A so-called return to normal in Alberta as provincial health restrictions are lifted is bringing the reality of debt back into focus.
The latest quarterly MNP Consumer Debt Index showed that nearly half of Albertans polled — 45 per cent — are not confident that they will be able to cover their next year’s worth of expenses without going further into debt.
At 54 per cent, Albertans were the most likely to be concerned about their ability to repay their debts — higher than responses from all other Canadian provinces.
“We are feeling a little bit more nervous about our debt levels here,” Donna Carson, Calgary-based licensed insolvency trustee with MNP, said Monday.
“I think probably based on what we’re hearing from people we talk to, this debt situation that we have personally was there before the pandemic started, and now that some of the restrictions are starting to relax a bit, I think we’re starting to feel a little bit like, ‘Oh, I still have all this debt that I had before. What am I going to do with it?’”
But a quarter of Albertans reported being unable to pay all their monthly bills and debt obligations, also known as insolvency — a six per cent drop from March 2021. A third of respondents in Alberta said they plan to spend more than normal as the province reopens.
That apparent contradiction shows a “K-shaped” economic recovery, with people in different income levels seeing different rates of bounce back.
Carson said temporary closures of courts and fewer active collections, as well as federal supports like CERB and CRB, helped keep Canadians out of insolvency proceedings during the pandemic.
“That’s where we do see one of the larger good note stories, if you will: insolvencies did drop when the pandemic hit,” Carson said.
“What concerns me is that the number of insolvencies before the pandemic in this province, in particular, were at almost record numbers, and I don’t think that that debt has disappeared.”
Just more than a third of those surveyed said they feel their debt situation is better now than when the pandemic started. That compares with nearly half of Canadians feeling good about how much they owe.
More than half of Albertans have taken advantage of low interest rates, with 55 per cent of respondents saying they’ve made a pandemic purchase that wouldn’t normally fit in their budget.
But an increase in interest rates is a concern, with 45 per cent of respondents saying they could be in financial trouble and 35 per cent concerned bankruptcy could be around the corner if interest rates go up.
“Higher interest rates mean it costs a lot more to carry debt,” Mark Kalinowski, a financial educator with the Credit Counseling Society, said.
“People that are taking big mortgages right now, have a large credit card debt, large bank debts are likely to see their payments go up over the future.”
The effects of increased interest rates are likely to be even worse with nearly a third of those surveyed saying they’re “house poor” — not having much left over after paying bills related to their home.
“People will really struggle with cash flow,” Kalinowski added. “As interest rates go up, their houses will become even less affordable than they are now.”
Carson said the statistics of Albertans making larger-than-usual purchases and Albertans concerned with the influence of interest rates are similar to national numbers. But the local situation is a little different.
“Because of the double whammy of the oil economy and then COVID-19 here in this province, the cash flow to sustain that isn’t maybe there, and we’re seeing that quite a bit,” she said.
Forty-three per cent of Alberta families feel like the pandemic has worsened or created a larger debt burden, compared to just 35 per cent of families nationwide.
When compared to the March index survey, Alberta households say they have an average of $810 left over in a month after paying their bills — a $190 increase.
The previous consumer debt index, released in April, suggested that just more than half of Albertans are $200 away from insolvency. In December 2020, the number was 42 per cent. That’s a problem that can be addressed, Kalinowski said.
“Maybe we can change that by changing the way we spend,” he said. “People have to go back to their actual income coming in and change the way they spend money.”
“When people first sit down, we tell them there is a solution, we’ll help you find it,” Kalinowski said. “There’s always a solution.
“It’s money. It’s not rocket science.”
The latest round of polling for the consumer debt index was done by Ipsos for MNP from June 14-17. A sample of 2,002 Canadians 18 and over were interviewed and responses were weighted to reflect census data. The Canada-wide poll is accurate to within 2.5 percentage points, 19 times out of 20.