The average Canadian carries $22,000 in non-mortgage consumer debt, but here at home people are deeper in the red. In Saskatchewan, the average debt load is $24,462, making Saskatchewan the second highest province behind Alberta.
Now that the Bank of Canada announced a second key interest rate increase this summer, 0.75 per cent to one per cent, paying off that liability is about to get more expensive.
“It’s not going to break most people,” University of Regina associate economic professor Jason Childs said.
“But it might put a few people over that edge where they can’t handle their debt servicing obligations anymore, and that’s when people start getting into trouble with financing and bankruptcy.”
READ MORE: Bank of Canada raises interest rate to 1% – and that’s not the end of it, economists say
There are resources to help people struggling with debt, such as the Credit Counselling Society. Credit counsellor Tanis Ell said her average client owes around $30,000 in consumer debt.
“Something else homeowners can do is use their home as a source of income. Maybe they have a spare room they can rent out to a student.”
Ell added another option could be renting storage space in your garage.
With the key interest rate now at one per cent, Ell said that interest rates ranging from variable mortgages to common lines of credit.
“Their minimum payment required will increase. The amount of interest that they’re paying will increase, and ultimately take them longer to pay down the debt, especially if they’re only making minimum payments,” Ell said.
READ MORE: Canadians have more debt than ever, but fewer are going bankrupt. Why?
However, there are those that stand to benefit from the interest rate adjustment according to Childs.
“People who are on fixed incomes that are interest dependent for their income, they’re going to be doing better,” Childs said. “Anybody who’s got bonds or those fixed income assets. It’s going to generate more income at a lower risk.”
This type of fixed income can include seniors living on their pensions.
As for why the Bank of Canada is raising interest rates, Childs believes it is and intentional slow down to control interest rates and stabilize the economy.
“So we’re seeing that they’re trying to hit the brakes a little bit so we don’t get an explosion of growth, which will be followed by potentially an even bigger bust,” he explained.
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