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.

Additional information-sources

Tagged with: , , , , , ,
Posted in Economy, Lifestyle, Society

Do you want to report an error or a typo? Click here!

@*@ Comments

Leave a Reply

Your email address will not be published. Required fields are marked *

 characters available

Note: By submitting your comments, you acknowledge that Radio Canada International has the right to reproduce, broadcast and publicize those comments or any part thereof in any manner whatsoever. Radio Canada International does not endorse any of the views posted. Your comments will be pre-moderated and published if they meet netiquette guidelines.

Netiquette »

When you express your personal opinion in an online forum, you must be as courteous as if you were speaking with someone face-to-face. Insults and personal attacks will not be tolerated. To disagree with an opinion, an idea or an event is one thing, but to show disrespect for other people is quite another. Great minds don’t always think alike—and that’s precisely what makes online dialogue so interesting and valuable.

Netiquette is the set of rules of conduct governing how you should behave when communicating via the Internet. Before you post a message to a blog or forum, it’s important to read and understand these rules. Otherwise, you may be banned from posting.

  1. RCInet.ca’s online forums are not anonymous. Users must register, and give their full name and place of residence, which are displayed alongside each of their comments. RCInet.ca reserves the right not to publish comments if there is any doubt as to the identity of their author.
  2. Assuming the identity of another person with intent to mislead or cause harm is a serious infraction that may result in the offender being banned.
  3. RCInet.ca’s online forums are open to everyone, without regard to age, ethnic origin, religion, gender or sexual orientation.
  4. Comments that are defamatory, hateful, racist, xenophobic, sexist, or that disparage an ethnic origin, religious affiliation or age group will not be published.
  5. In online speak, writing in ALL CAPS is considered yelling, and may be interpreted as aggressive behaviour, which is unpleasant for the people reading. Any message containing one or more words in all caps (except for initialisms and acronyms) will be rejected, as will any message containing one or more words in bold, italic or underlined characters.
  6. Use of vulgar, obscene or objectionable language is prohibited. Forums are public places and your comments could offend some users. People who use inappropriate language will be banned.
  7. Mutual respect is essential among users. Insulting, threatening or harassing another user is prohibited. You can express your disagreement with an idea without attacking anyone.
  8. Exchanging arguments and opposing views is a key component of healthy debate, but it should not turn into a dialogue or private discussion between two users who address each other without regard for the other participants. Messages of this type will not be posted.
  9. Radio Canada International publishes contents in five languages. The language used in the forums has to be the same as the contents we publish. The usage of other languages, with the exception of some words, is forbidden. Messages that are off-topic will not be published.
  10. Making repetitive posts disrupts the flow of discussions and will not be tolerated.
  11. Adding images or any other type of file to comments is forbidden. Including hyperlinks to other websites is allowed, as long as they comply with netiquette. Radio Canada International  is in no way responsible for the content of such sites, however.
  12. Copying and pasting text written by someone else, even if you credit the author, is unacceptable if that text makes up the majority of your comment.
  13. Posting any type of advertising or call to action, in any form, to Radio Canada International  forums is prohibited.
  14. All comments and other types of content are moderated before publication. Radio Canada International  reserves the right to refuse any comment for publication.
  15. Radio Canada International  reserves the right to close a forum at any time, without notice.
  16. Radio Canada International  reserves the right to amend this code of conduct (netiquette) at any time, without notice.
  17. By participating in its online forums, you allow Radio Canada International to publish your comments on the web for an indefinite time. This also implies that these messages will be indexed by Internet search engines.
  18. Radio Canada International has no obligation to remove your messages from the web if one day you request it. We invite you to carefully consider your comments and the consequences of their posting.

*

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.