According to MNP’s quarterly consumer debt report released Monday, half of Canadians are $200 or less away from being able to no longer pay their monthly bills and debt.
Posted at 12:49 p.m.
Rosa Saba
The Canadian Press
“Despite the drop in interest rates, people remain worried,” observes Grant Bazian, president of insolvency firm MNP.
The survey, conducted by Ipsos, reveals that fewer Canadians expect their debt situation to improve over the next year, while a growing number believe it will improve. ‘worsen. More than half of them express concerns about their ability to meet their current and family expenses over the coming year without falling into further debt.
MNP’s Consumer Debt Index, which measures Canadians’ attitudes toward their debts and their ability to pay their bills, fell to the second lowest level since it began tracking in 2017. Meanwhile, Canadians’ personal debt scores have reached a historic low. A third of respondents reported being insolvent, with women more likely than men to be $200 or less from insolvency.
“I think they have so much debt and it’s getting harder and harder to pay them off,” says Bazian. Canada has one of the highest debt ratios in the West…the volume of debt is catching up with people. »
Canadians also experience job anxiety, with two in five respondents worried that someone in their household could lose their job. Mr. Bazian specifies that this figure is the highest in the history of this report.
The general trend of the unemployment rate in Canada is constantly increasing. Despite a slight drop in December to 6.7%, according to Statistics Canada, unemployment remains high.
Present financial anxiety
According to Bazian, people’s perception of their financial situation is usually based on what immediately affects them.
“People react to what’s happening now rather than what’s going to happen in the future,” he admits.
Although economic indicators or changes in interest rates take some time to show their effects in daily life, Bazian says they can also affect consumers’ perceptions of their financial situation.
Despite the drop in interest rates, Canadians’ disposable income continues to decline and many do not feel prepared to handle a possible large and unexpected financial event, such as the repair or purchase of a car, or the loss of a job.
“We still have a growing number of people who anticipate that their financial situation will deteriorate, that they will have more difficulty repaying their debts in the future,” reports Mr. Bazian.
The financial cushion of Canadians is also diminishing. Respondents testified that on average they had nearly 16% less disposable income left at the end of the month compared to last quarter.
The Bank of Canada has significantly reduced its key interest rate from recent highs — the rate now sits at 3.25% after five cuts last year, down from 5%. It is expected to continue cutting rates this year.
“We still see that many people are concerned about the current level of interest rates,” concludes Mr. Bazian.
The survey was conducted between December 6 and 17 among a sample of 2,003 Canadians.
