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

• Two out of ten Ontarians with a mortgage agree they are ‘in over their head’ with their current mortgage payments
• One quarter of homeowners agree they will face financial difficulties if the value of their home goes down, seven in ten Ontarians think we’re in a housing bubble
• Four in ten Ontarians agree they are concerned about the impact of rising interest rates
• Over seventy percent of Ontarians rate their ability to cope with a 1% interest rate increase as less than optimal

KITCHENER, July 10, 2017

A new survey released today by MNP LTD finds that Ontarians 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.

Four in ten (41%) Ontarians and nearly half (48%) of Canadian homeowners are concerned about the impact rising interest rates will have on their finances. At the same time, almost half of Ontarians (49%) are worried about the potential impact that a decline in house prices might have on homeowners.

“Many are using the equity in their homes to borrow in order to finance a lifestyle they can’t afford. It’s concerning to see that many are not able to make regular payments against the principal. Now, the real possibility of an interest rate increase could leave even more Ontarians struggling to make ends meet,” says Kitchener-based Wesley Cowan, Licensed Insolvency Trustee at MNP LTD, a division of MNP LLP.

One quarter (25%) of home owners 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, 21% of Ontarians who have a mortgage agree that they are ‘in over their head’ with their current mortgage payments.

Homeowners aren’t the only ones concerned. Over seventy per cent of Ontarians rate their ability to cope with a 1% interest rate increase as less than optimal. The vast majority of Ontarians (77%) would have difficulty absorbing an additional $130 per month in interest payments on debt. 

“Those who are only making the minimum payments on their debts could be in serious trouble if they haven’t accounted for the impact of an interest rate increase. That could seriously affect their ability to afford the payments. Others have already found themselves in that position,” says Cowan.

When asked about their personal debt situation, the majority of Ontarians don’t feel optimistic. Six in ten (60%) rated their debt situation as less than good, while 14%rated their situation as bad. On a scale of one to ten, from terrible to excellent, Ontarians gave themselves an average rating of 6.5.

Ontarians are also more likely than any other province to be within $200 per month of financial insolvency. This leaves little wiggle room left to pay any unexpected bills or debts. If that amount is increased to $300 per month, a staggering 53% of Ontarians would be on the verge of insolvency. Three in ten (31%) already don’t make enough to cover their bills and debt payments, the highest proportion amongst the other provinces. More than one in three (36%) say they are concerned about their current level of debt.

“Ontarians should be preparing themselves for the financial changes ahead, and seek professional advice if they need help creating a plan to manage their debts,” says Cowan.

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 BC (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.

Wes Cowan is a Licensed Insolvency Trustee serving the Kitchener region. To learn more about how MNP Debt can help, contact our local office at 519.741.1999.