BoC Rate Increase got Consumers Worried
The latest poll by Forum Research Inc., which was conducted right after the Bank of Canada’s decision to increase its benchmark overnight rate to 1% earlier this month, revealed that over half of Canadians believe that rising interest rates will have a negative impact on their personal finances.
“Rates were so low for so long, it was almost like money was free,” Forum Research president Lorne Bozinoff told the Financial Post. “Some may have overextended themselves during that time, thinking rates will never go up.”
This is despite a rather small proportion of the 1,350 respondents actually having emergency funds stashed away, pointing to the possibility that Canadians’ fears the source of their near-future financial woes might be misplaced.
Bozinoff noted that the greater danger lies in the fact that 26% of respondents have no emergency savings, defined as a three- to six-month cushion against job displacement or other financial setbacks. Fully 40% of those surveyed have a hedge of a month or less, while only 15% have a year’s worth of income (or more) set aside (56% of this segment are aged 55 and older).
In particular, millennials are in a “really precarious situation,” Bozinoff said. 35% of young adults aged 18 to 34 have no savings at all, while another 10% have less than a month’s cushion.
Credit Canada CEO and executive director Laurie Campbell warned that “we’ll see more fallout” should interest rates get hiked by another percentage point.
“We’re seeing people one or two paycheques from financial disaster, with no cushion for job loss, rate hikes or to repair the roof,” Campbell explained. “People are tapped out. Many bought more than they can afford and are house poor. Then they move to other types of credit to make up the difference. That’s scary.”
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