Hundreds of thousands of Canadian consumers could struggle with their finances if the Bank of Canada raised interest rates by as little as a quarter-point – and that should raise alarm bells for the country’s lenders, according to a new study by consumer credit agency TransUnion.

The report, released on Tuesday, found that a quarter-point increase to the current 0.5 per cent target overnight interest rate may “seriously impact” the 15  per cent of the population that currently has a variable-rate mortgage, a line of credit, or both types of credit products.

While that would mean a “monthly payment shock” of at least $50, about 718,000 borrowers wouldn’t be able to absorb the increased payment amounts, TransUnion said. 

“For some, a $50 increase in their obligations may simply be managed by forsaking a couple of restaurant dinners and eating at home, while for some others, this may mean they would not be able to fill their gas tanks to get to work,”  Jason Wang, TransUnion’s director of research and industry analysis in Canada, said in a statement.

If interest rates rose by one per cent, TransUnion’s study found that an additional 253,000 borrowers would face financial challenges.

This could come as an “unpleasant surprise” for many Canadian lenders, the agency said.

Such rate increases could mean that nearly one million Canadians “believed to be low-risk consumers may suddenly become risky,” according to Wang.

“While lenders expect subprime consumers to be risky, this sudden change in prime or better segments may come as an unpleasant surprise,” he said.  

Economists don't expect the Bank of Canada to raise its key interest rate target any time soon. The central bank cut its overnight interest rate target twice last year.

The rate is a key variable for the country's big banks in setting prime rates, as well as borrowing rates for products like variable rate mortgages and lines of credit.