MNP Consumer Debt Index Drops 4 Points Underscoring Canadians Deteriorating Financial Situation

Canadians’ perception of their debt situation has been on a gradual decline and now sits near its lowest point since tracking began in June 2017. Confidence in ability to absorb an interest rate increase has reached a historic low. Nearly 50% are $200 or less away from financial insolvency, up 2 points since December. Four in ten are concerned about their current level of debt and unsure if they will be able to cover all living and family expenses in the next 12 months without going into further debt.

CALGARY, AB – Canadians are feeling worse about their consumer debt and personal finances than was the case just three months ago. The MNP Consumer Debt Index has fallen four points since December, signalling growing concern and deteriorating financial stability for many. 

The quarterly survey, conducted by Ipsos on behalf of MNP LTD, shows more Canadians are hovering close to financial insolvency at the end of the month; nearly half (48%) of Canadians say they are $200 or less each month away from financial insolvency, an increase of two points. This includes one in four (26%) who say they have no wiggle room at month-end, as they already don’t make enough to cover their bills and debt payments.

“When there is this little room in the household budget, people can easily get trapped in an endless cycle of debt,” says Grant Bazian, President of the country’s largest insolvency firm, MNP LTD. “This isn’t simply a matter of people living beyond their means. The reality is that too many households simply cannot make ends meet, however hard they try.”

Since September 2018, Canadians’ perception of their debt situation has been on a gradual decline and now sits near its lowest point since tracking began, in June 2017. More than half of Canadians are more worried about their ability to repay debts (54%) or believe they could be in financial trouble (47%) if interest rates increase. Thirty-five per cent say a rate increase could move them towards bankruptcy.

“Canadians appear to be maxed out with no real plan for paying back what they have borrowed. This raises many alarming questions about how and if consumer debt will be repaid, particularly if conditions deteriorate or interest rates rise,” says Bazian.

Canadians’ confidence in their financial ability to cope with either an interest rate increase of 1 percentage point or an additional $100 in interest payments on debt has reached a historic low.  However, as the Bank of Canada has held interest rates steady recently, concerns over interest rates have softened somewhat since December. Still, almost half (47%) say they are concerned about the impact of rising interest rates on their financial situation.

While there may be red flags about where the economy and interest rates are heading, that has not stopped Canadians from continuing to borrow. Slightly more Canadians report taking on consumer debt compared to this time last year; two in three (67%) say they have, up two points. What’s more, it seems many may continue to borrow, with four in ten (44%; -1pt) saying they won’t be able to cover all living and family expenses in the next 12 months without taking on more debt. Around the same number (37%) are concerned about their current level of debt and regret the amount of debt they have taken on in their life (41%).

“Credit has become inextricably woven into Canadian household budgets. A whole industry has grown up around making that happen, from payday lenders to credit card companies, to buy-now-pay-later retail offers. Paying down debt or saving for the future is seen as more of a luxury than a necessity,” says Bazian.

Despite the debt anxiety that many are feeling, Canadians are somewhat optimistic about their financial future, as a year from now more than a third (35%; -1pt) expect their debt situation to improve, and five years from now nearly half (45%) believe their situation will improve.

“Getting out of debt is possible — even if you have no income or assets — but it requires action. The first step is to ask for help from a licensed professional,” says Bazian.

Licensed Insolvency Trustees are the only federally regulated debt professionals empowered to provide a full range of debt relief options including consumer proposals, bankruptcies, informal debt settlements, and debt consolidation.

It’s important for people to be aware there are systems in place to help provide stability and peace of mind to severely indebted Canadians. Seeking help from a Licensed Insolvency Trustee is, in many cases, the best route to get the relief and financial fresh start they deserve.

Click here to view our digital infographic and learn more insights from this quarter’s MNP Consumer Debt Index.

Other MNP Consumer Index highlights include: 

• Regionally, Atlantic Canadians have the least wiggle room, with over half (55%) now within $200 or less away from not being able to pay all their bills and debt payments each month, a jump of 10 points since December. The proportion of financially insolvent Quebecers (51%; +5pts) and Ontarians (48% +2pts) increased as well. Albertans have remained unchanged at 48 per cent, while fewer residents of Saskatchewan and Manitoba (46%; -10pts), and British Columbia (39%; -2pts) are likely to be near financial insolvency.
• Women (53%; +2pts) are significantly more likely than men (42%; +0pts) to be within $200 or less of financial insolvency, although reported levels of financial insolvency have remained stable for both cohorts since December.
• The number of Canadians who say they have no funds leftover at month-end has decreased from 31 per cent to 26 per cent - though this still leaves a quarter of Canadians struggling to make ends meet.
• Four in ten (39%; +0pts) rate their personal debt situation as excellent, two in five (43%) give their situation a neutral rating, and seventeen per cent (unchanged) rate their personal debt situation as terrible.
• Looking back just a year ago, only a quarter (24%) of Canadians perceive their current debt situation to be better, whereas nearly two in ten (16%) say it has worsened. In comparison to five years ago, while more say their debt situation has improved (31%), a large proportion also indicates that their debt situation has become worse (22%).
• Eight in ten (78%) say that they will be more careful about how they spend their money with interest rates rising.
• After bills and debt obligations have been settled, on average, Canadians are left with slightly more funds than last wave, a total of $699 in comparison to $641 in December.

About MNP Debt

MNP LTD, a division of MNP LLP, is the largest 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 March 13 and March 24. For this survey, a sample of 2,070 was interviewed online. The precision of Ipsos online polls is measured using a credibility interval. In this case, the poll is accurate to within ±2.4 percentage points, 19 times out of 20, had all Canadian been polled. The credibility interval will be wider among subsets of the population. All sample surveys and polls may be subject to other sources of error, including, but not limited to coverage error, and measurement error. To learn more about the survey and how MNP can help you manage your debt challenges, contactGrant Bazian, CIRP, LIT, President, MNP Ltd., at 1.877.363.3437 orgrant.bazian@mnp.ca