Half of Albertans say rising interest rates could drive them closer to bankruptcy — a 15 per cent jump since December — according to the results of a new poll.
That increase is the largest among the provinces, as seen in the latest MNP Consumer Debt Index conducted by Ipsos on behalf of MNP LTD, the largest insolvency practice in Canada.
“These are scary numbers given that there’s nothing to show inflation and high interest rates are going to change anytime soon,” said Kevin Lacey, Alberta director with the Canadian Taxpayers Federation.
He said Alberta’s economy was just starting to improve after some difficult years which is why Albertans are worse off than others.
The survey, compiled between March 9 and 15, shows two in three Albertans say that they were more concerned about their ability to pay their debts.
Six in ten say they were already feeling the effects of interest rate increases, also the highest amongst the provinces.
Donna Carson, a licensed insolvency trustee with Alberta-based MNP LTD, said high consumer debt loads may be intensifying the impact for Albertans.
“Many have piled on more debt in an attempt to keep up with the rising costs of their living expenses, but as interest rates rise, the cost of servicing some of those debts will rise too, making it more challenging to pay them down. Once that cycle of debt has begun, it is extremely hard to break free of the cycle,” Carson said in a statement.
Lacy said if average Red Deer residents don’t have money to spend, and high-income earners are also cautious, local store owners are not going to be able to contribute to economic drivers like job growth.
He said a poll like this should be a signal to politicians. The federal government needs to cancel the carbon tax increase that went into effect on April 1. The provincial government was off to a good start with its 13-cent gas tax break and electricity rebate, but could go further by putting an end to income tax bracket creep.
“This is a call to action.”
Compared to the other provinces, Albertans were also the most likely to say they were not financially prepared to deal with a rate increase of one percentage point.
“Over the course of the pandemic, many people’s rainy-day savings funds were severely depleted. Albertans’ household budgets are contracting, but particularly for those who are already living in the red,” Carson said.
Half of those surveyed say they were $200 away or less from not being able to meet all of their financial obligations, which was an eight-point increase since December. This includes 36 per cent who say they already didn’t make enough to cover their bills and debt payments, which was more than any other province.
Over half were concerned they won’t be able to cover all living/family expenses in the coming year without going further into debt, the largest increase from last quarter among all provinces.
Albertans were also most likely to be concerned about their current level of debt.
Ron Rose, Alberta Council on Aging president, said increasing costs make it particularly difficult for those living on a fixed income, like seniors.
He said they aren’t in a position to earn more money by getting a job, and he suspects going to a food bank can be a bit of a hurdle for seniors, but that day may come.
“A lot of seniors will get by on tea and toast when they probably shouldn’t be,” said Rose, of Red Deer, who doesn’t see an end to soaring costs.
“Everybody wants to go back to normal. I don’t want to go back to normal. That’s what got us into this mess. We need a new normal, and I guess I’m waiting to see who figures out what that is.”