Rising inflation rates not surprising with record-low interest rates: Kamloops mortgage broker

KAMLOOPS — A Kamloops mortgage broker says record-low interest rates that many people have been taking advantage of in the last year are contributing to the rising inflation rates.

Inflation is at the highest level it’s been since February 2003 and experts say it is not expected to slow down.

Mortgage broker Travis Colman at Colman & Associates says this level of inflation — at 4.4 per cent in September, according to StatsCan — was bound to happen.

Economic stimuli such as government supports, including CERB, as well as the historically-low interest rates have worked to increase demand in the housing market, as one example.

“When the Bank of Canada can stimulate the economy, as they have been doing for the last couple years, and they’re spurring that additional demand for money — for mortgages or for housing or whatever it might be — supply’s a real issue,” said Colman. “To broader that to inflation in general, you look at the other complications because of COVID [such as] supply chain issues.”

Colman says the consequences of low interest rates such as inflation are not always easy to identify in the short term. With the Bank of Canada meeting next week to discuss interest rates, which are expected to rise, people borrowing money at a variable rate could be in for a financial shock soon.

“You’re getting people in and they’re normalizing their budget. They’re taking on vehicle payments based on what their nice little mortgages payment is right now,” said Colman. “The problem is three years from now, four years from now when we see prime [interest rates] up to 3.95 [per cent], which is where it peaked in 2018, we’re looking at payments that are $300, $400, depending on a mortgage size, larger than what people are budgeting or making financial decisions for right now.”