British Columbians appear to be weathering the effects of rising interest rates better than most Canadians. Insolvency stats in Canada show that the number of consumer insolvencies nationally fell by 2.9% in 2017 from 2016. In British Columbia, insolvencies decreased by 7.5%, with bankruptcies down by 12.1%. But this doesn’t mean that British Columbians should be complacent about debt. Despite forecasts of strong economic growth in the province, rising interest rates put the skids under your finances.
The BC economy is growing, but…
According to the Conference Board of Canada, British Columbia will benefit from the fastest economic growth in the country in 2018. It forecasts that the provincial economy will grow by 3.1% this year, powered by construction in the energy sector, before falling back below 3% in the following years.
Unemployment in BC declined by an incredible 1.2% in 2017, to 4.6%. That’s the lowest of all Canada’s provinces. Star performing sectors included health care and social assistance, construction, real estate, and finance.
Strong economic growth. Low unemployment. What could go wrong?
British Columbians should be worried by higher interest rates
The Bank of Canada has already started to hike interest rates. Economists expect they will continue to increase rates steadily in 2018 and through the following three years. This could put British Columbians at a distinct financial disadvantage to those in other provinces:
- Residents here have a higher average debt than Canada’s average
- Consumer debt in BC grew by 3.2% – the second-highest growth of all Canada’s provinces
- The average consumer debt in BC is now $24,207
According to Statistics Canada, average annual mortgage payments in British Columbia total $14,900. They have the highest payments in Canada, paying 20 cents of every dollar earned on their mortgage.
With interest rates rising, the effect on disposable income could be quite drastic in BC – and that could have a knock-on effect to business and house prices.
Can BC economic growth remain above the Canadian average?
If interest rates rise, the relative high average debt of BC households could hold down consumer spending. Lower spending will harm business sales, and this could make businesses more hesitant to invest, take on new employees, and increase wages. In this scenario, economic growth in the province could fall short of expectations.
How will you cope with rising interest rates?
Right now, the insolvency statistics in BC indicate that British Columbians are coping with their debt better than most. Fewer insolvencies, fewer bankruptcies, and fewer consumer proposals. But with interest rates rising and regional economic growth predicted to taper off in the next three years, this may be as good as it gets in BC.
|Consumer Insolvency Stats 2017 in British Columbia |
(Source: Government of Canada)
|2017||2016||% Change 2016 to 2017|
British Columbians should still treat debt with caution. Economic growth of 3.1% is robust, but it isn’t exceptional. It isn’t a boom. It’s unlikely to lead to a massive explosion in jobs or wages. This is where the Bank of Canada comes into play. Because it is likely to raise interest rates in the coming months and years. If this does transpire, you will be paying more to service your debt.
We are experts in credit counselling, proposals, trustee services, and bankruptcies. If you, or a client of yours, needs our help contact Debt Help BC. Or call us at 1-877-421-2288.
Photo by RawPixel.com