New report highlights continuing financial challenges for Canadian households
Consumer insolvency incidence across Canada spiked by 11.2% last year, with a total of 100,184 insolvencies filed in 2022 versus the 90,092 seen in 2021, according to latest numbers from the Office of the Superintendent of Bankruptcy.
In Q4 alone, the agency saw 25,885 consumer insolvencies filed, representing a 16.3% annual increase.
This quarterly volume was higher than any other quarter in 2022, and was the largest seen since the onset of the pandemic back in Q1 2020, said the Canadian Association of Insolvency and Restructuring Professionals.
The upward trend in filings is not expected to subside any time soon, taking into account the likely impact of the Bank of Canada’s unprecedented hiking campaign that pushed the benchmark rate from 0.25% to 4.5%.
“As we head into 2023, we will likely see insolvency filings increase, as the gradual effects of the past year’s repeated interest rate hikes begin to have a more profound impact on household budgets in the form of higher debt servicing costs,” said André Bolduc, licensed insolvency trustee and vice chair of CAIRP.
Bolduc cited one borrower type as the segment that will be disproportionately affected by the current environment.
“Those with variable rate loans are already shouldering higher carrying costs, and many are struggling to service their debt,” Bolduc said. “This is compounded by a fairly high rate of increase in prices for food, energy and other essential consumer goods.”
And the worst impacts are likely to be felt sooner than later.
“While some homeowners haven’t yet felt the impact of rising interest rates, those who have a mortgage up for renewal this year may be in for a payment shock, as the higher rate environment could drive their payments up significantly,” Bolduc added.
