More than half of Canadians are living within $200 per month of not being able to pay all their bills or meet their debt obligations, according to a recent Ipsos survey conducted on behalf of accounting firm MNP.
As a collection agency Edmonton, collection agency Calgary and collection agency GTA we recognize that the vast majority of consumers we inevitably end up dealing with are good people, with good intentions that have now simply arrived at the tipping point of having to either try to continue to rob Peter to pay Paul or, in the alternative, to make some hard choices in monthly budgeting in order to honour their outstanding financial obligations.
For 10 per cent of Canadians, the margin of error when it comes to household finances is even thinner, at $100 or less.
But those with anything at all left at the end of the month were in better shape than many: A whopping 31 per cent of respondents said they already don’t make enough to meet all their financial obligations
Debt is causing Canadians a fair bit of stress, the polling suggests, but few appear to be on track to buff up their monthly financial cushion.
Two-thirds of survey takers said they are “less than very confident” about their ability to create an emergency fund.
Another hair-raising finding from the survey: Roughly 60 per cent said they don’t have a firm grasp of how interest rates affect debt repayments. Such data raises the question of whether Canadians understand the implications of an interest rate hike by the Bank of Canada (BoC).
As an example a one percentage point rise in the BoC’s key interest rate would likely push up variable mortgage rates by a similar amount. A variable mortgage rate that’s currently set at 3 per cent, for example, would go up to 4 per cent, which represents a 33 per cent increase in interest payments for the mortgage holder. That’s an extra $83 a month for every $100,000 in outstanding mortgage debt.
A decision by the BoC to start lifting its key policy rate from historic lows would raise the cost of carrying debt across the country. The Bank uses interest rates, among other tools, to influence inflation and economic activity. Many economists believe it could start to raise rates in the first half of 2018, as economic growth picks up pace.
Although typically the BOC raises rates gradually and over time, the impact on Canadian wallets will be substantial.