Polling suggests Atlantic Canadians are feeling the pain of rising interest rates more than those living in other provinces.
According to the latest MNP Consumer Debt Index, conducted quarterly by Ipsos, for every 10 Atlantic Canadians polled, six (or 64 per cent) say interest rate increases have impacted them.
Inflation in Canada hit a 39-year high of 7.7 per cent in May – with the Bank of Canada raising its key interest rate by half a percentage point on June 1, bringing it to 1.5 per cent.
Economists are predicting another hike of three-quarters of a percentage point this Wednesday, but the poll shows Atlantic Canadians are feeling it now.
READ MORE: Bank of Canada will hike interest rate by 0.75% this week, economists predict
According to the MNP report, Atlantic Canadians are the most likely to say rising rates could drive them closer to bankruptcy, with 49 per cent of those polled saying so. That number is up six points from the previous quarter.
People are taking a number of steps in an effort to cope:
- 45 per cent – nearly half of those polled – say they’re cutting back on non-essential spending – things like travel, dining out and entertainment.
- 41 per cent say they’re opting for cheaper versions of their everyday purchases.
- 36 per cent say they’re driving less.
- 30 per cent of respondents say they’re cutting back on essentials – things like food, utilities and housing.
“There’s no relief for Atlantic Canadian households, no matter where they look,” says Tina Powell, a local Licensed Insolvency Trustee with MNP Ltd.
“Housing is more expensive; driving a car is more expensive; food is more expensive.”
In a release issued Monday accompanying the data, Powell says residents are trying to adjust their budgets but will face increasingly difficult choices as the cost of living continues to climb.
“Some could find themselves piling on debt to keep up with their monthly bills,” Powell says.
Nearly six in 10, or 58 per cent, of those polled say they’ll be in financial trouble if interest rates go up much more.
James McNeil, an assistant professor within Dalhousie University’s Department of Economics, says it’s no surprise Atlantic Canadians appear to be suffering more.
“We know already that incomes on average in Atlantic Canada are a bit lower than some of the other provinces and inflation, while it’s been high across the country and across the world, has been on average a little bit higher even in Atlantic Canada,” says McNeil.
He says inflation in the region is about a percentage point higher than the average across Canada.
McNeil explains that the Bank of Canada’s expected raise of it’s interest rate is an effort to cool inflation, but says things will likely get worse before they get better.
“There are not too many examples in the past of central banks lowering inflation without there being some type of effect on the economy. And typically, it’s a bad effect,” he says.
