Debt-laden Canadians vulnerable to interest rate hikes: CICA survey

TORONTO, July 17, 2012 – A national survey commissioned by the Canadian Institute of Chartered Accountants (CICA) finds that almost half of the respondents (48 per cent) would be challenged to keep up with mortgage or debt payments following a significant rise in interest rates. 

Among that group of respondents, 29 per cent would encounter serious problems making payments if rates were to rise two per cent or less.  Another 29 per cent believe a rate increase of three to four per cent would be challenging. 

The CICA survey, conducted by Harris/Decima Inc., also found that nearly four in 10 of all respondents believe they will still be paying off debt after they turn 65. 

“Many Canadians have little room for error when it comes to their finances and that scenario won’t be changing overnight,” said Kevin Dancey, FCA, president and CEO, CICA.  “This is why the CICA firmly believes that helping Canadians develop financial knowledge is critical to Canada’s ongoing economic strength and prosperity.”

That thought is echoed by James Rajotte, Member of Parliament for Edmonton-Leduc. His Private Member’s Motion to help improve financial literacy in Canada was recently adopted by the House of Commons.  “With many Canadians vulnerable to rate hikes or facing long-term debt, it is important that they acquire the knowledge required to make the best financial choices for their circumstances,” stressed Rajotte.

The survey found that groups most worried about rate hikes are women, younger adults and those who lack confidence in their financial skills. 

Almost six in 10 surveyed (59 per cent) save less than 10 per cent of their monthly income and, of these, 33 per cent save less than five per cent or nothing at all.

In addition, the research also focused on credit card financing.  Forty three per cent of those surveyed reported carrying over a balance on their credit cards, up nine percentage points from a similar study conducted for the CICA in 2010.   

Survey Highlights:

Carrying Debt

  1. Sixty per cent of Canadians have borrowed for the purchase of a big ticket item such as a car or vacation, and 44 per cent still owe against these loans.
  2. Almost two in 10 Canadians (17 per cent) have borrowed to cover day-to-day living expenses, and nearly half (42 per cent) still owe against these loans.

Insufficient retirement savings

  1. Of those 55 or older, 43 per cent reported they have not saved enough for their retirement.
  2. Nearly four in 10 think they will have to work past age 65 to make ends meet.

Almost half of the survey respondents (46 per cent) indicated that their financial situation had not changed year over year.  However, roughly two in five reported improvement and the reasons cited among this group included:  payment of some or all of existing debt (59 per cent); an increase in overall household earnings (58 per cent) and general improvement in money management skills (49 per cent).

“It is encouraging to see debt management and improved financial skills being referenced by individuals feeling better about their own situation,” stressed Dancey.

The survey findings assist the CICA in determining ways it can continue to play an active role in helping Canadians learn more about personal finances.  The Institute recently published A Parent’s Guide to Raising Money-Smart Kids, a book designed to put parents at ease when preparing their children for life’s important financial decisions.  Additional resources are available through a CICA website dedicated to financial literacy (www.financialdecisionsmatter.com). 

The CICA’s Canadian Finance Study 2012 was conducted by Harris/Decima Inc. via telephone between March 29 and April 16 with a national random sample of 1,000 adult Canadians aged 18 years and over and is considered accurate to within ± 3.1 per cent, 19 times out of 20.  A survey summary report is available online (www.cica.ca/flsurvey2012).

About CICA

Chartered Accountants (CAs) are Canada's most valued, internationally recognized profession of leaders in senior management, advisory, financial, tax and assurance roles. Through their integrity, expertise, and internationally recognized qualification standards, Canada's 82,000 CAs sustain their influence and leadership position both in Canada and globally. As trusted business advisors to Canadian organizations of all sizes, Canada’s CAs foster confidence in Canadian business and contribute to the health and sustainability of Canada’s capital markets and economy. The Canadian Institute of Chartered Accountants (CICA) represents Canada’s CA profession both nationally and internationally. The CICA is a founding member of the International Federation of Accountants (IFAC) and the Global Accounting Alliance (GAA).

– 30 –

For more information or to arrange an interview, contact:
Tobin Lambie, Manager, Media, CICA
(416) 204-3228
tobin.lambie@cica.ca
www.cica.ca

Chartered Professional Accountants/ Comptables professionnels agréés


Welcome to CPA Canada!

CPA Canada is the national organization established to support unification of the Canadian accounting profession under the Chartered Professional Accountant (CPA) designation. CPA Canada provides services to all CPA, CA, CMA and CGA accounting bodies that have unified or are committed to unification.

This legacy website is still available to Chartered Professional Accountants while we work on transferring the materials within this site into our new integrated website: cpacanada.ca

Bienvenue à CPA Canada!

CPA Canada est l’organisation nationale établie pour soutenir l'unification de la profession comptable canadienne sous la bannière du titre de comptable professionnel agréé (CPA). CPA Canada fournit des services à toutes les organisations comptables de CPA, de CA, de CMA et de CGA qui se sont déjà unifiées ou qui sont engagées dans le processus d’unification.

Ce site d’origine reste accessible pour les comptables professionnels agréés pendant que nous travaillons à en transférer le contenu vers notre nouveau site Web intégré : cpacanada.ca.