Interest rate hike a first in 7 years, but nowhere near rates of the 1980s

The Bank of Canada raised its key interest rate for the first time in almost seven years on Wednesday, but the level is nowhere near what it was in the early 1980s.

30 years ago, double-digit interest rates led to businesses going under

The value of the Canadian dollar relative to its U.S. counterpart rose by more than 1.05 cents on Wednesday, July 12, 2017, after the Bank of Canada increased its key interest rate for the first time since September, 2010. (Patrick Doyle/Bloomberg)

The Bank of Canada raised its key interest rate for the first time in nearly seven years on Wednesday, putting some Canadians — especially homeowners — on alert. 

The rate inched up a quarter of a percentage point to 0.75 per cent, up from 0.5 per cent.

The Bank of Canada said the increase comes as the economy is robust, but the move means consumers will likely have to fork over more money for variable-rate mortgages and lines of credit.

Although this marks the first increase since September 2010, it is nowhere near the rates of the 1980s. The interest rate peaked at 21 per cent halfway through 1981 at a time when thousands of companies went out of business, including right here in Ottawa. 

In a news report from the CBC archives dating back to Sept. 20, 1981, a CBC News reporter explains how a popular café on Elgin Street was one of the casualties of the soaring borrowing rates of the '80s. 

From the archives: Canadian interest rates in the 1980s killed thousands of small businesses.

6 years ago
Duration 2:01
CBC News takes a look back at September, 1981, when the interest rate peaked at 21 per cent. On July 12, 2017, the rate rose for the first time in seven years to 0.75 per cent.

The current rate hike wasn't all bad news. Higher rates boosted the Canadian dollar almost immediately and holders of savings accounts will also see slightly higher returns.

CBC News' Pete Evans breaks down the pros and cons of the Bank of Canada's rate hike in the video below.

How a small interest rate change can cost you big

5 years ago
Duration 1:37
Tick tock, Canada: It’s time to pay more to pay back all that money you borrowed