MNP Survey: Atlantic Canadians Concerned about Impact of Interest Rate Hikes and Potential Housing Bubble

• Eighty per cent of Atlantic Canadians rate their ability to cope with a 1% interest rate increase as less than optimal.
• One quarter of Atlantic Canadians with a mortgage agree they are ‘in over their head’ with their current mortgage payments.
• More than one in three homeowners agree they will face financial difficulties if the value of their home goes down, six in ten Atlantic Canadians think we’re in a housing bubble.
• Half of Atlantic Canadians agree they are concerned about the impact of rising interest rates.

HALIFAX, July 10, 2017 – A new survey released today by MNP LTD finds that Atlantic Canadians are concerned about the uncertainty of a potential housing bubble and impending interest rate hikes, adding financial stress to households already carrying a record level of debt.

Half (50%) of Atlantic Canadians and nearly half (48%) of Canadian homeowners are concerned about the impact rising interest rates will have on their finances. At the same time, over half of Atlantic Canadians (52%) are worried about the potential impact that a decline in house prices might have on homeowners.

“Many have struggled with unemployment in recent years which has resulted in significant financial stress. As a result, many have borrowed against their homes or use other forms of credit. What’s concerning is that many are unable to afford to carry to pay off this debt - they are not making regular payments against the principal. Now the threat of an increase in interest rates could pull people even further into debt,” says Joe Wilkie, a local Licensed Insolvency Trustee at MNP LTD, a division of MNP LLP.

More than one in three (36%) home owners in Atlantic Canada say that they will be faced with financial difficulties if the value of their home goes down. Even if home values don’t decline in the near future; one quarter of Atlantic Canadians (25%) who have a mortgage agree that they are ‘in over their head’ with their current mortgage payments.
Homeowners aren’t the only ones concerned. Eighty per cent of Atlantic Canadians rate their ability to cope with a 1% interest rate increase as less than optimal. The vast majority of Atlantic Canadians (83%) would have difficulty absorbing an additional $130 per month in interest payments on debt. 

When asked about their personal debt situation, the majority of Atlantic Canadians don’t feel optimistic. Seven in ten (71%) rated their debt situation as less than good, while nearly a quarter (22%) rated their situation as bad. On a scale of one to ten, from terrible to excellent, Atlantic Canadians gave themselves an average rating of 5.7, the lowest rating compared to other provinces.

With over 40%of Atlantic Canadians (42%) finding themselves within $200 per month of financial insolvency, there is little wiggle room left to pay any unexpected bills or debts. If that amount is increased to $300 per month, a staggering 52% of Atlantic Canadians would be on the verge of insolvency, with one in four (26%) not making enough to cover their bills and debt payments. Four in ten (42%) say they are concerned about their current level of debt.

“Now is the time for Atlantic Canadians to buckle down and start paying down their debts. This will help to prepare for the changes ahead. If you are already struggling, it’s time to speak with a professional who can create a realistic plan to manage your debt,” says Wilkie.

Other poll highlights include:

• Over a quarter (27%) of Canadians with a mortgage agree that they are ‘in over their head’ with their current mortgage payments. This includes more than one in three Quebecers (35%), followed by residents of B.C. (32%), Alberta (31%), Atlantic Canada (25%), Saskatchewan and Manitoba (23%), and Ontario (21%).
• Half of Canadians (51%) are concerned about the potential impact on home owners that a decrease in house prices might bring.
• Over forty (44%) of Canadians are within $200 of financial insolvency at the end of the month, down 8 points from March 2017 and 12 points from September 2016.
• Women are significantly more likely (48% women vs. 39% men) than men to be within $200 of insolvency at month-end.
• Gen X’ers are more likely (48%) to be within $200 of insolvency at month-end, compared to Millennials (43%) and Baby Boomers (40%).
• Half of Canadians (50%) are $300 per month away from being financially insolvent.
• Atlantic Canadians are the most likely to rate their personal debt situation as ‘bad’ – the highest in the country at 22%
• While two in three Canadians (67%) think we’re in a housing bubble, only a minority (43%) expect that bubble to burst through a decline in house prices in the next year. Half (51%) are concerned about the potential impact on home owners that such a decrease might bring.

About MNP LTD

MNP LTD, a division of MNP LLP, is one of the largest personal insolvency practices in Canada. For more than 50 years, our experienced team of Licensed Insolvency Trustees and advisors have been working collaboratively with individuals to help them recover from times of financial distress and regain control of their finances. With more than 200 Canadian offices from coast-to-coast, MNP helps thousands of Canadians each year who are struggling with an overwhelming amount of debt. Visit www.MNPdebt.ca to learn more.

About the Survey

These are some of the findings of an Ipsos poll conducted between June 19 and June 21, 2017, on behalf of MNP Debt. For this survey, a sample of 2,002 Canadians aged 18+ from Ipsos' online panel was interviewed online. Weighting was then employed to balance demographics to ensure that the sample's composition reflects that of the adult population according to Census data and to provide results intended to approximate the sample universe. The precision of Ipsos online polls is measured using a credibility interval. In this case, the poll is accurate to within ±2.5 percentage points, 19 times out of 20, had all Canadian adults been polled. The credibility interval will be wider among subsets of the population. All sample surveys and polls may be subject to other sources of error, including, but not limited to coverage error, and measurement error.