One In Five Canadians Likely To Take On Additional Credit Debt Due To The Bank Of Canada Rate Cut Announcement

2015-03-19   minute read

Donna Carson

MNP Consumer Debt Index

A new survey conducted by Ipsos Reid on behalf of MNP Ltd. reveals that a sizable portion of Canadians are willing to take on more debt due to the Bank of Canada’s key interest rate cut announcement.

 “This news is alarming news at a time when consumer debt in Canada is at an all-time high and the downturn in the energy sector is resulting in layoffs. Canadians across the country have to understand the importance of saving more, and spending less then they earn. The big fear is that if people take on more credit, they will be unable to meet their repayment obligations when interest rates rise,” says Donna Carson, Senior Vice President with MNP

Person on their laptop holding a credit card

The survey also showed that eight in ten (80%) Canadians ‘agree’ (27% strongly/54% somewhat) that most Canadians do not take their debt obligations as seriously as they should. Ironically, the survey revealed that most (89%) Canadians agree that paying down de​bt is more important, financially, than saving.

This finding is only exacerbated by the data revealing a large disconnect when it comes to what Canadians believe their debt-to-income ratio is compared to what it likely is. In December 2014, Statistics Canada released a report that average household debt in Canada has reached an all-time high of 162.6% of disposable income, meaning that Canadians owed $1.63 for every dollar of disposable income. 

When asked to assess the average Canadians debt ratio, as well as their own, Canadians are drastically off the mark.  Canadians believe the average Canadians debt-to-income rate is 48%, nearly 120 points below the actual figure.  When assessing themselves, however, this figure is even more incorrect. Canadians identify their own debt-to-income ratio at only 25% compared against the 163% it currently sits at.

“People tend not to do their own personal balance sheet, and therefore don't realize what their total debt load is until they do. Forget taking on more credit. People must take an honest look at their debt and use this period of low interest rates to start paying down principal,” advises Carson.

The Ipsos Reid poll was conducted between February 6 – 12, 2015. A sample of 1,006 adults were interviewed across Canada.

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