B.C. Residents Increasingly Feeling The Impact Of Higher Interest Rates

2018-04-12   minute read

Lana Gilbertson

MNP Consumer Debt Index

According to a recent Ipsos poll conducted by MNP LTD., British Columbians' pocketbooks are continuing to get lighter as a result of recent interest rate increases. The latest results from the quarterly survey indicate a worsening situation and foreshadows more trouble ahead. Up three percent over the last quarter and five percent over the past six months, more than two in five B.C. residents (41%) say they've felt the pinch of higher interest payments. More than half (51%) are now concerned past and future hikes could impact their ability to repay their debts. Moreover, three in ten now believe this trend could push them towards bankruptcy, up four percent from December.

Night view of Vancouver port, downtown lighting up the streets and water

The result is even more people struggling to make ends meet. Those who are $200 or less from making ends meet has risen six percent over the last three months — now approaching half of all people (47%) across the province. Nearly a third (29%) admit their budget is already maxed out at the end of the month, while 45 percent of households expect to take on more debt over the next year just to cover basic living expenses — an eight percent increase since October.

A lack of emergency savings also continues to be a pressing concern. Across the board, confidence in British Columbians' ability to handle an unexpected expense looks bleak. In the event of a job loss, only 29 percent believe they could do so without requiring debt — down three percent. The trend is similar for required auto repairs or replacement (34%), taking three months off work due to illness (34%), paying for their own or someone else's education (27%) and a change in relationship status such as a divorce (34%).

B.C. residents are in an extremely vulnerable position right now. Though a surprising number expect their financial situation to improve in both the near and long term, with 34 percent predicting it will be better within the year and 49 percent within five years — certain trends appear to argue against such optimism. Most notably, a vast number of people will require interest rate renewals on their mortgages within the next year. Meaning many homeowners who enjoyed the benefits of unprecedented and record low borrowing costs will soon contend with a significant spike in monthly payments.

Anyone who is only making the minimum payments, relying on credit to cover basic expenses or is struggling to make ends meet would likely benefit from the help of an accredited professional. The sooner the reach out, the more options they will likely have to improve their situation and prevent it from deteriorating any further.

Other poll highlights include:

  • Concern over rising interest rates is being led by Millennials aged 18-34; they are significantly more likely than their older counterparts to have concerns about their ability to repay their debts as a result of a rate hike (61% vs. 53% of Gen Xers aged 35-54 and 42% of Baby Boomers aged 55+) and about moving towards bankruptcy (45% vs. 35% of Gen Xers and 23% of Baby Boomers) if interest rates continue to increase.
  • Albertans (55%) are more likely to say they are already beginning to feel the effects of interest rate increases, followed by residents of Atlantic Canada (51%), Saskatchewan and Manitoba (43%), Ontario (42%), British Columbia (41%), and Quebec (39%).
  • Albertans (52%) are more likely to be in financial trouble if interest rates go up much more, followed by residents of Atlantic Canada (46%), Quebec (44%), British Columbia (44%), Saskatchewan and Manitoba (42%), and Ontario (42%).
  • Albertans (43%) are more likely to be concerned that rising interest rates could move them towards bankruptcy, followed by residents of Atlantic Canada (41%), Saskatchewan and Manitoba (37%), Quebec (35%), British Columbia (30%), and Ontario (29%).
  • Albertans (20%) are the most likely to rate their personal debt situation as terrible, followed by Saskatchewan and Manitoba (18%), Atlantic Canada (18%), Ontario (16%), British Columbia (16%), and Quebec (13%).
  • Women (50%) are more likely than men (40%) to report being within $200 of financial insolvency. At the regional level, residents of Saskatchewan and Manitoba (52%) are most likely to be within $200 of insolvency, followed by residents of British Columbia (47%), Ontario (46%), Quebec (45%), Atlantic Canada (43%), and Alberta (41%).
  • Nearly eight in ten Canadians (78%) say that with interest rates rising, they will be more careful with how they spend their money.

About the MNP Consumer Debt Index

The MNP Consumer Debt Index measures Canadians' attitudes toward their consumer debt and gauges their ability to pay their bills, endure unexpected expenses, follow a budget, and absorb interest-rate fluctuations without approaching insolvency. Conducted by Ipsos and updated quarterly, the Index is an industry-leading barometer of financial pressure /relief among Canadians. Visit www.MNPdebt.ca/CDI to learn more.

The latest Index data was compiled by Ipsos on behalf of MNP LTD between March 12 and March 16, 2018. For this survey, a sample of 2,001 Canadians from the Ipsos I-Say panel was interviewed online. The precision of online polls is measured using a credibility interval. In this case, the results are accurate to within +/- 2.5 percentage points, 19 times out of 20, of what the results would have been had all Canadian adults been polled. Credibility intervals are wider among subsets of the population. This represents the fourth wave of the MNP Consumer Debt Index.