Canadians Feeling The Pinch Of Higher Interest Rates
Following more than seven years of historic lows, the Bank of Canada surprised many debtholders last summer by announcing two interest rate increases in less than three months. For a country already burdened by record levels of debt, the move forced millions of households to reconsider their finances; particularly how to compensate for higher payments while still keeping up their other bills and living expenses. The rate hikes carried the sharpest sting for those with variable rate mortgages, with the average household now paying $130 more per month than they were in June. Considering more than 40% of Canadians are already less than $200 away from not being able to pay their bills, the prospect of further increases on the horizon has left many wondering how much longer they will be able to make ends meet.
A new poll conducted by Ipsos on behalf of MNP LTD reveals one in three Canadians are already feeling the effects of recent increase, while two in five worry any further increases will put them in financial trouble. A majority, 70%, say they will be more careful about how they spend their money moving forward.
It is positive to see Canadians taking an honest look at their debt situations and thinking about what changes are required to offset their increased costs. However, more dramatic steps are required if many hope to weather this storm over the long term. With such narrow room for error, those who do not yet have a budget will want to consider making one so they can get the most out of every dollar they earn. They will also want to seize any opportunity to pay down the principal value of their debts and consider not using credit until their existing balances are paid down – especially over the upcoming holiday season. Finally, as interest rates are still low, those with variable rate debts might look at locking in now to avoid the sting of any further surprise increases in the new year when debt levels tend to be the highest.
Original coverage discussing the Ipsos poll and concern amongst Canadians was published online on October 23, 2017.
