MNP Ltd.

MNP Ltd.

July 10, 2017 06:30 ET

Survey: Canadians Concerned About Impact of Interest Rate Hikes and Potential Housing Bubble

- One quarter of Canadians with a mortgage agree they are 'in over their head' with their current mortgage payments.

- Three in ten homeowners agree they will face financial difficulties if the value of their home goes down. Two in three Canadians think we're in a housing bubble.

- Almost half of Canadians agree they are concerned about the impact of rising interest rates.

- Over seventy percent of Canadians rate their ability to cope with a 1% interest rate increase as less than optimal.

CALGARY, ALBERTA--(Marketwired - July 10, 2017) -

Editors Note: There is an infographic associated with this release.

A new survey by MNP LTD finds that Canadians are concerned about the uncertainty of a potential housing bubble and impending interest rate hikes, adding financial stress to households already carrying a record level of debt.

Almost half (45 per cent) of Canadians and nearly half (48 per cent) of homeowners are concerned about the impact rising interest rates will have on their finances. At the same time, over half of Canadians (51 per cent) are worried about the potential impact that a decline in house prices might have on homeowners.

"Many are borrowing against their homes and using them to finance lifestyles they simply can't afford. What's worse is that many are not making regular payments against the principal, and the threat of an increase in interest rates might make it even harder to make ends meet," says Grant Bazian, President at MNP LTD.

Three in ten home owners say that they will be faced with financial difficulties if the value of their home goes down. Even if home values don't decline in the near future; more than a quarter of Canadians (27 per cent) who have a mortgage agree that they are 'in over their head' with their current mortgage payments.

Homeowners aren't the only ones concerned. Over seventy percent of Canadians rate their ability to cope with a 1% interest rate increase as less than optimal. The vast majority of Canadians (77 per cent) would have difficulty absorbing an additional $130 per month in interest payments on debt.

"We've been living with this 'minimum payment mentality' for far too long. Collectively we need to start looking critically at our debt loads and factoring in interest rate changes to see if the debt amassed is even affordable. For many, it already isn't," says Bazian, who leads a national team of Licenced Insolvency Trustees across the country.

When asked about their personal debt situation, the majority of Canadians don't feel optimistic. Six in ten (60%) rated their debt situation as less than good, while fifteen per cent rated their situation as bad. On a scale of one to ten, from terrible to excellent, Canadians gave themselves an average rating of 6.5. Gen X'ers were found to be more likely to rate their personal debt situation as bad.

With over forty per cent of Canadians (44 per cent) finding themselves within $200 per month of financial insolvency, there is little wiggle room left to pay any unexpected bills or debts. If that amount is increased to $300 per month, a staggering fifty per cent of Canadians would be on the verge of insolvency, with one in four (27 per cent) not making enough to cover their bills and debt payments. Nearly four in ten (37 per cent) say they are concerned about their current level of debt.

"Canadians should be bracing themselves for some major financial changes ahead and seek professional help to create a realistic plan to deal with their debt," says Bazian.

Other poll highlights include:

  • Over a quarter (27%) of Canadians with a mortgage agree that they are 'in over their head' with their current mortgage payments. This includes more than one in three Quebecers (35%), followed by residents of BC (32%), Alberta (31%), Atlantic Canada (25%), Saskatchewan and Manitoba (23%), and Ontario (21%).
  • Half of Canadians (51%) are concerned about the potential impact on home owners that a decrease in house prices might bring.
  • Over forty (44%) of Canadians are within $200 of financial insolvency at the end of the month, down 8 points from March 2017, and 12 points from September 2016.
  • Women are significantly more likely (48% women vs. 39% men) than men to be within $200 of insolvency at month-end.
  • Gen X'ers are more likely (48%) to be within $200 of insolvency at month-end, compared to Millennials (43%) and Baby Boomers (40%).
  • Half of Canadians (50%) are $300 per month away from being financially insolvent.
  • Atlantic Canadians are the most likely to rate their personal debt situation as 'bad' - the highest in the country at 22%.
  • While two in three Canadians (67%) think we're in a housing bubble, only a minority (43%) expect that bubble to burst through a decline in house prices in the next year. Half (51%) are concerned about the potential impact on home owners that such a decrease might bring.

About MNP LTD

MNP LTD, a division of MNP LLP, is one of the largest personal insolvency practices in Canada. For more than 50 years, our experienced team of Licensed Insolvency Trustees and advisors have been working collaboratively with individuals to help them recover from times of financial distress and regain control of their finances. With more than 200 Canadian offices from coast-to-coast, MNP helps thousands of Canadians each year who are struggling with an overwhelming amount of debt. Visit www.MNPdebt.ca to learn more.

About the Survey

These are some of the findings of an Ipsos poll conducted between June 19 and June 21, 2017, on behalf of MNP Debt. For this survey, a sample of 2,002 Canadians aged 18+ from Ipsos' online panel was interviewed online. Weighting was then employed to balance demographics to ensure that the sample's composition reflects that of the adult population according to Census data and to provide results intended to approximate the sample universe. The precision of Ipsos online polls is measured using a credibility interval. In this case, the poll is accurate to within ±2.5 percentage points, 19 times out of 20, had all Canadian adults been polled. The credibility interval will be wider among subsets of the population. All sample surveys and polls may be subject to other sources of error, including, but not limited to coverage error, and measurement error.

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