In the latest quarterly survey conducted for MNP LTD by Ipsos, more and more Canadians have expressed concerns about their ability to absorb higher interest rates and service their monthly bills.
Fully half of the Canadian respondents said that they are more concerned about their ability to repay debts, representing a 3-point increase since September. Meanwhile, one-third of those polled said that they would be unable to cover their monthly bills, up by 8 points since September.
42% of the Canadians surveyed said that if interest rates go up further, they will get in financial trouble. 32% feared that rising interest rates could push them towards insolvency, an increase of 4 points since September.
However, while over 70% said that as interest rates rise, they’ll be more careful with their expenses, 48% of Canadians still anticipate having to go further into debt to cover their expenses over the next year.
“The psychological effects of the Bank of Canada interest rate increases might not match up with Canadians’ intended behaviours yet. While Canadians say they are heeding rate increase warnings, they are still reliant on credit to make their household budgets work. The result may be a dangerous debt trap that will be impossible for some to ever get out of,” MNP LTD president Grant Bazian said.
On average, Canadians were left with $112 less at the end of the month compared to the previous quarter.
“Canadians [said] they are left with $631 after bills and debt obligations, which represented a 15% decrease from last quarter ($743), and a 29% cut since June ($892). Nearly half (48%) of Canadians said they are within $200 of not being able to pay their bills and debt obligations, up 6 points,” the report explained.
Meanwhile, 34% agreed they are concerned about their current level of debt, and 38% regretted how much debt they’ve taken on in their life. Almost 60% of Canadians do not think they’ll be debt free in retirement.
“The results highlighted just how financially vulnerable Canadians are. Even small interest rate increases result in escalating financial strain and anxiety,” Bazian concluded. “With interest rates on the rise, Canadians are more stretched financially than they have ever been before. I wouldn’t say we’re at a major tipping point yet, but likely not far off.”
Are you looking to invest in property? If you like, we can get one of our mortgage experts to tell you exactly how much you can afford to borrow, which is the best mortgage for you or how much they could save you right now if you have an existing mortgage. Click here to get help choosing the best mortgage rate