A widespread appetite for carrying debt is amplifying these anxieties, new poll says
While the record-low rate climate has proven quite attractive to consumers, nearly 35% of Canadians are worried that higher interest rates could push them into bankruptcy, according to MNP Debt.
A majority of Canadians (52%) are also concerned about the impact of rising interest rates on their financial situations, MNP said.
The fears stem from a widespread appetite for increasing debt, with 49% of Canadians saying that they’re more relaxed about carrying debt than they usually are with interest rates so low, and 58% saying that low interest rates provide them the opportunity to enter into transactions they otherwise couldn’t afford.
Read more: TD Bank raises five-year fixed mortgage rate
“Buy now, pay-later options, payday loans, and credit cards are particularly attractive to those with tight finances, but the payment terms, fees, and interest charges are largely underestimated or misunderstood,” said Grant Bazian, president of MNP. “In addition to the financial turmoil brought on by the pandemic, another issue we see in our research is households are struggling with the rising cost of living. With the price of necessities increasing, some may take on more credit to make ends meet while others will have less room in the budget for debt repayment.”
Market observers are expecting the Bank of Canada to keep the benchmark overnight rate at 0.25% for the foreseeable future to stimulate growth, with a prolonged rate hold well into 2023 paving the way for full economic recovery.