2 The average household faces a $1,000 hit from rate hikes ighteen months in, Canadian households have yet to Average household feel the full brunt of the Bank of Canada’s interest- principal and interest Erate hiking cycle, from the increases that have already payment happened and those yet to come. The amount of interest households pay is poised to rise in the year ahead – adding Increase to increases households were forced to absorb in 2018. 7.6%in 2019 In this age of elevated household-debt levels, even small upticks in interest rates can produce large increases in interest payments. We estimate an aver- age household will pay about $1,000 more in 2019 to service its principal and interest obligations. That would represent a 7.6% jump from 2018 – a tough pill to swallow for many. Rising incomes, however, will provide a buffer. We expect average disposable income per household before debt-service obligations will grow by $2,300 in 2019. This means that after servicing its debt, the aver- age Canadian household will end up with $1,300 more in its pocket. A nice cushion like this will keep a majority of households out of trouble. The question, though, is whether it will be enough to cover the rise in the cost of other goods and services. For many Canadians, it probably won’t. Expect some belt-tightening in the year ahead. RBC Economics Research | Navigating 2019 - 9 big insights for the year ahead | January 2019 7