Canada’s rising interest rates pose a great question about Canadian immigration.
Reportedly, the Bank of Canada constantly raised the policy rate of interest to fight back against Canadian inflation. Overall, in 2022, Canada witnessed a continual increase in interest rates. However, on October 26, the Bank of Canada raised the policy interest rate to 3.75 percent by 50 points.
As per earlier reports, Boc’s policy interest rate began at 0.25 percent on January 26. Moreover, the interest rate increased continuously by a minimum of 25 basis points based on each raise.
Bank of Canada fixes a policy interest rate as a reference point, as it provides information to the clients on mortgages and credit lines’ interest rates charged by Canadian banks.
Impact of interest rates
However, the impact of the interest rate on consumers will largely depend upon whether they will become borrowers or savers.
The current interest rate in Canada will impact the borrowers and savers in the following ways:
- Savers– The rise in interest rates might make the banks increase the interest rates on savings accounts. However, they will not have any obligation to do so, yet they might do it to align with the borrowers’ interest rates. This might even happen if the banks experience extreme competition and pressure.
- Borrowers– Homeowners might have to face increased debt and even face challenges while applying for a new loan due to the increased interest rates. For instance, a house owner who seeks renewal for their fixed-rate mortgage could experience costly monthly payments. The same situation applies to mortgage owners (variable rates), who might face a gradual increase in payments identical to the policy rates.
The reason behind the increased interest rates
The primary reason behind the increased interest rates is to lower inflation in Canada. Essentially, by raising the interest rates, the economy will gain stability. Additionally, higher interest rates might lead to fewer consumers borrowing money as they will have to pay more. Accordingly, buying goods will eventually decline along with the demand for goods. Contrarily, consumers are more likely to focus on more savings because of the rise in interest rates on savings. However, these initiatives will stabilize the economy and work in favor of Canadians in the long run.
Presently, the interest rates might continue to rise for some time; however, they will only continue for a short time.
Impact of Canada’s interest rates on Canadian immigration
The increasing interest rates can economically impact the Canadian population. Considering the economic perspective, uncertainty in the economy is quite possible as it will eventually demotivate the immigrants from coming over, or they might have to rethink their options. Fortunately, Canada’s economy and society won’t get affected.
Canada underwent slow immigration due to the rise of Covid-19 and other travel restrictions. However, immigration figures are rising as the situation shifts to normalcy. In 2021, Canada welcomed the maximum number of immigrants in one year. The highest record set in 1913 for the number of permanent residents also broke with 405,000 permanent residents.
This means that Canadian immigration didn’t negatively impact due to the rising interest rates. Overall, Canada’s immigration prospects look brighter. Additionally, Canada’s high immigration targets also confirm the same about its immigration future. The Immigration Levels Plan 2022-2024 is proof of the high targets set for immigration for the following years.
Canada will currently welcome more than 430,000 newcomers each year until 2024.
Take a look at the following targets:
- The latter part of 2022 and its immigration target- 431,645
- Immigration target for 2023- 447,055
- 2024 immigration target- 451,000
For the 2023 to 2025 Immigration Levels Plan, you will have to wait until November 1 this year.
Besides this, the new immigration plan might also revise the current immigration plans set for 2023 and 2024. However, the targets for IRCC will continue to be high because Canada is ready to compensate for the low immigration figures due to the pandemic.
The link between Canada’s rising interest rates and immigration
Several people have assumed that Canada’s rising interest rates negatively link Canadian immigration. Contrarily, this isn’t true if we look at Stephen Brown’s perspective, a Canadian economist who believes that immigration can significantly contribute toward reducing Canada’s interest rates.
Canadian Statistics reports suggest that immigration helps in addressing the acute labor shortage prevalent in the country. According to June 2022’s published report, it is clear that 84 percent of the increase in the labor force took place due to immigrants during the 2010s. In the future, Canada’s immigration can significantly contribute to reducing the labor shortage gap across the country.
More immigrants imply that job vacancies in Canada will also reduce. This will eventually reduce the burden of increasing wages on the Canadian economy. New immigrants coming to Canada will not just help reduce the demand for the labor force but will also lead to a decline in job vacancies. Due to deteriorated interest rates, Canadian immigration will gradually lead to a stable economy.
The Canadian economist also suggests that immigration will be critical in slowing Canada’s inflation rate in 2023. Apart from this, property rentals will rise, and there will be more expectations from newcomers coming to Canada. These factors will regulate the prices, providing stability to Canada’s housing market and proving advantageous for the country.
On the whole, Canadian immigration will benefit the country from an economic point of view and obviously for the immigrant’s future.
