Consumer confidence shaken: Londoners react to interest rate hike

With the Bank of Canada’s aggressive one per cent interest rate increase on Wednesday, many in the London region are wondering how they’ll get ahead — whether it’s buying or selling a home, or investing in their small business.

Londoner Fernando Vecchi Xavier emigrated from Brazil seven years ago. He just opened his restaurant Acaio Concept in downtown London last month.

With the prime lending rate up a full point, he worries it will be tough to get his new business off the ground.

“I never got a loan, I had to use my own money,” he said. “So seven years living in Canada, all the money came to this business, all the savings. I didn't even buy my first house yet so I could invest everything in the business.”

Buying and selling a home just became a little harder as well. It comes at a time when the market was already slowing down.

Randy Pawlowski, the president of the London St. Thomas Real Estate Association, advises those in the market not to panic.

“The challenge with the interest rate hike is that it really shakes consumer confidence,” said Pawlowski. “And when that happens many just push pause and put things on hold, so it will take some time before the aftermath kind of unfolds and we see actually what's happening month over month.”

However, the dream of ever owning a home continues to slip out of reach for many.

London renter Melissa Bailey finds herself in that boat. She’s already been turned down once for a mortgage.

“It would be even harder than it was before because you have to come down with a least $10,000 to $20,000 down payment before they'll even accept you to do a mortgage,” she said.

The rate hike to 2.5 per cent from 1.5 per cent is the largest single increase by the central bank since 1998.

Further rate hikes are expected later this year.