Canadians worry about cost of borrowing, going further into debt: survey

As interest rates continue to skyrocket in Canada, it appears many Canadians are growing increasingly concerned about the cost of borrowing and going further into debt.

The latest MNP consumer index report shows more than half of consumers are already feeling the effects of the Bank of Canada’s interest rate moves.

Nearly six in ten Canadians say that as interest rates rise, they are more anxious about their ability to pay their debts. Meanwhile, four in ten say rising interest rates could drive them closer to bankruptcy, and almost half are concerned they won’t be able to cover all living/family expenses in the coming year without acquiring more debt.

“People are definitely concerned about the rising interest rates when they have variable mortgages and lines of credit that can alter with these interest rates,” said Grant Bazian, president of the MNP, the country’s largest insolvency firm.

“Being closer to filing bankruptcy, or not being financially prepared and going into further debt to survive. All of those indices have gone up.”

Bazian says with rates expected to jump even higher this year, it’s going to lead to some big adjustments.

“There is going to be about 2 million or five per cent of Canadians renewing their mortgages in the next 12 months. A couple hundred dollars more could serve as your debt,” he said.

“Many are likely to rack up more debt to keep up with the rising costs of their daily expenses, but as interest rates rise, so will the cost of servicing some of those debts, making it more difficult to pay them down. Once that cycle of debt begins, it is extremely hard to break free of.”

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Bazian believes people often feel shame and regret about their debt situation, labelling themselves as failures and convincing themselves they will never get out of debt and are beyond help. Bazian says those ideas simply aren’t true.

“The reality is that we’ve all been through a lot over the last two years, including a financially devastating pandemic and associated job loss. So my advice to anyone struggling is: go easy on yourself and seek professional debt advice right away.”

Bazian notes while many people fear they will lose their house or car as a result of bankruptcy or insolvency, filing a consumer proposal can offer protections.

He recommends speaking with a licensed professional about your options.