A new survey released by MNP LTD finds that Albertans are concerned about the uncertainty of a potential housing bubble and impending interest rate hikes, adding financial stress to households already carrying a record level of debt.

Six in ten (61 per cent) of Albertans and nearly half (48 per cent) of Canadians homeowners are concerned about the impact rising interest rates will have on their finances. At the same time, more than half of Albertans (59 per cent) are worried about the potential impact that a decline in house prices might have on homeowners.

“So many are over-leveraged right now. Making matters worse, many are not making regular payments against the principal. With the financial stress of the downturn, and the threat of an increase in interest rates, many are going to find it even harder to make ends meet,” says Donna Carson, Licensed Insolvency Trustee at MNP LTD, a division of MNP LLP.

Nearly four in ten (39 per cent) homeowners in Alberta say that they will be faced with financial difficulties if the value of their home goes down, the highest proportion among other provinces. Even if home values don’t decline in the near future; three in ten Albertans (31 per cent) who have a mortgage agree that they are ‘in over their head’ with their current mortgage payments.

Homeowners aren’t the only ones concerned. Nearly eighty per cent of Albertans rate their ability to cope with a 1% interest rate increase as less than optimal. The vast majority of Albertans (83 per cent) would have difficulty absorbing an additional $130 per month in interest payments on debt.

“We’ve become far too comfortable paying only the minimum payments on our debts. It’s time to start assessing our ability to pay down those debts and ask ourselves if we can truly afford them if there is a rate change,” says Carson.

When asked about their personal debt situation, the majority of Albertans don’t feel optimistic. Nearly seven in ten (69 per cent) rated their debt situation as less than good, while sixteen per cent rated their situation as bad. On a scale of one to ten, from terrible to excellent, Albertans gave themselves an average rating of 6.

With nearly four in ten Albertans (38 per cent) finding themselves within $200 per month of financial insolvency, there is little wiggle room left to pay any unexpected bills or debts. If that amount is increased to $300 per month, a staggering forty-two per cent of Albertans would be on the verge of insolvency, with nearly one in four (22 per cent) not making enough to cover their bills and debt payments. Four in ten (42 per cent) say they are concerned about their current level of debt.

“Albertans should be bracing themselves for what’s ahead, especially those who already consider themselves to be in financial distress. Seek professional advice and start creating a realistic plan to deal with that debt,” says Carson.

Survey Highlights include:

• Three in ten Albertans with a mortgage agree they are ‘in over their head’ with their current mortgage payments
• Nearly four in ten homeowners in Alberta agree they will face financial difficulties if the value of their home goes down, six in ten Albertans think we’re in a housing bubble
• Six in ten Albertans agree they are concerned about the impact of rising interest rates
• Nearly eighty per cent of Albertans rate their ability to cope with a 1% interest rate increase as less than optimal
• Over a quarter (27%) of Canadians with a mortgage agree that they are ‘in over their head’ with their current mortgage payments. This includes more than one in three Quebecers (35%), followed by residents of BC (32%), Alberta (31%), Atlantic Canada (25%), Saskatchewan and Manitoba (23%), and Ontario (21%).
• Half of Canadians (51%) are concerned about the potential impact on home owners that a decrease in house prices might bring.
• Over forty (44%) of Canadians are within $200 of financial insolvency at the end of the month, down 8 points from March 2017, and 12 points from September 2016.
• Women are significantly more likely (48% women vs. 39% men) than men to be within $200 of insolvency at month-end.
• Gen X’ers are more likely (48%) to be within $200 of insolvency at month-end, compared to Millennials (43%) and Baby Boomers (40%).
• Half of Canadians (50%) are $300 per month away from being financially insolvent.
• Atlantic Canadians are the most likely to rate their personal debt situation as ‘bad’ – the highest in the country at 22%
• While two in three Canadians (67%) think we’re in a housing bubble, only a minority (43%) expect that bubble to burst through a decline in house prices in the next year. Half (51%) are concerned about the potential impact on home owners that such a decrease might bring.