Toronto – September 26, 2016 – With Canadian interest rates at an all time low, many Canadians will be facing payment shock on their debt obligations if interest rates rise by even a quarter of a point. A newly released study reveals that some Canadians would struggle to pay their monthly bills if interest rates were to rise, suggesting that now is the time to pay down debt as much as possible.
If interest rates were to rise by a one-quarter-point, as many as 718,000 individuals would see their monthly payments rise by as much as $50.
If interest rates should rise by 1 per cent, as many as one million consumers could be facing payment shock and would likely be unable to meet their debt obligations.
An additional 253,000 consumers might run the risk of being in financial difficulty if the rate were to rise by a full percentage point.
In a survey conducted earlier this year, nearly half of all respondents said they were living paycheque to paycheque, meaning they couldn't afford any type of hike to their monthly payments.
More than one-third of working Canadians said they feel overwhelmed by their level of debt.
At the start of 2016, the average Canadian owed $21,348 in consumer debt – a figure that has jumped 2.7% from the last year and does not include mortgage debt.
A report from the Bank of Montreal found that one quarter of Canadians view credit as an additional source of spending money – a figure that rises to 33% for millennials.
Nearly half of all Canadian credit card holders are carrying credit card debt.
Sources: "Canadian borrowers could face payment shock if interest rates rise," The Globe and Mail, 13 September 2016; “Canadians living pay cheque to pay cheque, challenged by debt and economy, payroll survey finds,” The Canadian Payroll Association, 7 September 2016; "Debt loads increased 2.7% this year to $21, 348 on average, TransUnion says," CBC, 18 May 2016; "Nearly half of Canadians have credit card debt, report shows,"Global News, 10 February 2015