With many economists expecting the Bank of Canada to make its first interest rate rise of 2018 this week, a report shows that millions of Canadian households are already suffering from last year’s hikes.
Experts from the big banks including RBC, CIBC and TD are calling for a rise in rates and have already increased their mortgage rates “in line with market conditions.”
But the latest quarterly Consumer Debt Index from insolvency firm MNP shows that one in three Canadians say they are unable to cover their monthly bills and debt repayments.
$200 higher bills would tip more into deficit
The impact of the interest rate rises has also cut the amount of spare cash available to those who are managing to cover their outgoings.
On average, Canadians had $631 left to cover any irregular or planned costs in Q4 2017 after paying their bills and servicing debts, down 15% from the previous quarter and down 29% from June.
Almost half said that they are within $200 per month of not meeting their obligations and a similar number said they will need to take on more debt over the next year just to cover basic expenses.
Four in ten Canadians are concerned that they would be in financial trouble if interest rates rise much more; a third could be facing insolvency.
“Financial strain and anxiety are escalating significantly even with small rate increases,” says MNP licenced insolvency trustee David Gowling.
Regrets and retirement fears
More than a third of respondents to MNP’s survey, which was conducted by Ipsos, say they regret taking on so much debt while interest rates were low.
More than half say they will not be debt free in retirement.
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