Over half of Canadians hovering close to financial insolvency

By: Thomas I. Likness
EBC News Service

(Eagle News) — The number of Canadians on the brink of financial insolvency is at a five-year high, according the latest MNP Consumer Debt Index.

“The anxiety Canadians are feeling about making ends meet – or already being unable to do so – tells us we may eventually see an avalanche of households falling behind on payments or defaulting on loans, mortgages, car payments or credit cards.” Grant Bazian, president of MNP Ltd., the country’s largest insolvency firm.

Over half of those asked — 53% — say they are $200 or less per month from not being able to pay their bills and debt obligations.

That’s a 10% increase from December.

Part of the problems stems from pandemic-related financial support and loan deferral programs winding down.

“We saw that pandemic-related financial relief measures provided some breathing room over the last year, but now we’re seeing a reversal,” said Bazian. “The number of Canadians with virtually no wiggle room in their household budgets has reached a five-year high.”

Canadians borrowing more

A quarter of Canadians say they have taken on more debt as a result of the pandemic.

This includes using their savings to pay for bills (20%), using credit cards (14%), using a line of credit (7%), taking out a bank loan (3%), or deferring mortgage payments (3%).

Over half (51%) are concerned about their ability to repay debts if interest rates rise. About four in ten (35%) are concerned that rising interest rates could move them towards bankruptcy.

“Unfortunately, using credit is a reflex amongst many Canadians,” said Bazian. “For those concerned, it is probably a good time to stop thinking of debt as the solution when it can actually become a trap.”

Bazian urges Canadians to get professional advice to help deal with concerning consumer debt.

But few are likely to do that. The survey found, over the next year, only 4% plans to seek professional advice and just 2% will consult a bankruptcy trustee to discuss debt relief options.

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.

It was compiled by Ipsos between March 4-9, 2021. A sample of 2,001 Canadians aged 18 years and over was interviewed. The poll is accurate to within ±2.5 percentage points, 19 times out of 20.
(Eagle News Service)