July 20, 2023 – Millions of Canadians are fast getting up to speed on monetary policy this summer against the backdrop of yet another increase to the Bank of Canada’s key overnight rate, the 10th such rise since the beginning of 2022. A jump of 25 basis points brings the bank’s policy interest rate to an even five per cent and puts even more pressure on Canadians struggling to keep up with the cost of living.
New data from the non-profit Angus Reid Institute finds one-third of Canadians (34%) saying they expect significant challenges due to the rate hike and an overall three-in-five (59%) say it will have a negative impact on their personal finances. Just one-in-ten Canadians (10%) say they expect positive results from the decision to raise the rate again, while 22 per cent say they will not be affected.
For Canadians paying a mortgage, increasing rates are causing immense difficulties.
Currently, nearly two-in-five (37%) mortgage holders are having a difficult time making their payments. Among this group, nine-in-ten (89%) say this latest rate increase will further exacerbate this. Further, among those who say their payments are currently “manageable” – fully half of mortgage holders (51%) – a majority (60%) say that this decision will negatively affect their ability to keep payments in this comfortable zone going forward.
Homeowners are not alone, however. An even larger number of renters – 45 per cent – are having a difficult time paying their rent. Within this group, three-in-five (63%) expect a worsening of their own financial conditions due to another interest rate boost. This, as many Canadians eschew home purchases while they wait for interest rates to settle, further increasing competition for rentals.
For some, this difficult reality is acceptable. One-in-three Canadians (32%) say that the Bank of Canada should hold the rate firm at five per cent and await the downstream economic impacts, the target of which is a further reduction in inflation. Another one-in-nine (11%) would increase the rate further. The largest group (36%) say that this is the wrong decision, and the Bank of Canada should decrease rates. Notably, the percentage of Canadians who say the BoC should decrease rates has risen 13 points since September 2022, when the policy rate was 3.25%.
In the next six months, what kind of impact will the higher interest rates have on your personal finances? (All Respondents, n=1,600)
More Key Findings
Groceries
Half of Canadians (49%) say grocery costs are difficult to endure, while half say they are comfortably keeping up (49%). The size of the group having challenges rises to 63 per cent among those whose household incomes are less than $50,000.
Large Purchases
Many Canadians are planning to hold off on making large purchases for now. Two-thirds (68%) say this is a bad time to spend money on something major. That proportion is significantly higher than those measured in 2019 and 2020, though it is lower than a high of 75 per cent recorded last July.
Charitable Donations
Two-in-five Canadians (40%) are cutting back on charitable donations amidst these difficult economic times.
Survey Methodology
The Angus Reid Institute conducted an online survey from July 13 – 17, 2023 among a representative randomized sample of 1,600 Canadian adults who are members of Angus Reid Forum. For comparison purposes only, a probability sample of this size would carry a margin of error of +/- 2 percentage points, 19 times out of 20. Discrepancies in or between totals are due to rounding. The survey was self-commissioned and paid for by ARI.
For detailed results by age, gender, region, education, and other demographics, click here.
For detailed results by renters, owners and how difficult respondents find their monthly rent or mortgage, click here.
To read the full report, including detailed tables and methodology, click here.
To read the questionnaire, click here.
Image – Bank of Canada – Banque du Canada from Canada, CC BY 2.0, via Wikimedia Commons
From the Angus Reid Institute, Canada’s non-profit foundation committed to independent research.
For detailed breakdown of the results, visit angusreid.org