Canadians scrambling to pay off debt as interest rates rise: poll
The quarterly MNP consumer debt index survey found 43 per cent of respondents said they are already feeling the effects of higher interest rates in Canada, which is up five percentage points from three months ago.
The result is just one of a number of findings showing that Canadians’ household budgets have significantly higher since the Bank of Canada started raising interest rates in July.
“With interest rates increasing, people are recognizing that they are getting closer and closer to the point of not paying off their bills,” David Gowling, senior vice president at debt consultancy MNP.
The poll, released on Monday, showed 51 per cent of respondents said they fear the rising interest rates could affect their ability to pay down debt. One-third of the respondents said the rising interest rates could possibly push them toward bankruptcy.
Forty-seven per cent of the respondents said they do not believe they’ll be able to cover all living and family expenses in the next 12 months without going into further debt.
“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,” said Grant Bazian, president at MNP, in a media release.
“But a staggering percentage of Canadians say they already don’t have any wiggle room at all,” he said.
As more Canadians renew their mortgages this year, Gowling said it could put stress on a household’s monthly budget. For example, if your mortgage is $200,000 to $400,000 and there is a one to two per cent increase after the renewal, a household could be paying $200 to $400 more a month, he said.
“This may be enough to tip someone over the edge,” Gowling said.
“So people should pay attention to what debt they have and get it under control,” he added. “The best thing you can do is talk to a lender and negotiate. Get a payment you are comfortable with. A fixed rate mortgage may be the best for one person, but for others, it may be a variable rate.”
The survey also found that less than one in three respondents said they are confident in their ability to cope financially if there was an unexpected life-changing event.
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Gowling said there is a lot of danger to this finding as debt is only going to get more expensive.
“If something were to happen, such as car repairs or you losing your job, would you be able to cope with the change?” he said.
Canadians need to be more proactive about managing debt instead of maintaining the status quo, Gowling said. If you’re having trouble making ends meet and are only making minimum payments on debts, Gowling recommends you seek help from an accredited professional right away.
The Bank of Canada has raised its key interest rate target three times since last summer, which also caused big banks to raise their prime lending rates. The central bank is expected to make its next interest rate announcement this week.
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The MNP poll was done between March 12 and March 16 and included a sample of 2,001 Canadians that were interviewed online.
The polling industry’s professional body, the Marketing Research and Intelligence Association, says online surveys cannot be assigned a margin of error because they do not randomly sample the population.
— With files from the Canadian Press
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