Over one-third admitted that another interest rate increase will push them towards bankruptcy
Canadians’ perception of their finances and debts has fallen to a new record low, according to the latest analysis by MNP Ltd.
Over half (54%) of the MNP survey respondents are deeply concerned about their ability to repay debts, while a similarly-sized contingent (47%) indicated a belief that they would fall in financial trouble if interest rates increase further.
An alarming 35% stated that another rate hike could push them towards bankruptcy.
The downward trend, which MNP said has been going on since September 2018, has been fuelled by increases in interest rates. The insolvency practice added that its readings of Canadians’ debt sentiments are at their lowest point ever since it began tracking the metric.
“Canadians appear to be maxed out with no real plan for paying back what they have borrowed. This raises many alarming questions about how and if consumer debt will be repaid, particularly if conditions deteriorate or interest rates rise,” MNP Ltd. president Grant Bazian said.
Moreover, around 48% said that they are just $200 or less each month away from financial insolvency. Over a quarter (26%) admitted that they basically have no buffer at month-end, already unable to earn enough to cover bills and debt payments as it is.
“When there is this little room in the household budget, people can easily get trapped in an endless cycle of debt,” Bazian warned. “This isn’t simply a matter of people living beyond their means. The reality is that too many households simply cannot make ends meet, however hard they try.”
“Credit has become inextricably woven into Canadian household budgets. A whole industry has grown up around making that happen, from payday lenders to credit card companies, to buy-now-pay-later retail offers. Paying down debt or saving for the future is seen as more of a luxury than a necessity.”
