As another Bank of Canada interest rate announcement looms, a recent poll conducted by Ipsos on behalf of MNP LTD finds that over half of British Columbians (56%) say they are concerned about the impact of increasing interest rates on their financial situation, remaining stable since last quarter.
“After the repeated interest rate hikes this year, and the potential of more to come, it is understandable that more than half of British Columbians remain concerned about what the impact will be on their finances,” says Linda Paul, a Licensed Insolvency Trustee with MNP LTD.
Paul says those who are financially vulnerable and struggling to make ends meet may not be able to cut back their budgets any further if interest rates continue to rise and make their debts more unaffordable.
“Any future interest rate hikes could push households in BC that have already slashed their expenses and shaved off as much as they can from their budgets to take on additional debt to keep up with their bills. The cost of servicing that debt will also become more expensive as rates rise, making it even tougher to pay back those debts,” explains Paul. “Those who are using debt to pay off their other debts should seek professional help from a Licensed Insolvency Trustee before their finances spiral beyond their control.”
While Licensed Insolvency Trustees can administer debt-relief options including bankruptcies and consumer proposals, they are also qualified to provide valuable personalized debt advice to individuals who are struggling to budget for their bills and debt repayment obligations. Additionally, Licensed Insolvency Trustees can help individuals reduce their debts through an informal debt settlement, a voluntary arrangement negotiated between an individual and their creditors, which will help put them in a better financial position as the cost of borrowing continues to rise.
Paul adds that many can think about making small budget changes to give themselves some breathing room.
“Sometimes, those smaller expenses on your credit card can go unnoticed, but be aware that they can really add up. Your monthly subscriptions such as TV streaming subscriptions, app subscriptions, music subscriptions and cloud services, for example, can be sneaky,” says Paul. “Always look over your bills at the end of each month with a critical eye to keep those recurring monthly expenditures in check and cut down on costs where you can. Cut back by cancelling subscriptions you no longer use or use rarely, and checking to see if you have any overlapping services you can remove. Keep a close eye on any trial offers, and set reminders to cancel before you’re charged or the pricing goes up.”
Most British Columbians (84%,+1pt) agree that with interest rates rising they will be more careful with how they spend their money.
As British Columbians tighten their budgets, one-quarter (26%) say they are better equipped to absorb an interest rate increase of one percentage point than they used to be, up six points from last quarter. Meanwhile, British Columbians are the least likely to say (13%) say their ability to deal with this increase has worsened, dropping by 13 points from last quarter, the largest decrease amongst the provinces. When asked about their ability to absorb an interest rate increase of an extra $130, there was a small improvement in the number (25%,+3pts) who say their ability to absorb this increase is much better, and far fewer (24%,-7pts) this quarter say it is much worse.
“More British Columbians than last quarter believe they are in a better place to deal with an interest rate increase, but we should recognize that they are still in the minority. There are many who may not fully understand how a rate increase can impact their finances,” says Paul. “Anyone who is already having difficulty meeting all of their debt repayment obligations should seek professional guidance to deal with their debt load.”
While the majority of British Columbians are being more conscious of their spending, six in ten (60%,+1pt) say that they are already beginning to feel the effects of interest rate increases. British Columbia was the only province to see an increase since last quarter. Approximately one in five (19%) say they do not have a solid understanding of how interest rate increases impact their financial situation.
The proportion of British Columbians who say that as interest rates rise, they are more concerned about their ability to pay their debts has remained relatively stable, at fifty-one per cent (-2pts). Also remaining stable since last quarter, half (48%,-1pt) say that if interest rates go up much more, they will be in financial trouble. One-third (36%,-5pts) say that rising rates could drive them closer to bankruptcy, showing a modest improvement since last quarter.
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