One-third of Canadians say they cannot cover their bills and debt payments, while more than half state they are $200 or less away from being unable to cover their financial obligations, according to a new survey.
“As interest rates move upwards and the cost of living remains a challenge for households, the proportion of Canadians who report being insolvent has reached an all-time high, according to the latest MNP Consumer Debt Index,” said MNP, Canada’s largest insolvency firm.
More than half of those surveyed indicated they were $200 or less away from being unable to pay all their bills—up six points since the last quarter. This includes one-third of respondents who said they already do not bring in enough income to pay their bills and make their debt payments, making them insolvent.
This was the highest recorded proportion since the index was initiated five years ago.
“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, MNP’s president.
“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.”
Millennials are the most likely to regret the amount of debt they’ve taken on (61 percent), increasing six points since last quarter.
Two-thirds (66 percent) responded they were more concerned about their ability to pay their debts as interest rates rise.“Households are facing a range of financial pressures with the dramatic increase in the cost of living. Without much wiggle room in household budgets, many are at risk of falling into arrears. 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,” Mr. Bazian said.
Compared to last quarter, 69 percent of Canadians are now reporting that interest rate increases are affecting their household finances, and 66 percent have growing concerns about paying debts as interest rates climb.
About 63 percent of Canadians, or three out of five who responded to the survey, state they will be in financial trouble if interest rates increase further. The majority of those who responded (86 percent) state they will be careful how they spend their money.
Women (89 percent) and Canadians aged 35 to 54 (88 percent) are the most likely to agree they will be more careful with their spending due to rising interest rates.
However, despite efforts to spend more prudently, the average Canadian indicated their weekly cost of essential items has increased by $230, and 73 percent of those surveyed said their weekly spending on essentials is up by at least $100 from the year before.
“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. They’ve already switched to the cheapest options at the grocery store and trimmed their entertainment costs—yet they still find themselves struggling with essential financial obligations like their mortgage or rent and putting food on the table,” said Mr. 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.”
