Economists warn of faster interest rate rise after election

Interest rates could rise sooner under the new Trudeau government if spending plans have the desired effect on the Canadian economy.

Economists have been crunching the numbers following the Liberal victory Monday and believe that the $10 billion boost to the economy through the planned infrastructure program and other measures could mean that the Bank of Canada would be ready to hike rates as economic conditions improve.

This raises concerns over higher mortgage payments and the debt-to-income ratio in households.

Some of Canada’s largest mortgage lenders are among those predicting the gains for the economy from federal spending plans: TD Bank economists suggest a 0.1 to 0.3 per cent positive impact on GDP, while BMO is predicting 0.5 per cent with overall growth for 2016 of 2.5 per cent.

Those on higher incomes are set to lose out in the new government’s plans for a new higher tax rate and would mean New Brunswick would have the highest combined tax rate for those earning above $200,000 at 58.75 per cent.

Nova Scotia, Quebec and Ontario would also collect more than 50 per cent in taxes from high earners.

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