Many Canadians are cutting back on essentials
Canadian household purchasing power continues to deteriorate as interest rates and commodity prices remained on their upward trajectory over the past few months, according to a new poll by MNP Ltd.
Nearly 59% of Canadians told MNP that they are already feeling the effects of interest rate increases, while 46% admitted that they are already scaling back their non-essential expenses like dining out, travelling, and entertainment. Around 30% are driving less, and 27% are cutting back on essentials such as food, utilities, and housing.
“No matter where Canadians turn, there is no reprieve; housing is more expensive, driving a car is more expensive, food is more expensive,” said Grant Bazian, president of MNP.
“Right now, many Canadian households are trying to adjust their budgets, cutting costs where they can in order to keep up with their monthly bills. But as the cost-of-living continues to rise – it’s likely to get worse before it gets better – households will have to make increasingly difficult choices about what to cut, and could find themselves piling on debt to make ends meet.”
Read more: What are the prospects of further policy tightening in Canada?
With the Bank of Canada poised to implement more outsized rate hikes, the costs of borrowing will only get worse for consumers. Fully half of Canadians polled by MNP said that they will be in dire financial straits if interest rates go up much more, while 39% said that rate hikes could drive them closer to bankruptcy. Nearly a quarter (24%) said that they are not financially prepared to deal with an interest rate increase of 1%.
“With inflation nearing a 40-year high, there is mounting pressure for more aggressive interest rate hikes to tame inflation. Canadians who are not financially prepared to absorb future interest rate increases are likely to find themselves in financial trouble soon, as they are unable to manage the increasing costs of their debt repayment obligations,” Bazian said.
