The latest Consumer Debt Index by insolvency practice MNP LTD reported that 1/3 of Canadians are concerned that rising rates could push them towards bankruptcy.
Over half (52%) of the study’s respondents also said that rate hikes will affect their ability to service their existing debts.
“It’s been over a year now since the first interest rate increase and as rates continue to inch higher, more Canadians are feeling it. With little decrease in household debt and the pace of rate hikes expected to accelerate, we will likely see a more immediate and significant effect on borrowers with rate increases in the future,” MNP LTD president Grant Bazian stated.
Meanwhile, 40% of Canadians are concerned about their existing debt loads, the highest proportion ever since MNP started tracking this metric in June 2017. Another 43% regretted the amount of debt that they have taken on in their lives.
“Rising interest rates have forced people to take a more serious look at their debts. Still, many are reluctant to get professional help. They may not know where to go or they feel helpless,” Bazian said.
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Young Canadians most acutely feel the pressure of these fears. The study found that 50% of millennials are already feeling the worst effects of interest rate hikes, compared to 48% of Gen X’ers and 38% of boomers.
The millennial demographic is also more likely to express concern about interest rate hikes and their impact on debt repayments (62% of millennials vs. 57% of Gen X’ers and 40% of boomers), or the risk of bankruptcy (46% of millennials compared to 38% of Gen X’ers and 22% of boomers).
“Millennials have never experienced a time when credit wasn’t cheap and easily accessible. Some have over extended themselves on their homes and vehicle payments and are in the habit of relying on credit to cope with any kind of unexpected expense,” Bazian said.