Canadians Increasingly Pessimistic About Their Ability To Absorb Higher Interest Rates And Cover Monthly Bills

According to a recent Ipsos poll conducted by MNP LTD., Canadians are increasingly worried about their ability to repay their debts. Since interest rates first rose in July, households across the country have noticed their budgets tightening as they struggle to keep up with expenses and manage other rising costs. Jumping eight percent since September, a full one-third (33%) of Canadians now say they are unable to cover their monthly bills and debt repayments. At the same time, almost half (48%) say they are $200 or less from not being able to meet their monthly financial obligations.

Disposable income has also declined noticeably over the previous two Consumer Debt Index surveys. The average Canadian notes a 15 percent reduction in money left over after bills and debt payments since September and a 29 percent reduction since June. Decreasing from $892 to $743, households are now left with $631 to cover any irregular or unplanned costs. This has led four in ten (42%) to express concern if interest rates go up much further they may find themselves in financial trouble and one in three (32%) to worry it may move them towards bankruptcy.

Over 70 percent of Canadians resolve to be more careful with how they spend their money, yet almost half (48%) still anticipate going further into debt just to cover basic expenses over the next year — a five percent increase in less than three months. This indicates many may be stuck in a dangerous debt trap. While they’re heeding warnings that credit will continue to get more expensive, rising costs mean they’re struggling to cover basic expenses without relying on credit to get them through.

Reflecting on their situations, one third (34%) say they are concerned about their current debt situation while nearly four in ten admit (38%) they regret how much debt they’ve taken on. Looking towards retirement, a four percent increase means more than half (55%) of Canadians now doubt their ability to be debt free by the time they leave the workforce.

Among those most likely to be worried about the impending fallout of higher interest rates are Millennials and Gen Xers. With millennials also being the least likely to understand the impact of interest rates on their overall finances, these two groups are also the most likely to worry they’ll be in financial trouble if rates go up much further — at 50 percent each. There is an entire generation who has never known anything but historically low interest rates, readily available financing and low returns on savings. They’ve never been prepared to switch from a borrowing mindset to one focused on savings and that could prove detrimental as debt becomes more expensive.

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 December 8th to December 13th, 2017. 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 third wave of the MNP Debt Index.