Back in 2017, interest rates at the Bank of Canada and other big banks began to climb, signalling what may be beginning of the end of a period of low rates

Dalhousie University economics professor Lars Osberg says more Canadians should have seen it coming.

Back in 2017, interest rates at the Bank of Canada and other big banks began to climb, signalling what may be beginning of the end of a period of low interest on loans.

"Even at the time there were articles in the news saying that well, about two years down the road you're going to start seeing more insolvencies and bankruptcies," says Osberg. "Because it takes a while for the impact of an increase in interest rates to feed through to bankruptcies."

According to a report from the Office of the Superintendent of Bankruptcy, Canadian insolvencies hit their highest level in a decade, with 13,200 Canadians declaring bankruptcy or rearranging their debts in October alone -- a 13 per cent jump from last year.

"When people have got too much debt, the first thing they do is try to cut back on expenditures or maybe run up other lines of credit, hope for an increase in pay or something to prevent bankruptcies," Osberg tells NEWS 95.7's The Todd Veinotte Show.

The economist says that around the world, many banks have been cutting interest rates over the past decade to try to increase spending after the 2009 recession.

"Around the world interest rates have been going down," he explains. "It's a global phenomenon and in some countries in Europe the central banks are actually having negative interest rates instead of positive interest rates."

But Osberg says Canadians may overspend when interest is low and end up owing more now that interest is going back up.

"When interest rates stay that low for that long, then people pile up the debts cause they think they can finance it," he says. "But even if you're only going from two per cent to four per cent in interest rates, that's a doubling of your mortgage obligations, a doubling of the interest rate burden, and that's what creates real financial stress."

If you're shocked at new interest rates, Osberg reminds Canadians that increased interest could have benefits in other areas, like pensions.

"Pension funds have been hammered by the decline in interest rates. So there's always a bunch of trade-offs to be made in interest rate policies," he says.

On average, Osberg says about 5,700 Nova Scotians file insolvency every year. From October 2018 to October 2019, the number was over 6,000.

"I think that is a pretty large number really for a province the size of Nova Scotia, and it means that an awful lot of people out there don't necessarily file for insolvency but they're struggling with avoiding it," he adds.

But the economics professor isn't sure rates will continue to go up to the extent they did in the 1980s, when interest reached over 15 per cent.

"There's a lot of anxiety about the international economy, the trade wars that are going on, particularly between the U.S. and China but also between the U.S. and Europe. That creates an awful lot of uncertainty in the international economy, a lot of anxiety about recession," he says.

Because Canadians are so heavily impacted by what's going on in other parts of the world, Osberg says he hopes interest will stay reasonable.

"There's a real case to be made for lower interest rates right now, just to keep the economy growing and to keep unemployment from going up," he says.