The Impact of Rising Interest Rates on the Financial Health of Canadians
The financial security of many Canadians is increasingly being threatened by rising interest rates. According to a recent survey conducted by Ipsos, almost 60% of Canadians are worried about the effects of increasing rates on their personal finances. This represents the highest level of concern since the survey began. This growing apprehension is particularly noticeable among renters and low-income households, who are more vulnerable to these financial shifts.
Impact on Renters versus Homeowners
Renters appear to bear the brunt of the financial impact of hiking interest rates. The survey revealed that 34% of renters, compared to 29% of homeowners, are worried about the increasing rates. Renters are also more anxious about their ability to repay debts with 63% expressing concern, compared to 48% of homeowners. The fear of falling into financial trouble is also more prevalent among renters (59%) than homeowners (41%). Moreover, 45% of renters believe that rising rates could push them towards bankruptcy, a sentiment shared by only 27% of homeowners.
Impact Based on Household Income
The survey also highlighted that Canadians with a household income of less than $40,000 are the most affected by interest rate increases. The table below illustrates the varying degrees of concern among different income groups:
| Household Income | Feeling the effects of interest rate increases (%) | Concerned about their ability to repay debts (%) | Worried about facing financial trouble due to rising rates (%) | Fear of moving closer to bankruptcy due to rising rates (%) |
|---|---|---|---|---|
| <$40K | 62 | 60 | 59 | 44 |
| $40K – $60K | 53 | 51 | 46 | 34 |
| $60K – $100K | 57 | 52 | 44 | 32 |
| >$100K | 55 | 52 | 44 | 29 |
The Role of Licensed Insolvency Trustees
For those who are financially vulnerable and struggling to survive, any further increase in interest rates could make their debts more unaffordable. Individuals in such a position should seek professional debt help from a Licensed Insolvency Trustee before their debt situation worsens. These professionals can administer debt-relief options including Consumer Proposals and Bankruptcy, provide personalized debt advice, and help individuals negotiate informal debt settlements with their creditors.
Tips to Navigate the Financial Storm
Even for those who are not yet at their breaking point, making small budget changes can provide some relief. We suggest keeping an eye on monthly subscriptions which can be easily overlooked but might accumulate into a significant expense. Cutting back on unused services and keeping a vigilant eye on trial offers can also help in managing expenses.
A majority of Canadians (84%) agree that they will be more cautious with their spending due to rising interest rates. While their ability to absorb an interest rate increase varies, a majority are conscious about the need to tighten their budgets.
The Future Outlook
While most Canadians are becoming more cautious about their spending, more than half already feel the effects of interest rate increases. We advise Canadians to take steps to improve their financial standing in preparation for current and future rate hikes by seeking professional debt advice, prioritizing monthly budgeting, and understanding how interest fluctuations can affect their monthly expenses and debt repayments.
Conclusion
Rising interest rates pose an undeniable threat to the financial stability of a significant number of Canadians, particularly those in the lower income bracket or renting their homes. As the cost of borrowing continues to rise, it becomes increasingly important for individuals to seek professional advice, manage their debts wisely, and make necessary changes to their spending habits.
