Rising Interest Rates Have Canadians Scrambling To Lower Debt
Nearly a decade of free-flowing credit with the promise of low interest has accustomed many Canadians to the affordability of debt. But after seven years without an increase, the Bank of Canada raised its key lending rate on July 12. Up a quarter per cent from 0.25 per cent to 0.5 per cent. With another increase expected this fall, the move has millions worrying about how they’re going to afford it. Amidst an uncertain housing market that threatens to cool at any moment and with many borrowing against their homes to pay for lifestyles they can’t afford, some major changes will be required if people want to avoid a difficult situation down the road.
A recent study by Ipsos on behalf of MNP LTD underscores the anxiety British Columbians are feeling about the strain higher rates will place on their finances. More than 70 per cent of debtholders across the province say their ability to cope with a 1 per cent higher interest rate is “less than optimal” with nearly three quarters of people admitting would have difficulty coping with the resulting $130 in additional monthly payments that hike would bring.
This offers a timely reminder about the dangers of living beyond one’s means. As the cost of debt is only expected to rise, people need to start making plans to curb spending and to pay back what has already been borrowed. This requires breaking free of the minimum payment mentality and making an effort to chip away at the principal value of any outstanding credit cards, loans and mortgages wherever possible.
An original article discussing the Ipsos poll and concern amongst Canadians was published online on July 10, 2017.
Based out of Vancouver, Lana Gilbertson is a Licensed Insolvency Trustee and a Vice-President of MNP LTD. To learn more about how MNP Debt can help, contact our local office at 604.639.0001.
