Interest rates: Introduction
Canadians have been on a borrowing binge due in large part to very low rates. But, the tide is beginning to change and interest rates, although still low, are beginning to creep up. This rise in rates is making many Canadians very nervous. For some, it could cause serious financial hardship.
Interest rates: The threat of rising interest rates
Forum Research Inc. conducted a survey after the Bank of Canada raised rates in September and the results are quite interesting:
- 60% of young people are at least somewhat concerned by the prospect of rising rates
- Over 50% of Canadians think that rising rates will negatively impact their personal finances
- 35% of Millennials aged 18 to 34 have no savings at all
- Only 26% have an emergency fund
- 12% expressed concern that more rate hikes were on the way and that the impact would be extremely negative
Interest rates: “It was almost like money was free”
In theory, higher interest rates should provide an incentive for Canadians to save more, but the long period with low rates have taken their toll on many. “Rates were so low for so long, it was almost like money was free,” said Forum Research president Lorne Bozinoff in an interview. “Some may have overextended themselves during that time, thinking rates will never go up.”
Interest rates: How will you cope with higher interest rates?
The question now is how will Canadians cope with higher rates? “Some households might not be able to afford an increase,” says Frances Donald, senior economist with Manulife Asset Management. “And this is where we can see defaults, first on auto loans and then on housing.”
Interest rates: Are you worried about defaulting?
Are you worried about defaulting on your loans or mortgage? Are higher rates causing you financial hardship? There’s no time to waste. Contact Ira Smith Trustee & Receiver Inc. today.
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