More than half of Canadians concerned about impact of rising interest rates, up three points since September

  • Half say (47%) they will be in financial trouble if rates rise, 35 percent say rising rates could move them towards bankruptcy.
  • Nearly half (47%) believe feeding their family has already become less affordable.
  • One quarter (25%) say they do not have a solid understanding of how interest rates impact their financial situation.
  • Eight in 10 (81%) say that with interest rates rising, they will be more careful with how they spend their money.

Canadian Parliament Building

C

ALGARY, AB – February 22, 2022 – As the country inches closer to the Bank of Canada’s next interest rate announcement on March 2, 2022, many Canadian households stretched thin by the rising costs of living over the COVID-19 pandemic will be bracing for a potentially challenging year ahead. More than half (55%) of Canadians are concerned about the impact of rising interest rates on their financial situation, a three-point increase from September, according to a recent poll conducted by Ipsos on behalf of MNP LTD.

About half say they are more concerned about their ability to repay their debts than they used to be (54%, unchanged), and worry that they will be in financial trouble if interest rates go up much more (47%, +3pts). Thirty-five percent agree that rising interest rates could move them toward Bankruptcy (unchanged).

 “As we approach what is likely to be the first of several interest rate increases in the coming year, more Canadians are concerned about how they would cope,” says Grant Bazian, president of MNP LTD., the country’s largest insolvency firm. “The most vulnerable are those who have taken on credit to get by and aren’t able to pay down the debt. The added debt servicing costs are coming at a time when many Canadians are already finding it less affordable to feed their families or pay for things like housing.”

Those with an upcoming mortgage renewal are showing some apprehension about potential rate increases. Six in 10 (61%) who will renew their mortgage in the next year say they worry that they will be in financial trouble if interest rates go up much more. Of those who say they’ve borrowed money they couldn’t afford to pay back quickly or only paid the minimum balance on a credit card or personal line of credit, three quarters (75%) feel they would be in trouble. Unsurprisingly, those who rate their personal financial situation as ‘poor’ are the most likely (80%) to believe they will be in financial trouble if rates rise. 

“Variable-rate mortgage holders will be the most significantly impacted, especially with talk of there being a string of rate increases in 2022. Households may need to re-adjust their budgets to accommodate for hundreds or thousands of dollars more a year in mortgage-related costs,” says Bazian. “The impact will also be felt by those with other costs of borrowing like home equity lines of credit or other variable rate loans.”

Additionally, higher interest rates could disproportionately impact younger Canadians. Those aged 18-34 are the most likely (49%) to agree that rising interest rates could move them towards Bankruptcy, followed by those aged 35-54 (41%). Canadians under the age of 55 are more likely to say they are already beginning to feel the effects of interest rate increases, with 56 percent of 18-34-year-olds and 57 percent of 35-54-year-olds in agreement. In both cases, middle-aged Canadians saw the largest increases since September (+4pts and +9pts respectively).

“Many younger Canadians who have yet to pay off debts on significant expenses such as tuition, a car, or a home may be more negatively affected by rate hikes than Canadians over 55 years of age,” says Bazian. “Canadian households that are struggling with debt are not the only ones who are concerned about the impact of interest rate increases. The rising cost of living is likely causing even those who are more confident with their financial status to feel uneasy about the impact of rate hikes.”

With the price of goods and services rapidly rising, Canadians are finding many areas of their day-to-day lives have become less affordable over the past year,  including feeding themselves or their family (47%), putting aside money for savings (44%), clothing and other household necessities (40%), transportation (36%), housing (35%), and putting money towards paying down debt (31%). More than four in 10 (44%) say at least half of these areas of their lives have become less affordable.

Further evidence of affordability concerns, eight in 10 (81%, -1pt) say they will be more careful with how they spend their money with interest rates rising. Even a large proportion (74%) of those who consider their financial situation to be ‘excellent’ say they are being more careful with how they spend their money.

“It’s promising to see some Canadians are taking note of the chatter surrounding impending interest rate increases, and are adjusting their mindset accordingly,” says Bazian. “But a lack of financial literacy impacts our findings as well because we know many Canadians don’t understand how interest rate increases will affect their personal financial situation.”  

With many predicting gradual rate hikes throughout 2022, about a quarter (25%, +2pts) say they do not have a solid understanding of how interest rates impact their financial situation. Two in 10 (20%) say they are concerned about their ability to absorb an interest increase of one percentage point, up four points from September. Of those who consider their financial situation ‘poor’, two-thirds (67%) say they are not prepared, a notable jump of 12 points since September. Additionally, those who say they have borrowed money sometime in the last year and can’t afford to pay it back quickly are more likely (51%) to say they are not prepared to handle a one-point increase.

“Our hope is anyone who is already struggling or anticipates financial difficulties will seek professional guidance to help manage their debt especially in a higher rate environment,” says Bazian.

Anyone can obtain a free and confidential assessment of their financial situation with a Licensed Insolvency Trustee at MNP LTD. As the only government-regulated debt professionals, Licensed Insolvency Trustees provide a full range of debt-relief options, including Consumer Proposals, informal debt settlements and Bankruptcies. With specialized debt training and education, Licensed Insolvency Trustees take a customized approach to determine the most suitable debt-relief options.

Other key poll highlights include:

  • Nearly half (47%, +2pts) say they are already beginning to feel the effects of interest rate increases.
  • Five percent of Canadians say they will renew their mortgage in the next year.
  • One-quarter (26%) say they have only paid the minimum balance on a credit card or personal line of credit.
  • One in 10 (11%) say they have borrowed money they could not afford to pay back quickly.
  • Sixteen percent rate their financial situation to be ‘poor’.
  • Nearly two in 10 (18%) rate their financial situation as ‘excellent’.

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 have 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 December 1-7, 2021. 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.

A summary of some of the provincial data is available by request.