For the first time in nearly a decade, interest rate uncertainty has become a hot button topic for Canadian consumers. Following two surprise increases last summer, each subsequent bank of Canada announcement has been an edge of the seat experience for those already struggling to keep their financial house in order. More and more it is looking like many households were lured into taking on credit they couldn’t afford by a promise of low interest rates. With that promise rapidly evaporating and predictions that the current debt levels in the country – now at a record 167% – are unsustainable in a higher rate environment, the prognosis is worrisome. If significant measures aren’t taken to lower their overall credit burden, millions of people could be looking at difficult times ahead.
A new poll conducted by Ipsos on behalf of MNP LTD reveals 70% of Canadians are already reconsidering their spending habits given the new debt environment and their uncertainty about where things are headed. At the same time, one in three admit they are already feeling the effects of the summer increases and 40% worry any further increases will put them in financial trouble.
On the one hand, it is encouraging to see attitudes about debt are shifting and there is a heightened awareness about the effects of interest rates on the bottom line. On the other hand, awareness alone will not be enough to stave off the effects of past or future increases. Whenever possible, Canadians will want to start looking at the principal value of their debts and how that can be reduced to offset the increased costs. Budgeting will be more important than ever, with an emphasis on lowering costs to focus on emergency savings and debt reduction. Finally, consumers with variable rate debts may want to consider locking in now to provide better piece of mind and financial certainty as they head into the most expensive season of the year.
Original coverage discussing the Ipsos poll and concern amongst Canadians was published online on October 23, 2017.
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