According to a recent Ipsos survey, most Canadians are living with $200 per month of not meeting their debt rights or being capable to pay their bills.
With such an impending problem, several hardships such as loss of jobs or even a simple car repair could plunge families already suffering into financial desperation, said the president of MNP’s personal insolvency practice Grant Bazian.
Mathematically speaking, for every 10 per cent of Canadians, the household finances margin of error is at a staggering $100 or lower. However those with something left by month end were better placed than others. 31 per cent of correspondents declared that they find it hard to meet up their financial obligations.
This issue of debt is weighing a lot on most Canadians, but despite the stress it poses, a few are seen to be enrooting to boost their monthly financial cushion.
About two-thirds of survey takers in Canada are less confident in their ability to come up with an emergency fund due to the rising issue of debts.
This leads to another critical finding from the survey, that approximately 60 per cent of most Canadians don’t understand how interest rates have a toll on debt repayments. This finding helps to justify why high-cost loans and more debt are being taken by many indebted Canadians, placing them in a continuous cycle of debt, says Bazian.
This data also tries to show if the Canadians really understood the rise of interest rate by bank of Canada and its implications. This decision would enable the cost of carrying debts all over the country to increase. Interest rates are used by the bank to regulate economic activities and influence inflation.
Though the bank of Canada will lift up interest rates over time, the repercussion will be substantial in the pockets of the Canadians.
For instance, a one per cent rise in the bank of Canada’s interest rate will similarly raise the variable mortgage rate by same amount. Now a 3 per cent variable mortgage rate will rise to 4 per cent, leading to an increase of 33 per cent in interest payments for the current mortgage holder. This results to an $83 extra for every $100,000 per month in an unbelievable mortgage debt.
Another valuable financial tool that carries variable rates is lines of credit, which is largely influenced by the over all levels of interest rates.