MNP Consumer Debt Index: Canadians’ Debt Outlook Reaches Lowest Point in 5 Years

• More Canadians report their current and expected debt situation as deteriorating.
• An increasing number report a decline in their capacity to handle an interest rate increase (28%, +5pts) or an additional $130 in interest payments (37%, +5pts).
• Half report that they are $200 away or less from not being able to meet all of their financial obligations (51%, -1pt).

CALGARY, Alberta, Oct. 18, 2023 (GLOBE NEWSWIRE) -- From near-zero to the highest interest rates in over two decades, Canadians’ debt outlook has reached the most pessimistic point since tracking began five years ago, according to the latest MNP Consumer Debt Index. Reflecting on their current debt situation compared to one year ago, more rate their current situation as much worse, an increase of 2 points from the previous quarter (20%) and more say their debt situation has worsened compared to five years ago, (25%, +3pts). When asked to look into the future, more believe their debt situation will be worse a year from now (18%, +3pts). Five years from now, more believe that their debt situation will worsen (16%, +2pts) and fewer feel it will improve (35%, -2pts).

“There is no mystery as to what is causing Canadians’ bleak debt outlook: it’s getting increasingly difficult to make ends meet,” says Grant Bazian, president of MNP LTD, the country’s largest insolvency firm. “Facing a combination of rising debt carrying costs, living expenses and concern over the potential for continued interest rate and price hikes, many Canadians are stretched uncomfortably close to broke.”

More than half (51%, -1pt) of Canadians report that they are $200 away or less from not being able to meet all their financial obligations, including three in 10 (31%, -4pts) who say they already don’t make enough to cover their bills and debt payments. The average amount of money that Canadians say they have left over at the end of the month dropped significantly this quarter to $674, down $97 from the previous quarter, as the surging cost of living has chipped away at household budgets.

When it comes to the potential for future interest rate increases, Canadians feel worse about their ability to absorb further hikes compared to last quarter. More (28%, +5pts) say their ability to deal with an increase of 1 percentage point has worsened. This question was rephrased to ask their ability to absorb an additional $130 in interest payments on debt, to which four in 10 (37%, +5pts) say their ability to absorb this increase is much worse.

While Canadians’ debt outlook and ability to absorb additional interest rates have deteriorated, there were a few bright spots in the data. Overall, the MNP Consumer Debt Index improved slightly to 86 points, up 3 points since last quarter, but remains below the five-year average. Canadians are feeling marginally better about their ability to pay their debts (62%, -4pts), being in financial trouble (60%, -3pts), or being driven towards bankruptcy (45%, -5pts). Four in ten Canadians regret or are concerned about their current level of debt but, perhaps adjusting to the higher interest rate environment, the number who have regrets (45%, -7pts), or feel concerned (45%, -3pts) declined this quarter.

“For now, the financial concerns of some Canadians have been offset, at least to some degree, by the strong job market. The uncomfortable truth is that higher interest rates slowing the economy will inevitably come with consequences like increased unemployment,” says Bazian.

Four in ten Canadians worry about someone in their household potentially losing their job (38%. -2pts), according to the survey.

Bazian says that higher unemployment and underemployment, where individuals either make insufficient income or are given insufficient hours to meet their household expenses, is one of the leading causes of insolvency.

“Bills and debt obligations and the ever-increasing cost of living may be somewhat manageable when income remains consistent but suddenly become troublesome when the unexpected occurs, even after cutting back on non-essential spending,” he says.

“That’s when the danger of relying on credit to meet basic household needs becomes a real risk. Initially, households use credit with the idea that the reduced income is temporary and that they will be able to pay off the debt as soon as their circumstances improve. Using credit to pay for one bill, then another they start to miss payments and end up on a high-interest debt treadmill,” he explains.

The consequences of missed payments, compounding interest, repossession or foreclosure can be swift and have long-lasting effects. Bazian recommends those who anticipate missing payments first contact their lender to see if they can set up a payment plan and seek advice from a Licensed Insolvency Trustee.

“In addition to initiating direct contact with their lenders, individuals facing the challenge of escalating debts should speak with a Licensed Insolvency Trustee for a confidential financial assessment and impartial advice on various debt relief solutions, including budgeting and debt consolidation and consumer proposals.”

Licensed Insolvency Trustees are the only federally regulated debt professionals who can assist with all the debt relief options, including consumer proposals and bankruptcies, stop harassment from debt collectors, and discharge people from debt. To support those in need of financial assistance, MNP provides free consultations across the country.

About MNP LTD

MNP LTD, a division of the national accounting firm 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 240 Canadian offices from coast-to-coast, MNP helps thousands of Canadians each year who are struggling with an overwhelming amount of debt. Visit MNPdebt.ca to contact a Licensed Insolvency Trustee or use our free Do it Yourself (DIY) debt assessment tools. For regular, bite-sized insights about debt and personal finances, subscribe to the MNP 3 Minute Debt Break Podcast.

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, 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.

Now in its 26^th wave, the Index increased to 86 points, up 3 points since last quarter, but remains below the five-year average. Visit MNPdebt.ca/CDI to learn more.

The data was compiled by Ipsos on behalf of MNP LTD between September 5-8, 2023. For this survey, a sample of 2,000 Canadians aged 18 years and over was interviewed. Weighting was then employed to balance demographics to ensure that the sample's composition reflects that of the adult population according to Census data and to provide results intended to approximate the sample universe. The precision of Ipsos online polls is measured using a credibility interval. In this case, the poll is accurate to within ±2.5 percentage points, 19 times out of 20, had all Canadian adults 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.

Provincial data is available upon request.

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