Credit crunch in Newfoundland: Seven in 10 Atlantic Canadians are concerned about the impact of interest rates on their financial situation, jumping a staggering 15 points since last quarter

2022-10-24  4 minute read

Greg Gosse

Lifestyle Debt

StJohnsDowntown

ST. JOHN’S, NL – October 24, 2022 – As another Bank of Canada interest rate announcement looms, a recent poll conducted by Ipsos on behalf of MNP LTD finds seven in 10 Atlantic Canadians (71%) are concerned about the impact of rising interest rates on their financial situation, increasing a staggering 15 points since last quarter to reach the highest level compared to the other provinces.

“After multiple interest rate hikes this year, Atlantic Canadians are understandably more concerned about the impact on their finances. In fact, they’re more concerned than any of the other provinces,” says Greg Gosse, a local Licensed Insolvency Trustee with MNP LTD.

Atlantic Canadians (64%, unchanged) are more likely than any other province to say they’re already beginning to feel the effects of interest rate increases. Six in 10 say they’re more concerned about their ability to pay their debts as interest rates rise (64%, +7pts), and that they will be in financial trouble if interest rates go up much more (61%, +3pts). Atlantic Canadians are also the most likely to say rising rates could drive them closer to Bankruptcy (49%, unchanged) compared to the other provinces.

Gosse says those who are financially vulnerable and struggling to make ends meet may not be able to cut their budgets any further if interest rates continue to rise and make their debts more unaffordable.

“Many households have already slashed their budget and shaved down their expenses as much as they can. Any future interest rate hikes could force them to take on additional debt just to pay their bills. The problem is, the cost of servicing that debt is also ballooning, which will make it tougher to pay off,” explains Gosse. “Individuals should seek professional debt help from a Licensed Insolvency Trustee before their debt continues to snowball.”

While Licensed Insolvency Trustees can administer debt-relief options including Consumer Proposals and Bankruptcy, they’re also qualified to provide valuable personalized debt advice to individuals who are struggling to budget for their bills and debt repayment obligations. Licensed Insolvency Trustees can also help individuals reduce their debts through an informal debt settlement, a voluntary arrangement negotiated between an individual and their creditors, which will help put them in a better financial position as the cost of borrowing continues to rise.

Gosse says many might benefit from small budget changes to give themselves some breathing room.

“Smaller expenses on your credit card often go unnoticed but can really add up. Monthly subscriptions such as TV streaming, apps, music and cloud services can be sneaky,” says Gosse. “Start by cancelling subscriptions you rarely or no longer use and check in to see if you have any overlapping services you can cut. Set reminders to cancel trial offers before you’re charged or the pricing goes up. Always look over your bills each month with a critical eye to those recurring monthly expenditures and cut down on costs where possible.”

Most Atlantic Canadians (90%, +5pts) agree that they will be more careful with how they spend their money with interest rates rising.

More (25%, +6pts) this quarter say they are better equipped to absorb an interest rate increase of one percentage point than they used to be, while fewer (19%, -8pts) say their ability to deal with this increase has worsened. Only one in 10 (13%, +5pts) say their ability to absorb an interest rate increase of an extra $130 is much better this quarter, while a larger proportion (34%, -10pts) say it’s much worse.

“While more Atlantic Canadians say they’re better prepared to deal with an interest rate increase, these individuals are still in the minority. Many may not understand the full impact of an interest rate hike on their finances,” says Gosse. “Those who are already having trouble meeting all of their debt repayment obligations should seek guidance from a professional to help deal with the debt they have.”

A quarter of Atlantic Canadians (25%) say they don’t have a solid understanding of how interest rate increases impact their financial situation.

About MNP LTD

MNP LTD, a division of the national accounting firm MNP LLP, is the largest insolvency practice in Canada. For more than 50 years, our experienced team of Licensed Insolvency Trustees and advisors has been working with individuals to help them recover from times of financial distress and regain control of their finances. With more than 240 offices from coast to coast, MNP helps thousands of Canadians each year who are struggling with an overwhelming amount of debt. Visit MNPdebt.ca to contact a Licensed Insolvency Trustee or use our free Do it Yourself (DIY) debt assessment tools. For regular, bite-sized insights about debt and personal finances, subscribe to the MNP 3-Minute Debt Break Podcast.

About the Survey

The data was compiled by Ipsos on behalf of MNP LTD between September 6 and September 13, 2022. For this survey, a sample of 2,000 Canadians aged 18 years and over was interviewed. Weighting was then employed to balance demographics to ensure that the sample's composition reflects that of the adult population according to Census data and to provide results intended to approximate the sample universe. The precision of Ipsos online polls is measured using a credibility interval. In this case, the poll is accurate to within ±2.5 percentage points, 19 times out of 20, had all Canadian adults been polled. The credibility interval will be wider among subsets of the population. All sample surveys and polls may be subject to other sources of error, including, but not limited to, coverage error and measurement error.

National data is available upon request.