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More than a quarter of Canadians with a mortgage say they “are in over their head” with current payments, a new survey reveals.

The Ipsos poll taken for bankruptcy service MNP Ltd. found Canadians are worried about a potential housing bubble and impending interest rate hikes, adding financial stress to households already carrying a record level of debt.

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The Bank of Canada is now widely expected to hike its key rate this Wednesday, with some economists forecasting a second hike before the year is out.

The poll found that 45 per cent of Canadians and 48 per cent of homeowners are concerned about the impact rising rates will have on their finances.

“Many are borrowing against their homes and using them to finance lifestyles they simply can’t afford,” said Grant Bazian, President at MNP LTD.

“What’s worse is that many are not making regular payments against the principal, and the threat of an increase in interest rates might make it even harder to make ends meet.”

Over 70 per cent of Canadians rate their ability to cope with a 1% interest rate increase as “less than optimal.” And the majority of Canadians (77 per cent) would have difficulty absorbing the additional $130 per month in interest payments on debt.

“Canadians should be bracing themselves for some major financial changes,” said Bazian.