Some Canadians are cutting back on basic necessities like food, utilities and housing as the cost of living continues to rise, the latest MNP Consumer Debt Index survey revealed.
Twenty-seven percent of respondents said they cut back on essentials, while 37 percent said they opted to buy cheaper versions of their everyday purchases, the data showed. Nearly half (46 percent) have cut back on non-essentials, including travel, eating out and entertainment.
Six in 10 report they are already feeling the impact of higher interest rates – a seven-point jump in the index compared to the last quarter. The survey was conducted by Ipsos on behalf of MNP LTD.
“No matter where Canadians turn, there is no reprieve; housing is more expensive, driving a car is more expensive, food is more expensive,” Grant Bazian, president of MNP, a major debt advisory agency in Canada, said in a press release Monday.
“Right now, many Canadian households are trying to adjust their budgets by cutting back where they can to keep their monthly bills under control. But as the cost of living continues to rise—likely to get worse before it gets better—households will have to make increasingly difficult choices about what to cut back on, and may find themselves racking up debt to bridge the gap. the end.”
In an effort to rein in inflation, Canada’s central bank is aggressively raising interest rates. The bank’s current interest rate is 1.5 percent, and market data shows investors are betting the bank will achieve a three-quarter point hike when it meets on Wednesday.
“Right now, many Canadian households are trying to adjust their budgets by cutting back where they can to keep their monthly bills in check,” Bazian said.
“But as the cost of living continues to rise – likely to get worse before it gets better – households will have to make increasingly difficult choices about what to cut back on and may find themselves in a position to pile up debt to bridge both ends.’
Half of respondents said they would have financial problems if interest rates continued to rise. Almost a quarter of those surveyed said they were not financially prepared to deal with a one percentage point interest rate increase.
“There comes a point when even the strictest budget may not be enough to help an individual avoid financial trouble,” Bazian said.
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