor, poorer,” he said.
Like many Canadians, Webster is hoping that the interest rate will decrease to not only allow citizens to live sustainably but also allow the opportunity for Canadians to be confident again in the housing market.
I would love for the Bank of Canada to start decreasing interest rates right away and to do so consistently until we get down to a sustainable rate that allows for reasonable economic growth, while also creating a stable and more predictable housing market,” he said.