Consumer Alert: Managing debt when interest rates rise

News Release

Ottawa, Canada

At a time when Canadians are carrying record amounts of debt, the Financial Consumer Agency of Canada (FCAC) is advising consumers to take steps to manage a rise in interest rates.

An interest rate increase requires consumers to make higher monthly payments on credit products and loans such as variable interest rate mortgages, personal loans and lines of credit. Interest rate increases could also impact loans that are coming up for renewal such as fixed rate mortgages. For some consumers, higher debt payments means having less money to put toward other expenses.

Consumers may be more vulnerable if a larger share of their disposable income is applied to servicing their debt, since they may lack flexibility in their monthly budget to cope with higher borrowing costs.

A rate increase is a good time for consumers to review their finances. FCAC recommends consumers review their budget to see how higher interest rates will impact their payments and take steps to manage an increase, such as:

  • paying down larger debts, especially those with the highest interest rates
  • making prepayments on their mortgage or accelerating mortgage payments
  • cutting expenses and putting more money toward paying down debt
  • avoiding taking on more debt
  • setting aside savings to deal with unplanned expenses
  • consolidating debts with high interest rates into a loan with a lower interest rate


“Many Canadians have high debt and low savings. Even a slight increase in interest rates puts Canadians at risk of carrying debt over longer periods of time, leaving them more vulnerable to unforeseen events or unexpected expenses. We know that those who budget, make plans to pay off debt and set savings goals usually succeed."

Lucie Tedesco, Commissioner, Financial Consumer Agency of Canada

“An increase in interest rates is a good time for Canadians to review their budgets and figure out how a rate increase could impact their finances. FCAC tools and information can help people make informed financial decisions when creating a plan to pay down debt and set savings goals.”

Jane Rooney, Financial Literacy Leader, Financial Consumer Agency of Canada

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