Insolvency firm MNP LTD. released a report that revealed more and more Canadians are faced with crippling debt as high costs spike interest rates, making it more difficult for them to meet their payments.
The report was the latest Consumer Debt Index from MNP which found that 51% of Canadians are $200 or less away from not being able to meet their bills, while the amount of money the average person has left over after expenses has dropped to $674 this quarter.
“There is no mystery as to what is causing Canadians’ bleak debt outlook: it’s getting increasingly difficult to make ends meet,” said MNP president Grant Bazian in a press release.
“Facing a combination of rising debt carrying costs, living expenses and concern over the potential for continued interest rate and price hikes, many Canadians are stretched uncomfortably close to broke.”
The survey which has run annually for the last five years found that Canadians are more pessimistic about their financial situation now then in any other year previous.
The survey found that 20% of respondents said their financial situation is “much worse” than last year and 25% said their debt was worse now compared to five years ago.
Many respondents were not optimistic about their future either, 16% said they believe their debt will be even worse five years from now.
Canadian credit card balances hit an all-time high of $107.4 billion this year and total consumer debt hit $2.4 billion, according to Equifax Canada.
The Bank of Canada is expected to keep interest rates stabilized during next week’s announcement by most economists, however the MNP report shows that Canadians are afraid that they won’t be able to continue to outpace their future bills.
The survey found that 28% of respondents said that a 1% rate increase weakened their ability to pay their bills last quarter, while 37% said they would not be able to afford an additional $130 more in interest payments on their debt.
“For now, the financial concerns of some Canadians have been offset, at least to some degree, by the strong job market,” said Bazian. “The uncomfortable truth is that higher interest rates slowing the economy will inevitably come with consequences like increased unemployment.”
