More Canadians than ever told the MNP Consumer Debt Index poll that they can’t cover their bills and others are very close to joining them
With the dual impact of rising prices and interest rates set to continue for at least the near term, more Canadian households are losing their battle with debt.
New stats from insolvency firm MNP show a record high for poll participants who say that cannot keep up with their bills and debt payments; 35% said so, a 5-percentage-point rise in the second quarter compared to the previous quarter and the highest ever percentage since the MNP Consumer Debt Index was established 5 years ago.
While that situation means they are already insolvent, many more households are perilously close to joining them with 52% of respondents saying they are within just $200 or not meeting their financial obligations.
The index was down 6 points overall to a reading of 83, indicating a worsening national debt landscape.
“Battered by inflation and higher interest rates, a record number of Canadians say they can’t pay their bills and debt obligations each month,” said Grant Bazian, president of MNP. “The escalating burden of household bills and food prices has intensified Canadians’ financial anxiety and is further compounded by increased debt-servicing costs, particularly for those who are deeply indebted.”
Debt regret
More than half of those polled by MNP said they regret the levels of debt they have (this includes 6 in 10 Millennials) and almost half are concerned about it.
“Households are facing a range of financial pressures with the dramatic increase in the cost of living and, without much wiggle room in household budgets, many are at risk of falling into arrears on payments. That’s when bills like credit cards may go past due — which means the late fees kick in and interest accrues quickly — making it even more difficult to catch up,” added Bazian.
Seven in ten respondents say they are impacted by rising rates and a similar share is concerned about being able to pay their bills and debt payments if rates continue higher.
The average respondents is paying $230 more each week for everyday expenses, even as they try to be more prudent.
“Even if households are curbing discretionary expenses and spending more cautiously, many households have reached a point where there is nothing left to cut back on,” explained Bazian. “This situation forces individuals to make difficult decisions regarding which bills they can prioritize and which they may have to postpone or forgo altogether.”
Bazian concluded that those who are struggling get professional help including speaking with lenders if they are at risk of defaulting on payments.
