A situation that experts say could push some people to breaking point as they rely on higher-interest loans and credit cards to pay for the rising cost of daily necessities.
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Wes Cowan, a licensed insolvency trustee and senior vice president of MNP Ltd., says people are increasingly using credit cards and loans to make a living. .
He said with rising debt levels and escalating interest rates, he expects to see more people struggling to make minimum debt payments in the coming months.
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Meridian Credit Union senior wealth adviser, Paul Shelestowsky, says the risk of a payment shock is central as people grapple with a combination of high inflation and high interest rates.
“Anything with variable rates that come with it, like a line of credit, we see a big payout shock,” he said. “Everything is more expensive – buying groceries, heating your house, the basics – and now paying off debt is also going to cost more.”
Credit reporting agencies Equifax Canada and TransUnion Canada both released reports this week highlighting the recent rise in household debt.
Equifax said total consumer debt grew 8.2% in the second quarter of 2022 from the same period last year.
Meanwhile, TransUnion’s latest credit industry report said total debt rose to an all-time high of $2.24 trillion, up 9.2% year-on-year in 2021 and up 16 .4% above pre-pandemic levels at the end of 2019.
The agency also said credit card balances and the risk of consumers breaking the law on personal loans also increased.
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