Brexit impact on Canadian finances

June 27th, 2016  |  Personal Finance

Unless you were in a coma, you no doubt heard that Britain voted to leave the European Union last week. The vote has split the nation and thrown the world’s economic markets into turmoil. What does it mean for Canada?

The economy hasn’t had the easiest of times in Canada this past year. After the oilpatch downturn last summer, the Canadian resource industry took a major tumble and the country fell into a slight recession. Now that that’s behind us, the country was looking forward to building a stronger economy month by month. Then Brexit happened.

According to Business News Network, Brexit will likely cost Canada’s GDP 0.5% to 1.0% of economic growth in the second half of the year. The damage comes from indirect effects on economic confidence more so than direct consequences.

Canada’s interest rates are now lower than they’ve ever been and it’s been one of the main reasons housing markets in Vancouver and Toronto have been able to grow at the pace they have over the last few years. With borrowing costs lower than they’ve ever been, Canadians have not been shy about piling on debt. The slowly recovering economy heralded the promise of a return to normalcy for interest rates, but Brexit has changed all that.

The Bank of Canada will likely hold rates low during the economic slump which means lower mortgage rates and cheaper rates for borrowing in general.