MNP: Canadians wary of financial impact of interest rate hikes

The central bank's next rate decision is just a week away

MNP: Canadians wary of financial impact of interest rate hikes

Ahead of the Bank of Canada’s policy decision on March 2, over half (55%) of Canadians reported being concerned about the impact of rising interest rates on their household finances, according to a recent survey conducted by Ipsos on behalf of MNP LTD.

Approximately 47% admitted that they are already beginning to feel the effects of increasing interest rates, while 54% said that they are more concerned about their ability to repay their debts than they used to be.

Read more: Bank of Canada senior official on how soon rate hikes might take place

Another 47% said that they believe they will end up in financial trouble if interest rates grow further, and 35% said that any rate hikes could move them toward bankruptcy.

“As we approach what is likely to be the first of several interest rate increases in the coming year, more Canadians are concerned about how they would cope,” said Grant Bazian, president of MNP LTD. “The most vulnerable are those who have taken on credit to get by and aren’t able to pay down the debt. The added debt servicing costs are coming at a time when many Canadians are already finding it less affordable to feed their families or pay for things like housing.”

Among those who will be renewing their mortgages over the next year, 61% said that they could end up in financial trouble if interest rates rise further.

“Variable-rate mortgage holders will be the most significantly impacted, especially with talk of there being a string of rate increases in 2022,” Bazian said. “Households may need to re-adjust their budgets to accommodate for hundreds or thousands of dollars more a year in mortgage-related costs. The impact will also be felt by those with other costs of borrowing, like home equity lines of credit or other variable rate loans.”