Canadians’ confidence in their personal finances and ability to repay their debt has hit a record low, a new report suggests, with roughly half the country worried about how they will pay their next round of bills.
The latest MNP Consumer Debt Index, released Monday, has fallen to 88 points, the lowest point since the quarterly survey was launched in 2017. The Canadian insolvency firm pins the drop to the twin stressors of holiday spending bills coming due and the resurgent COVID-19 pandemic.
“It is getting harder for Canadians to see the light at the end of the tunnel,” said Grant Bazian, president of MNP LTD, in a statement Monday.
“Unexpected expenses are one of the biggest contributors to household financial turmoil, and many are starting the new year being dealt another round of unexpected business closures, reduced working hours or job loss, and COVID-related health concerns.”
The survey found 55 per cent of Canadians are confident they can comfortably cover their living expenses in the coming year, down five points from last quarter. Forty-three per cent said they are concerned about their current level of debt, up five points.
Only 27 per cent of those surveyed said they felt they could cope with life-changing events without increasing their debt burden, while nearly half reported they are just $200 or less away from not being able to meet all of their financial obligations.
Nearly one-third of Canadians said they are finding it harder than ever before to pay down their debt, the report suggests, and 20 per cent said it has become harder to set aside money for savings.
“We have seen households resorting to credit to make ends meet as their finances have been stretched thin over the course of the pandemic,” said Bazian.
“With the cost of living on the rise, those households who were already overextended may feel they have to take on more debt just to afford basic necessities.”
The report also found more Canadians are engaging in what MNP calls “bad financial habits,” including only making minimum credit card payments (21 per cent of those surveyed, up three points from last quarter) and borrowing money they can’t afford to pay back quickly (11 per cent, up one point). Nearly six in 10 Canadians said low interest rates convinced them to take on more debt, while 12 per cent pointed to sales events like Black Friday.
Potentially with those choices in mind, 45 per cent of Canadians said they regret the amount they have taken on, with 16 per cent saying their debt situation is worse than it was a year ago — up four points since September.
Bazian says that the likelihood of an approaching interest rate increase this year, on top of post-holiday and COVID-19 spending concerns, “Canadians are approaching a tipping point.”
Looking five years into the future, 10 per cent of those surveyed said they believe their debt situation will worse, up three points from last quarter.
Ipsos, which conducts the MNP Consumer Debt Index, found in an earlier poll conducted in late December that 67 per cent of Canadians are generally feeling positive about 2022 despite concerns about their financial well-being.
Yet it also found fewer Canadians (14 per cent) are feeling financially secure compared to December 2020.
–With files from Saba Aziz
The latest data, representing the nineteenth wave of the MNP Consumer Debt Index, was compiled by Ipsos on behalf of MNP LTD between December 1-7, 2021. For this survey, a sample of 2,000 Canadians aged 18 years and over was interviewed. Weighting was then employed to balance demographics to ensure that the sample’s composition reflects that of the adult population according to Census data and to provide results intended to approximate the sample universe. The precision of Ipsos online polls is measured using a credibility interval. In this case, the poll is accurate to within ±2.5 percentage points, 19 times out of 20, had all Canadian adults been polled. The credibility interval will be wider among subsets of the population. All sample surveys and polls may be subject to other sources of error, including, but not limited to coverage error, and measurement error.