Higher Interest Rates Force Albertans To Rethink Debt

Following nearly a decade of relatively easy to secure credit, the Bank of Canada raised its key interest rate on July 12. Up one quarter of a percentage point from 0.25 per cent to 0.5 per cent, this move has poised many households for a period of great financial uncertainty to come. With economists predicting another increase before the year is out, Canadians should begin bracing themselves for some significant changes now before it’s too late.

A recent poll conducted by Ipsos on behalf of MNP LTD shows millions of debtholders across the country are extremely concerned about their finances. Fearing the collapse of an overinflated housing market, along with rising interest rates and a record level of consumer debt, their focus has now shifted from what they can afford to borrow to how they can afford to pay it all back. According to the survey, almost 40 per cent of Alberta homeowners say they would struggle to cope with a drop in the value of their home, while nearly a third say they are already “in over their head” with current payments. This uncertainty isn’t only affecting mortgage holders, either. Across the province, 69 per cent of people surveyed admitted their debt situation was “less than good” and more than 20 per cent would not be able to cover bills and debt payments if their monthly expenses increased by $300.

In the face of historically low interest rates, many people have become extremely comfortable only making the minimum payments on their debt. If Canadians want to weather the coming storm, however, they are going to want to start paying down the principal value of their loans, credit cards and (if possible) their mortgages in an effort to reduce household financial stress.

An original article discussing the Ipsos poll and concern amongst Canadians was published online on July 10, 2017.