Canadians’ confidence in their personal financial situation and debt repayment abilities is hitting a record-low, according to a new report.

The latest MNP Consumer Debt Index plunged by seven points over the past quarter to 88 points, which is the lowest level since its inception in June 2017.

"Nearly two years into the pandemic, financial confidence among Canadians has reached a record low, with household debt becoming increasingly worrisome," said Grant Bazian, president of MNP, in a news release.

"Canadians’ financial optimism typically wanes as the holiday bills become due, but Canadians are feeling even more financially insecure this year — likely as a result of the Omicron variant and resulting pandemic fatigue, along with rising inflation and the potential for interest rate increases this year."

The survey found almost half of Canadians (45 per cent) aren’t confident they’ll be able to pay for basic living expenses this year. When it comes to debt levels, four-in-10 respondents (43 per cent) are worried about how much they currently owe.

Increasing concerns around Canadians’ personal finances come as the Bank of Canada gears up for its first benchmark interest rate decision of the year.

Economists at J.P. Morgan expect the central bank to raise its key rate at the Bank of Canada meeting next Wednesday, ahead of its own rate hike timeline.

"Based on rhetoric from the Bank of Canada in December, it was clear that labour market dynamics and outperforming economic data had created heightened concerns at the Bank that the output gap was closing more rapidly than expected," wrote Silvana Dimino, economist at J.P. Morgan, in a report to clients.

In October, Bank of Canada Governor Tiff Macklem indicated he would not tighten policy until the economic recovery was complete – something he expected to happen in the "middle quarters" of this year.

But if the Bank of Canada raises rates this month, Bazian said this could push many Canadians’ financial situation to the edge.

"With interest rates remaining low in 2021, Canadians took advantage to make purchases that wouldn’t normally have been within their budget," said Bazian.

"Add the pressure of holiday bills coming due and potential interest rate increases around the corner, and you can see how many Canadians are approaching a tipping point."