Rising interest rates have people in BC cutting back on spending: survey

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Rising interest rates around the world are causing a growing number of Canadians to feel the pinch — and worry about how they may be affected in the near future.

A new survey indicates that 59% of homeowners in British Columbia, and 63% of homeowners in Canada overall, are concerned about how interest rates are continuing to climb rapidly. Of particular concern to individuals is how these rising interest rates may impact their mortgage payments.

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Results of the Canadians & Money 2021-2022 survey, conducted by digital life insurance company PolicyMe, underscore just how chaotic the last year has been. Ongoing economic uncertainty caused by the COVID-19 pandemic, a tumultuous stock market and rapidly increasing inflation have hit Canadians hard.

In January 2022, the inflation rate in Canada hit 5.1%, which is the highest it’s been since 1991. Plus, at present, housing affordability is at a 31-year low.

“Rising interest rates will put a strain on many Canadian households,” said Andrew Ostro, cofounder and CEO of PolicyMe, in a statement.

“Financial preparedness is the number one way to stay ready, especially those who will be most affected by the rising interest rates, such as homeowners on tight budgets and individuals with large debt repayments.”

To stay resilient during this period of higher costs and rising interest rates, British Columbians report that they are making changes to their spending habits.

According to the survey, 60% of British Columbians are spending less on restaurant dining. Takeout and delivery are also taking a hit, with almost half (47%) reporting a reduction in ordering restaurant meals to go or to be delivered.

More than half (54%) of British Columbians are also reducing what they regularly spend on entertainment and leisure activities.

Many British Columbians are delaying making large purchases right now: 41% are putting off taking a much-needed vacation, while 40% are waiting to buy major items for their house or apartment, such as furniture, appliances and home decor.

“There’s no doubt people will be paying more at the pump, in the grocery store and on their mortgage repayments, and we’re seeing many families do the smart thing by adjusting their budgets to stay financially resilient,” said Ostro.

Adding to the stress of rising interest rates is the fact that the majority of British Columbians (63%) have just six months of living expenses put away for a rainy day. Even worse, 25% have less than one month in savings as a cushion in case of emergency.

As part of the statement, Ostro recommended that all Canadians consider purchasing life insurance as a way to reduce the financial risk if a parent or guardian passes away unexpectedly.

To learn more about trends in Canada regarding saving, spending and financial resilience, read the full Canadians & Money 2021-2022 survey.