Photo: James Bombales

The Bank of Canada is set to make its first rate announcement of the year and most economists are confident that the central bank will hike its overnight rate this Wednesday.

Although 70 per cent of Canadians feel confident about their current financial circumstances, roughly 60 per cent say they would feel “significantly less” confident if interest rates were to rise, according to CIBC’s annual Financial Confidence survey, published today.

In addition, 70 per cent of Canadians worry that they’re not saving enough to handle unexpected expenses.

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“Canadians overall are generally well indebted. There’s a lot of debt sitting on their personal balance sheet,” Jennifer Hubbard, Managing Director, Financial Planning and Advice at CIBC, tells BuzzBuzzNews.

“So, a rise in interest rates to many is just a sense that the cost of living — their own financial wellbeing — will go up” she adds.

Over 1,500 Canadians were polled in an online survey conducted last month.

In 2017, the Bank of Canada hiked the overnight rate twice, increasing it by 50 basis points from its historically low level of 0.5 per cent.

Although rates went up last year, Hubbard says many Canadians are feeling positive about their financial situation as the economy continues to strengthen.

But with possible further rate hikes coming this year and other financial hurdles, Canadians are starting to worry.

According to the CIBC poll, 70 per cent of Canadians say the impact of inflation and rising costs of household goods, including gas, utilities and groceries, make them feel less financially confident.

Canadians are also wary about their ability to save and repay their debts in a rising interest rate environment.

A similar sentiment was expressed in MNP’s Consumer Debt Index released today.

The personal insolvency firm’s survey says that four in ten Canadians are afraid they’ll be in financial trouble if interest rates go up.

“The results highlight just how financially vulnerable Canadians are. Even small interest rate increases result in escalating financial strain and anxiety,” says Grant Bazian, President at MNP LTD, in a press release.

The quarterly survey, conducted by Ipsos, says that one in three Canadians say they’re unable to cover their monthly bills and debt repayments.

In addition, 48 per cent of Canadians say they’re within $200 of not being able to pay their bills and debt obligations.

“With interest rates on the rise, Canadians are more stretched financially than they have ever been before. I wouldn’t say we’re at a major tipping point yet, but likely not far off,” says Bazian.

To prepare for potential rate hikes, CIBC’s Hubbard says Canadians have to save and plan ahead.

“A 25 basis-point increase is about $250 a year and that’s manageable if you really have a plan that takes advantage of that information and you understand where your spending is going,” says Hubbard.

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