Not all Canadians feel the pain of interest rate hikes. Here’s why that might change

interest rates today, efforts to get inflation back to manageable levels could leave some debt and mortgage holders feeling the pain for years to come.The Bank of Canada is widely expected to raise its benchmark interest rate again on Wednesday, marking the fifth time it would have raised the cost of borrowing so far this year in an attempt to cool the economy and tamp down rampant levels of inflation.

Bank of Canada expected to raise key interest rate again as inflation persists CIBC deputy chief economist Benjamin Tal argues that thanks to the structure of Canadian household debt, the direct impact of rising interest rates is currently limited to roughly one in four debt holders, largely focused around homeowners with certain kinds of mortgages.“When people hear about higher interest rates, they assume that everybody will be paying more.

And that’s not the case because of the structure of debt in our economy,” Tal says.Tal and CIBC’s Karyne Charbonneau broke down the impact of rising interest rates on Canadian household debt in an Aug.

22 report using data from Statistics Canada.The authors note in the report that 30 per cent of Canadians are completely debt-free, meaning a more expensive borrowing rate won’t affect their payments at all.Many people with debt don’t actually have a mortgage, meaning their household debt comes from credit cards or loans to finance a new car, for example.But credit cards already have very high rates of interest, making the impact of Bank of Canada rate hikes largely negligible, Tal argues, and instalment-based loans usually have steady interest rates through the length of the term.