Mario ToneguzziCanadians are increasingly fearful of interest rate hikes, according to the latest MNP Consumer Debt Index, which was released on Tuesday.

MNP said the fear of a rate increase has intensified over the past few months. One-third of Canadians express concern that rising rates could move them towards bankruptcy. That’s a six-point increase since June.

The report said 52 per cent of Canadians, a three-point rise since June, now say they’re more concerned about their ability to repay their debts if interest rates continue to climb.

The proportion of Canadians who say that they feel the effects of interest rate increases jumped seven points since June (45 per cent) and just under half (45 per cent) say that if interest rates go up much more, it could lead them to financial trouble, added MNP.

“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,” said Grant Bazian, president at MNP Ltd., the country’s largest personal insolvency practice.

The report said millennials are more likely to express concern about rising interest rates whether that be the fear of repaying debts (62 per cent versus 57 per cent for generation Xers, and 40 per cent for baby boomers), or moving them closer towards bankruptcy (46 per cent versus 38 per cent for gen Xers and 22 per cent for boomers). Millennials are most likely to say they already feel the effects of interest rate increases (50 per cent versus 48 per cent of gen Xers and 38 per cent of boomers), said MNP.

“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,” said Bazian.

The report also said:

  • 79 per cent of Canadians say that with rising interest rates, they will be more careful with how they spend their money;
  • 28 per cent rate their current debt situation better than a year ago;
  • 39 per cent are optimistic that their expected debt situation will be better in a year;
  • 50 per cent foresee their debt situation improving over the next five years;
  • 43 per cent regret how much debt they’ve taken on in their life;
  • 55 per cent of Albertans say that as interest rates rise, they’re becoming more concerned about their ability to repay their debts;
  • 77 per cent of Albertans say with rising interest rates, they’ll be more careful with how they spend their money;
  • 34 per cent of Albertans are concerned that rising interest rates will trigger a move toward bankruptcy;
  • Albertans (20 per cent) are most likely to say their current debt situation is worse.

Mario Toneguzzi is a veteran Calgary-based journalist who worked for 35 years for the Calgary Herald, including 12 years as a senior business writer.

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