The day of reckoning for over indebted Canadians does not appear to be coming soon, but a new survey indicates a rising proportion of Canadians fear the fallout from higher interest rates. Thirty-three per cent of respondents to a survey conducted on behalf of MNP said they could be pushed toward bankruptcy due to rising rates. That’s up five percentage points over the last six months. The Bank of Canada has raised interest rates three times since last summer, taking its benchmark policy rate to 1.25 percent. Although the Bank of Canada announced on April 18, 2018 that Canada’s key lending rate will remain steady for now at 1.25 percent the survey results paint a worrying picture of how consumers will bear the burden as the cost of borrowing rises.
More than half of respondents to the MNP survey (51 per cent) said they fear higher rates will affect their ability to repay debts, 43 per cent of respondents admit to feeling the effects of already-higher rates, and 29 per cent said they have no financial breathing room after paying monthly bills. “Nearly half of outstanding mortgages have interest rate renewals within a year so monthly mortgage payments are set to rise for a huge proportion of people. But a staggering percentage of Canadians say they already don’t have any wiggle room at all,” said MNP President Grant Bazian in a press release. “Households currently showing signs of financial difficulty and living on credit are about to fall into a debt-trap if interest rates continue to rise or, if they face an unexpected expense.”