New TD report highlights current consumer insolvency trends
After declining during the pandemic, the number of Canadians experiencing financial troubles and filing for insolvency is on the rise once again, according to TD Economics.
“The negative dynamics may seem at odds with the red-hot labour market, but this trend in personal insolvencies reflects a normalization from the ultra-low levels of the pandemic,” TD said in its new analysis.
The number of consumer filings went up by 11% annually to reach approximately 100,000 in 2022, amounting to 3.2 filings per thousand adult Canadians.
“Personal insolvencies increased coast-to-coast last year, in part driven by changes in household debt,” TD said. “Provinces with more favourable recent trends in household debt-to-income ratios experienced smaller increases in insolvencies.”
TD said that this data should be viewed in light of the fact that the federal government provided substantial financial support and near-zero borrowing rates during the pandemic.
“As these supports were removed and consumer spending rebounded last year, bankruptcy trends have been in the process of normalizing,” TD said.
Intensifying financial headwinds also contributed to the rise in insolvencies.
“Inflation took flight, squeezing household budgets and depleting savings,” TD said. “Adding to the pain, rents have also increased significantly. The vast majority of people filing for insolvency are renters, with only 16% owning a home.”
