SCU members should expect further interest rate adjustments in 2022

Steinbach Credit Union’s chief executive says we likely haven’t seen the final interest rate adjustment for 2022.

On Wednesday, the Bank of Canada raised interest rates by 25 basis points to 0.50%. Glenn Friesen, CEO of SCU, said that like all financial institutions, they followed suit by also increasing their lending rates by 25 basis points.

The prime rate for SCU is now 2.7%. Friesen says if you have a $100,000 mortgage, that equates to an increase in interest costs of about $250 per year.

Friesen says their savings rate reaches 1.10.

Friesen says the Bank of Canada raised interest rates to slow the economy and keep inflation between 1% and 3% to meet its mandate. He notes that currently the inflation rate is above 5% in Canada.

According to Friesen, bond markets indicate there will be three or four more adjustments in 2022.

“They want to get back to a neutral rate, which is probably where we were before COVID-19,” Friesen says.

He notes that when COVID-19 hit, interest rates fell 1.5%.

“I can see them coming back over the next two years from that 1.5% and that could be considered a neutral rate,” he says.

He notes that before the pandemic, the prime rate was 3.95%.

Friesen says interest rates are still historically low, making it a great time for borrowers, but not so good for savers and retirees.

Stephen V. Lee