The Bank of Canada kept interest rates on pause this week, but half of Canadians believe the worst part of the economic cycle is yet to come, according to the latest MNP Consumer Debt Index.
The quarterly survey, which interviewed 2,004 adults, found that 46 per cent of them are $200 away or less from not being able to meet their financial obligations, and a further 30 per cent are already not making enough to cover their bills and debt payments.
“Facing inflation as well as sharply higher interest rates on their outstanding debts, deeply indebted Canadians may be rightfully feeling that the worst is yet to come,” MNP president Grant Bazian said in a press release. “There isn’t much financial wiggle-room in many household budgets, illustrating the toll of higher interest rates, especially for those who can least afford it.”
One-third of Canadians said that economic conditions over the past six months were worse than they expected, and the average amount of money households have left over at the end of the month dropped $64 from the previous quarter to $787. Also, 61 per cent are concerned about the impact of rising interest rates and 57 per cent will be in financial trouble if interest rates go up much more.
“This reflects the lingering concerns many have surrounding inflation and interest rates,” Bazian said.
Canadians with household incomes of less than $40,000 and those aged 18-34 and 35-54 are most likely to fear that rising interest rates are moving them closer towards bankruptcy.
“For lower-income Canadians, many cannot find a financial comfort zone,” Bazian said. “Many are hesitant to reach out for help due to the stigma of bankruptcy, which only prolongs the financial stress and can lead to more serious problems like wage garnishments and harassment by collection agencies.”
A third of Canadians feel we are currently experiencing the worst part of the economic cycle while 15 per cent believe the worst is behind us.
“Whether expecting the worst or hoping for the best, Canadians should be proactive about managing their debt,” Bazian said.
Overall, 83 per cent of Canadians are continuing to be more careful when spending their money. But only 43 per cent are including finances on their spring-cleaning to-do list, according to a separate survey by PC Financial.
Indeed, 52 per cent prefer cleaning their bathroom and toilet over creating a budget, and 40 per cent are avoiding looking at finances or setting a budget altogether.
Part of the reason is because a majority believe creating a budget is time consuming (66 per cent) and reviewing their finances once a year is enough (65 per cent).
“Let’s face it, reviewing your finances can be overwhelming and requires a significant amount of elbow grease,” certified financial adviser Jackie Porter said in a press release. “However, it doesn’t have to be that way. Reviewing our finances helps us revisit financial habits and beliefs that no longer serve us. And, trust me, it’s definitely a lot more fun than cleaning a toilet.”