Photo: James Bombales
As interest rates climb, Canadian households are increasingly susceptible to racking up more debt to cover their dues, according to a recent survey from MNP.
Although 45 per cent of Canadians blame themselves for their non-mortgage debts, one in five identify external factors, including six per cent who say rising interest rates from the Bank of Canada are responsible.
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“With interest rates on the rise, households are increasingly vulnerable to the exploitive tactics of lenders: taking on more debts to cover their existing ones, investing more of their income just to cover the minimum payments and having less and less money to make ends meet,” reads the report, published last week.
The survey, which was conducted in March, polled 2,001 Canadians online. Along with rate hikes, 13 per cent of Canadians blame taxes for their debt. A further 10 per cent of Canadians blamed their spouses.
When broken down by region, Albertans are more likely to point the finger at government taxation (17 per cent) compared to the rest of the country.
According to 58 per cent of Canadians, the only way to get rid of their debts is a significant pay bump.
“With the average household estimating a 37 per cent wage boost would be necessary to pay off their creditors, it appears a poorly performing economy and nearly a decade of record-low interest rates have taken their toll,” reads the report.
Out of all regions, 69 per cent of indebted Albertans say they would need a notable increase in their household income of 21 per cent or higher in order to live debt-free — the highest percentage across Canada.
However, on average, Atlantic Canada residents say they would need the highest percentage boost in household income (40 per cent) in order to pay off their debts.
MNP’s survey also revealed that many Canadians who could be considered insolvent would need a pay boost of nearly 1.5 times their current income (49 per cent) in order to live without any consumer debt.