British Columbians Feel Increasingly Optimistic About Debt

A recent Ipsos poll conducted by MNP LTD. shows British Columbians are growing confident about their debt. Most notably, nearly three in five (57%) B.C. residents say they’re more optimistic than they were four months ago. This follows three in ten (30%) who believe their debt situation is better than it was at this time last year and almost two in five (36%) who claim their debt situation is the best it’s been in the last five years. A comfortable majority (60%) now anticipate they can afford all living and family expenses over the next year without requiring credit to fill in the gaps — a five percent increase over the last four months.

With unpredictable interest rates and the threat of rising borrowing costs, unease has been growing in recent months. Yet British Columbians are particularly undaunted in this area as well. When asked whether they could manage either a 1% or $100 increase to monthly debt costs, more B.C. residents say they’re in a favourable position — an 8% increase, the highest of any province. This matches closely with a five-point reduction in the number of people (25%) who worry a rate hike could push them toward bankruptcy.

But while it’s good to think positively, there are also reasons to be cautious. For example, there’s a reduction in the number of British Columbians who worry further interest rate hikes could put them in financial jeopardy (38%), who are $200 or less from financial insolvency (41%) and who have zero wiggle room left at the end of the month (21%) — by six, eight and six points respectively. However, there remains anywhere between 1 and 2 million people teetering dangerously close to the edge. All it would take is one unexpected cost to push them into a bankruptcy scenario.

It may also be beneficial to look at what factors are driving the recent improvement. A Stats Canada report released in June noted the household debt ratio experienced the largest drop on record in the first four months of 2018. Many suggest new mortgage rules and higher interest rates have played a significant role. But our survey also reveals British Columbians are taking initiative to curb their existing debt. Nearly half of households (49%) have cut back on variable expenses, such as dining out and entertainment, and more than two in five (44%) have committed to maintaining a strict budget. Three in ten have found ways to reduce their fixed expenses (e.g. housing, car payments), while a quarter (26%) have focused on downsizing their possessions and one in ten (11%) have taken on a second job.

That people are making necessary changes to their spending habits is encouraging. But it’s also concerning to see that only three percent of B.C. residents say they’ve sought out professional debt help. Especially for those who are already struggling to make ends meet, incremental changes may not be enough to gain the financial fresh start they need. The sooner these people speak with someone, the sooner they can have peace of mind.

Other poll highlights include:

• Four in ten Canadians (41%) rate their debt situation as excellent, up 5 points since March.Regionally, British Columbians (47%) are most likely to rate their personal debt situation as excellent, followed by Atlantic Canada (46%), Quebec (44%), Ontario (41%), Alberta (36%), and Saskatchewan and Manitoba (30%). There is also a generational divide, as Boomers (49%) are more likely to rate their debt situation as excellent compared to 37% of Millennials and Gen Xers.
• Fewer Canadians say they are already beginning to feel the effects of interest rate increases (38%, down 5 points), while more now say they have a solid understanding of how interest rate increases impact their financial situation (78%, up 4 points). Less than half of Canadians (47%, up 1 point) express concern toward the impacts rising interest rates could have on their financial situation.
• While concern over interest rates have softened, a majority (77%) continue to brace themselves for the possibility of an increase and agree that they will be more careful with how they spend their money.
• Overall concern about rising interest rates have decreased since March, with fewer Canadians concerned about moving towards bankruptcy (28%, down 5 points), repaying their debts (49%, down 2 points), and being put into financial trouble (42%, down 2 points) if interest rates rise.
• Overall, Canadians are gaining confidence in their ability to cope with unexpected life changes without taking on more debt. That includes: being able to cope with an unexpected auto repair or purchase (35%, up 7 points), a change in relationship status (36%, up 4 points), and paying for their own or someone else’s education (28%, up 4 points).
• Looking to the future, Canadians are far more optimistic: one year from now, 38 per cent of Canadians expect their debt situation to be better, while nine per cent expect it to be worse, giving a net 29 per cent score, the highest since tracking began. Five years from now, half (50%) of Canadians think their personal debt situation will be better and only eight per cent think it will be worse. The net score has increased 5 points since March (37% to 42%) and 4 points since December (38% to 42%), also the highest since tracking began.
• Though things may be looking up for some, half (50%) of Canadians are not confident that they will not have any debt in retirement.

About MNP Debt

MNP LTD, a division of MNP LLP, is the largest personal insolvency practice in Canada. For more than 50 years, our experienced team of Licensed Insolvency Trustees and advisors have been working with individuals to help them recover from times of financial distress and regain control of their finances. With more than 230 Canadian offices from coast-to-coast, MNP helps thousands of Canadians each year who are struggling with an overwhelming amount of debt. Visit www.MNPdebt.ca to contact a Licensed Insolvency Trustee or get a free checkup for your debt health using the MNP Debt Scale.

About the MNP Consumer Debt Index

The MNP Consumer Debt Index measures Canadians’ attitudes toward their consumer debt and gauges their ability to pay their bills, endure unexpected expenses, follow a budget, and absorb interest-rate fluctuations without approaching insolvency. Conducted by Ipsos and updated quarterly, the Index is an industry-leading barometer of financial pressure or relief among Canadians. Visit www.MNPdebt.ca/CDI to learn more. The latest Index data was compiled by Ipsos on behalf of MNP LTD between June 15 and June 19, 2018. For this survey, a sample of 2,001 Canadians from the Ipsos I-Say panel was interviewed online. The precision of online polls is measured using a credibility interval. In this case, the results are accurate to within +/- 2.5 percentage points, 19 times out of 20, of what the results would have been had all Canadian adults been polled. Credibility intervals are wider among subsets of the population. This represents the fifth wave of the MNP Consumer Debt Index.