Canadians' debt situation is getting worse, warns MNP
With the Bank of Canada poised to make its latest interest rate decision this Wednesday, anything other than a cut will not be enough for struggling households as Canada’s debt situation worsens.
The latest reading of the quarterly Ipsos-conducted MNP Consumer Debt Index is out today (July 22) and shows a six point decline from the previous quarter, despite the BoC’s latest rate cut. More than half of respondents said that the cuts are not coming quickly enough and almost six in ten say there will have to be bigger cuts before they get the financial relief they need.
“Canadians may have hoped for a more significant cut to interest rates or a quicker impact from the reduction, leaving many feeling disheartened,” says Grant Bazian, president of MNP LTD, the country’s largest insolvency firm. “With the prices of many daily necessities still high, many have not seen the meaningful reduction in their monthly expenses needed to ease their financial burdens."
With interest rates having risen sharply over the past two years, 65% of respondents report a negative impact on their household finances and 47% expressed concern about paying their bills even with rate cuts while 34% say their debt burden is too high for lower rates to help them much, this is particularly clear among those with incomes of $40K or less.
“Some individuals, living paycheck to paycheck, are struggling to make ends meet and cover basic necessities. Others are so deeply indebted that their financial problems won’t be manageable regardless of interest rates,” says Bazian.
Three in ten poll participants are already unable to pay their bills and debt payments, with 62% of those swamped either insolvent or heading that way. More than half of all respondents are $200 or less away from failing to meet all their financial obligations.
Just 23% perceive their current debt situation to be better than a year ago, while 19% say it’s much worse. Adding pressure to those with financial concerns, nearly two in five are concerned that they or someone in their household could lose their job.
“Those struggling with debt often feel overwhelmed by guilt and embarrassment, due to the stigma that still surrounds this issue. It's important to recognize that debt is not solely a personal failing; numerous external factors can lead to unmanageable debt. These factors include job loss, high costs of servicing debt – especially credit cards – increasing prices of basic necessities, rising mortgage payments and rental costs, emergency expenses like car or home repairs, and unexpected changes in income.”
