Posthaste: More Canadians are coping with higher interest rates, debt survey finds

Article content

Article content

More Canadians are getting used to higher interest rates, suggests a new debt survey, just when it looks like the Bank of Canada might be opening the door to a rate cut.

MNP Ltd.’s latest consumer debt index survey said 25 per cent of respondents could take on higher rates — an increase of three percentage points from the previous survey — and 24 per cent said they could manage an extra $130 a month in interest payments if they had to — up five percentage points.

Article content

“The main theme of the latest report is that things are not as bad as they were,” Grant Bazian, president of the insolvency specialist, said in a press release.

That sentiment was also reflected in MNP’s consumer debt index, which jumped to 91 per cent from 83 per cent, well off its all-time low of 77 per cent at the end of December 2022.

The quarterly index measures Canadians’ attitudes toward their consumer debt and gauges their ability to pay their bills, and manage unexpected expenses and changes in interest rates without nearing insolvency. The closer the index comes to 100 or rises above it, the better people feel about their finances.

Higher interest rates have made managing that much harder over the past few years, but there could be relief in sight.

The Bank of Canada on Wednesday held interest rates at five per cent for the sixth consecutive time, but economists are now saying the bank has opened the door to a possible rate cut at its next meeting, scheduled for June 5.

“Governor (Tiff) Macklem was careful not to suggest a cut is imminent quickly, but also did not dismiss the potential for a cut at the next policy meeting in June,” Nathan Janzen, assistant chief economist at Royal Bank of Canada, said in a note.

Article content

Article content

In the meantime, more people are taking their debt in stride, MNP said.

Only 41 per cent of people said they are worried about their debt levels, down six percentage points from December, and 44 per cent said they regret the amount of debt they assumed in the past, down from 47 per cent.

But that doesn’t mean it’s clear sailing on the personal finance front.

More than half of Canadians still said they would fall on hard times if interest rates rose much more than their current level of five per cent, but Bank of Canada governor Tiff Macklem has said he thinks interest rates have gone as high as needed to control inflation.

The central bank releases its latest interest rate decision today, and most economists are expecting policymakers to hold at five per cent, while possibly opening the door to a rate cut at their next meeting in June.

“Debt perceptions have rebounded from record lows over the last year. Canadians are more confident about their current debt situation, expected debt situation, and ability to absorb interest rate increases,” Bazian said. “However, Canadian households are still feeling the squeeze from looming mortgage renewals, pandemic-related financial setbacks and intensifying cost-of-living pressures.”

Article content

Nearly half said they were $200 away from not being able to pay their bills, and 30 per cent — an increase of three percentage points from the previous report — indicated they already couldn’t cover their expenses and repay their debts.

People may be less concerned about their debt overall, but almost half worry about what their social life and obligations are costing them, with some “discouraged by how expensive it is to participate in social events or celebrations, such as birthdays, weddings or graduations,” the survey said.

In a press conference after the rate decision, Macklem said central bankers are confident about the progress they’ve been seeing in inflation since January, including inflation expectations and corporate pricing activities, but they need to make sure it is sustained before moving on rates.

The MNP survey was conducted by pollster Ipsos SA from March 8 to 15 and is based on interviews with 2,000 adults.

 Sign up here to get Posthaste delivered straight to your inbox.

With all provincial budgets tabled and the federal budget set to come out next Tuesday, many taxpayers and investors are feeling less optimistic about the state of the economy. That’s in part because Canada’s 10 provinces are projecting a combined annual deficit of more than $30 billion, the largest recorded outside the pandemic.

Article content

Read the full story here.

• The Bank of Canada announces its latest decision on interest rates at 10 a.m. EDT with most economists expecting officials to hold while signalling that they are preparing to cut rates, possibly at the next meeting on June 5. The central bank will also publish a new Monetary Policy report, plus governor Tiff Macklem will give a press conference on the rate decision starting at 10:30 a.m. EDT.
• Innovation Minister Francois-Philippe Champagne will participate in a fireside chat hosted by AIoT Canada as part of the AIoT Spring Summit in Ottawa. The discussion will focus on the opportunities and challenges of AI and Internet of Things technologies, as well as Canada’s leadership in this area.
• BMO Capital Markets CAPP Energy Symposium continues today in Toronto.
  
• Today’s data: The Canadian Real Estate Association releases existing homes sales for March. The United States Bureau of Labor Statistics releases inflation numbers for March.
• Earnings: Roots Corp., Delta Air Lines Inc., Rent the Runway Inc., Applied Digital Corp.
  

Article content

There are going to be a lot of happy faces when investors open their upcoming quarterly investment statements because global markets have had an excellent start to the year. Rather than being greedy and swinging for home runs, Martin Pelletier suggests investors instead go after some base hits. Read his column here.

Are you worried about having enough for retirement? Do you need to adjust your portfolio? Are you wondering how to make ends meet? Drop us a line at [email protected] with your contact info and the general gist of your problem and we’ll try to find some experts to help you out while writing a Family Finance story about it (we’ll keep your name out of it, of course). If you have a simpler question, the crack team at FP Answers led by Julie Cazzin or one of our columnists can give it a shot.

McLister on mortgages

Want to learn more about mortgages? Mortgage strategist Robert McLister’s Financial Post column can help navigate the complex sector, from the latest trends to financing opportunities you won’t want to miss. Read them here 

Today’s Posthaste was written by Gigi Suhanic, with additional reporting from Financial Post staff, The Canadian Press and Bloomberg.

Have a story idea, pitch, embargoed report, or a suggestion for this newsletter? Email us at [email protected].

Bookmark our website and support our journalism: Don’t miss the business news you need to know — add financialpost.com to your bookmarks and sign up for our newsletters here.

Article content