Ontarians Increasingly Feeling The Impact Of Higher Interest Rates

2018-04-12   minute read

David Gowling

MNP Consumer Debt Index

​​​According to a recent Ipsos poll conducted by MNP LTD., Ontarians' pocketbooks are continuing to get lighter as a result of recent interest rate increases. The latest insights from the quarterly survey indicate a worsening situation and foreshadows more trouble ahead. Up two percent over the last quarter and eight percent over the past six months, more than two in five Ontario residents (42%) say they've felt the pinch of higher interest payments. Half (50%) are now concerned past and future hikes could impact their ability to repay their debts, a six-point increase in as many months. Moreover, three in ten (29%) worry this trend could push them towards bankruptcy, up six percent from December. The result is even more people struggling to make ends meet, with one in five (42%) Ontario households expecting to take on more debt over the next year just to cover basic living expenses — a five percent increase since October. Those who are $200 or less from making ends meet (46%) has improved slightly by two percent. But with nearly a third (30%) saying their budget is already maxed out at the end of the month, that indicates the optimism may not be as broad reaching as the improvement signals at first glance. A lack of emergency savings also continues to be a pressing concern. Across the board, confidence in Ontarian's ability to handle an unexpected expense looks bleak. In the event of an unexpected auto repair or purchase, only 29 percent believe they could do so without requiring debt — down one percent. This is mirrored by the prospect of paying for their own or someone else's education (23%) — also down one percent. While noting modest improvements when it comes to losing a job (28%), up four percent, taking three months off work due to illness (30%), also up 4 percent, the death of an immediate family member (26%), up three percent, and a change in relationship status such as a divorce (31%), up one percent — the number of people who could manage these costs continues to be the minority. Despite their vulnerable position, however, Ontarians are by far the most optimistic when it comes to their future financial prospects. More than a third (36%) expect their situation to improve within the year, while nearly half (49%) believe things will be better within the next five years. Unfortunately, the data and several trends indicate that may be wishful thinking. Most notably, a vast number of Ontario homeowners will require interest rate renewals on their mortgages within the next year. Meaning many who enjoyed the benefits of unprecedented and record low borrowing costs will soon contend with a significant spike in monthly payments. The best advice for Ontario debt holders is not to wait for the situation to get any worse before acting. Anyone who is only making the minimum payments, relying on credit to cover basic expenses or is struggling to make ends meet would likely benefit from the help of an accredited professional. The sooner the reach out, the more options they will likely have to improve their situation and prevent it from deteriorating any further. Other poll highlights include: Concern over rising interest rates is being led by Millennials aged 18-34; they are significantly more likely than their older counterparts to have concerns about their ability to repay their debts as a result of a rate hike (61% vs. 53% of Gen Xers aged 35-54 and 42% of Baby Boomers aged 55+) and about moving towards bankruptcy (45% vs. 35% of Gen Xers and 23% of Baby Boomers) if interest rates continue to increase.Albertans (55%) are more likely to say they are already beginning to feel the effects of interest rate increases, followed by residents of Atlantic Canada (51%), Saskatchewan and Manitoba (43%), Ontario (42%), British Columbia (41%), and Quebec (39%).Albertans (52%) are more likely to be in financial trouble if interest rates go up much more, followed by residents of Atlantic Canada (46%), Quebec (44%), British Columbia (44%), Saskatchewan and Manitoba (42%), and Ontario (42%).Albertans (43%) are more likely to be concerned that rising interest rates could move them towards bankruptcy, followed by residents of Atlantic Canada (41%), Saskatchewan and Manitoba (37%), Quebec (35%), British Columbia (30%), and Ontario (29%).Albertans (20%) are the most likely to rate their personal debt situation as terrible, followed by Saskatchewan and Manitoba (18%), Atlantic Canada (18%), Ontario (16%), British Columbia (16%), and Quebec (13%).Women (50%) are more likely than men (40%) to report being within $200 of financial insolvency. At the regional level, residents of Saskatchewan and Manitoba (52%) are most likely to be within $200 of insolvency, followed by residents of British Columbia (47%), Ontario (46%), Quebec (45%), Atlantic Canada (43%), and Alberta (41%).Nearly eight in ten Canadians (78%) say that with interest rates rising, they will be more careful with how they spend their money. About the MNP Consumer Debt Index The MNP Consumer Debt Index measures Canadians' attitudes toward their consumer debt and gauges their ability to pay their bills, endure unexpected expenses, follow a budget, and absorb interest-rate fluctuations without approaching insolvency. Conducted by Ipsos and updated quarterly, the Index is an industry-leading barometer of financial pressure /relief among Canadians. Visitwww.MNPdebt.ca/CDI to learn more. The latest Index data was compiled by Ipsos on behalf of MNP LTD between March 12 and March 16, 2018. For this survey, a sample of 2,001 Canadians from the Ipsos I-Say panel was interviewed online. The precision of online polls is measured using a credibility interval. In this case, the results are accurate to within +/- 2.5 percentage points, 19 times out of 20, of what the results would have been had all Canadian adults been polled. Credibility intervals are wider among subsets of the population. This represents the fourth wave of the MNP Consumer Debt Index. To learn more about the survey and how MNP can help you manage your debt challenges, contactDavid Gowling, CIRP, LIT, Senior Vice-President, MNP Ltd., at 905.639.3328 [email protected].​

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