According to the latest MNP Consumer Debt Index, rising interest rates and soaring cost of living is putting many Canadians in financial stress. While six in ten (59%) say they are already feeling the effects of interest rate increases, nearly half (46%) say they are cutting back on non-essentials such as travelling, dining out, and entertainment. Meanwhile, one-third are buying cheaper versions of everyday purchases (37%) and driving less (30%), while a quarter (27%) are cutting back on essentials such as food, utilities, and housing.
“No matter where Canadians turn, there is no reprieve; housing is more expensive, driving a car is more expensive, food is more expensive,” says Grant Bazian, president of MNP LTD. “Right now, many Canadian households are trying to adjust their budgets, cutting costs where they can in order to keep up with their monthly bills. But as the cost of living continues to rise – it’s likely to get worse before it gets better – households will have to make increasingly difficult choices about what to cut, and could find themselves piling on debt to make ends meet.”
Further indication that Canadians could be in for a rough rest of the year, half (50%) say that if interest rates go up any more, they will be in financial trouble, while four in ten (39%) say it could drive them closer to bankruptcy. Almost a quarter (24%) say they are not financially prepared to deal with an interest rate increase of just one more percentage point and are concerned with their ability to cover their living expenses in the next year without going further into debt (55%). The proportion of those who agree they are concerned about the impact of rising interest rates is up 13 points since June 2017.
“With inflation nearing a 40-year high, there is mounting pressure for more aggressive interest rate hikes to tame inflation. Canadians who are not financially prepared to absorb future interest rate increases are likely to find themselves in financial trouble soon, as they are unable to manage the increasing costs of their debt repayment obligations,” says Bazian.
While the vast majority of Canadians (82%) agree that rising interest rates will cause them to be more careful with how they spend their money, more than half (56%) say they are concerned about how it will impact their ability to pay their debts. Bazian advises those in this situation to speak with a federally-regulated Licensed Insolvency Trustee who can help determine the best debt-relief solution through a confidential, unbiased and customized assessment of their financial situation.
The MNP Consumer Debt Index is in its fifth year of quarterly tracking Canadians’ attitudes about their debt situation and their ability to meet their monthly payment obligations.
