A new report says a million Canadians are carrying a heavy debt load and a slight increase in interest rates would cause many of them a financial challenge, but for a few, it could push them over a debt cliff

A new report says a million Canadians are carrying a heavy debt load and a slight increase in interest rates would cause many of them a financial challenge, but for a few, it could push them over a debt cliff.
Photo Credit: (Richard Drew/Associated Press

Interest rates: Canadians living too close to the edge


A million Canadians are living on borrowed time, and borrowed money.

A new survey shows a mere 0.25 percent increase in lending rates would push some 700,000 Canadians into a financial squeeze.

Increase the lending rate by one full point, and the number of Canadians under financial pressure rises to one million.

A survey by the credit monitoring firm TransUnion shows that 26 million Canadians carry some form of debt. Given that the nation’s population is about 36 million, but that includes babies and the very young, and the very old, the implication is that just about every single adult Canadian is carrying some debt through credit cards, mortgage, various bank loans, a line of credit and/or combinations of those debts.

Jason Wang is the TransUnion director of research and industry analysis in Canada.  Quoted in the Globe and Mail newspaper he says, ““Many consumers do understand, but unfortunately some consumers have, in the last few years, developed a false sense of security, thinking that low rates are going to be here forever”.

Low interest rates won’t last forever

The Bank of Canada had twice cut its benchmark interest rate in 2015 to stimulate the economy and stands at a near record low of 0.5 percent. While it seems that the central bank has no immediate plans to raise rates anytime soon, analysts say the low rates won’t last beyond 2017.

Canada’s central bank lending rate remains at near record lows, but for how long?
Canada’s central bank lending rate remains at near record lows, but for how long? © Bank of Canada- Canadian Press

Also quoted in the Globe and Mail was Scott Hannah, president and chief executive officer of the non-profit Credit Counselling Society.He said many people have ‘variable rate” mortgages, which have rates that follow the rise and fall of bank rates. He said he’s concerned that people at risk might not take action soon enough as interest rates start to go back up. Hannah says, “The increase is coming. It’s how you prepare yourself for that increase. Now is the time to get prepared,”

RCI-Canadians living paycheque to paycheque

Depending on debt load, on average, a quarter point increase would mean an additional $10 to $50 charge on monthly payments.  For many that would  mean simply foregoing a restaurant meal or other discretionary spending.  That in turn  has further negative implications for the economy.

However, for as many as 253,000 Canadians, an additional $50 payment could cause serious financial hardship.

The federal statistics gathering agency, Statistics Canada, said that at the start of 2016 the average debt for Canadians was $21,348. That is exclusive of mortgage debt.

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7 comments on “Interest rates: Canadians living too close to the edge
  1. William says:

    Tax, food, hydro,water sewer and even phone bills are going up. Wages seem to stay the same. Something is going to give here soon.

  2. Bill Nadeau says:

    These headlines would have us believe that Canadians, generally, are poor managers of money. Here’s a headline that might be more appropriate and telling –
    “Canadians Taxed too Close to the Edge”
    Please consider that while the amount Canadians have spent on entertainment has gone down, it is taxation that has run away far past the rate of inflation and in many cases is the reason so many Canadian families have had to re-finance their homes. This inference that there is a social; predisposition to recklessness might be better aimed, editorially, at the purveyors of high taxation.

  3. Skye says:

    Interest bearing, debt-based money systems are unsustainable, and we are about to witness this one’s collapse.
    Interest rates have been artificially low for nearly a decade. There are trillions chasing poor yields.
    In countries with negative interest rates, it is now possible to open a viable business that produces no value. They can simply borrow money, and return less principal to the lender when the loan expires. It is insanity, and the bankers need to be stopped.

  4. Chris C says:

    Usury (credit cards). The oldest scam there is.

    • Sandeep Sandeep says:

      No – its the habit of ignoring need vs want rule. Average canadian now wants everything. Credit cards or not, any debt instrument can be used to fulfill your spending cravings. Too much marketing and sales promotions. 900$ for a phone ?!!! 70k for a car ? 1.2M for home ? really ? Thats how people are under debt because they dont follow one simple rule, dont spend more than 80% of your earnings, save atleast 20% for future, more the better.

    • Earthmanz says:

      truer words have never been spoken.Kudos.