As Bank of Canada decision looms, Canadians worry they can’t afford more hikes

As more Canadians worry about their ability to handle future rate hikes, others are finding they're having an easier time handling higher interest costs, a new survey found.

Mounting debt costs are spurring stress for Canadian households heading into the Bank of Canada’s interest rate decision next week, according to the MNP Consumer Debt Index.

The insolvency firm’s quarterly survey tracks how Canadians are feeling about their ability to pay down debt, and the latest instalment released Wednesday shows a mixed picture of worry about handling future rate hikes and some improvements in the ability to cope with higher interest costs.

Some 28 per cent of respondents indicated their ability to deal with an additional percentage point of rate hikes had worsened from the previous quarter. Phrased another way, some 37 per cent of respondents said they couldn’t absorb another $130 in interest payments on their debt, compared with 32 per cent in the previous survey.

MNP’s Consumer Debt Index is based on Ipsos polling of more than 2,000 Canadians between Sept. 5-8, 2023.

More than half of respondents to the poll said they’re $200 or less away from not being able to meet all of their financial obligations, according to MNP.

Canadians now have an average of $674 left over at the end of the month, the survey said, almost $100 less than in the previous quarter.

The latest MNP debt survey comes after the Bank of Canada increased its benchmark interest rate 4.75 percentage points since March 2022, significantly raising the cost of borrowing on products including credit card debt, certain loans and mortgages.

But despite the rapid tightening cycle, the survey also indicated most Canadians are having an easier time handling their debt obligations.