If the Bank of Canada were to raise it’s key interest rate, even slightly, some Canadians would find themselves in a bit of trouble.
That’s the finding of the latest study from TransUnion.
It says over 700,000 people would struggle with their finances, even with a quarter-point hike, and around one million Canadians would not be able to absorb the increase in their monthly payments if interest rates were to rise by a full percent.
In it’s most recent announcement, the Bank of Canada kept it’s key rate steady at 0.5%, where it’s been since July of 2015.
TransUnion says it’s expected the rate will rise in the future, but when and by how much is uncertain.
“Despite rising debt loads for Canadians, our study found that the far majority of consumers will be able to manage an interest rate hike of up to one percent. Our assessment, though, identified a subset of the population of nearly one million borrowers who may face financial challenges when rates rise.” – Jason Wang, TransUnion’s director of research and industry analysis in Canada. “The size of the monthly payment shock is only one side of the equation. For some, a $50 increase in their obligations may simply be managed by forsaking a couple of restaurant dinners and eating at home, while for some others, this may mean they would not be able to fill their gas tanks to get to work.”