Debt-burdened Calgarians won’t face an easier road after the Bank of Canada hiked its benchmark interest rate to 1.5 per cent Wednesday, says a local bankruptcy adviser.
While news of the rate hike comes as no surprise, it should force some in the city to take a closer look at their own budgets, particularly those with high levels of debt, said Donna Carson, a licensed insolvency trustee at MNP Ltd.
“Albertans have always seemed to have higher levels of debt than other parts of Canada,” she said.
“I think for some, maybe because of budget increases or the increase to credit card bills or mortgage, this could be enough to tip the scales.”
Earlier this week, before the Bank of Canada announced the increase, MNP released its quarterly consumer price index, which found that nearly half of Albertans surveyed (47 per cent) fear an increase to interest rates could throw them into financial peril. The survey also found some 29 per cent of Albertans have no wiggle room after paying monthly bills and debt obligations at the end of the month while another 44 per cent believe they are less than $200 away from bankruptcy at month’s end.
Albertans were the least likely among all the provinces in the survey at 22 per cent to say that their debt situation has improved compared to five years ago.
The increase marks the second time in six months the Bank of Canada raised the trendsetting rate, after hiking it to 1.25 per cent in January.
That meant some Albertans already close to the financial precipice have had to significantly reexamine their personal spending practices or look for ways to slay their debt, said Carson.
“What we’ve seen is people are sitting down and looking where they can cut back, whether it’s eating out or having coffee, and they’re updating their budgets and starting to budget accordingly,” she said.
“After the downturn a lot of people are back to work now, but often it’s a different job than they previously had, so they’re looking at a new reality and what does that budget look like?”
Those staring down the barrel of elevated personal debt aren’t the only ones expecting to feel the weight of interest rate hikes.
Calgary’s housing market has already been struggling to emerge from the province’s economic swoon, with the Calgary Real Estate Board reporting city-wide sales …read more