Nearly half of Canadians (45%) and almost half of homeowners (48%) are concerned about the impact rising interest rates would have on their finances. Meanwhile, over half of Canadians (51%) are worried about the potential impact a decline in house prices would 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,” said Grant Bazian, president of MNP LTD.
Three in 10 homeowners said they would contend with financial difficulties if the value of their homes went down. Even if home values don’t decline in the immediate future, 27% of Canadians with a mortgage said are “in over their heads” with their current mortgage payments.
Debt issues beyond homeowners are just as dire. According to MNP LTD’s survey, over 70% of Canadians rate their ability to cope with a 1% interest rate increase as less than optimal. Moreover, the majority of Canadians (77%) 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,” said Bazian.
“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.”
MBN
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