48% of Canadians just $200 from insolvency says MNP

by Steve Randall on 23 Apr 2019

Canadian households are becoming increasingly concerned about their debts according to a new report.

The MNP Consumer Debt Index has fallen 4 points since December and 48% of respondents say they are just $200 or less away from financial insolvency.

One in four report they have no wiggle room at the end of the month because they 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.”

Atlantic Canadians have the least wiggle room, with 55% now within $200 or less away from not being able to cover their expenses, a jump of 10 points since December.

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 proportion of financially insolvent Quebecers (51%; +5pts) and Ontarians (48%; +2pts) increased as well while Albertans have remained unchanged at 48 per cent.

Things have improved in Saskatchewan and Manitoba (46%; -10pts), and British Columbia (39%; -2pts).

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.

Interest rate fears
While it appears that the BoC will be leaving interest rates alone for now, 47% of respondents are still concerned about the impact of higher rates on their personal finances.

Even an increase of $100 per month would be an issue for many with the share of respondents who felt confident that they could cope with this – or a 1% rise in interest payments on debts - falling to a historic low.

“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.

Increasing debt
There has been a rise in Canadians report taking on consumer debt compared to this time last year; two in three (67%) say they have, up two points.

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%).

“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.

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