Widespread pessimism is driven by a combination of pandemic woes, rising inflation, and more
Compared to the previous quarter, far fewer Canadians said that they are confident they can comfortably cover their living expenses over the next year (down five points to 55%), and far more said they are concerned about their current debt levels (up five points to 43%), according to polling by MNP Debt.
The MNP Consumer Debt Index also reached its lowest point so far, dropping by seven points quarterly to reach 88 points.
“Canadians’ financial optimism typically wanes as the holiday bills become due, but this year more than any other, Canadians are feeling more financially insecure, likely as a result of the Omicron variant, and resulting pandemic fatigue, along with rising inflation, and the potential for interest rate increases this year,” said Grant Bazian, president of MNP LTD.
Read more: Rate hikes, inflation to weigh heavily on household finances – poll
“With interest rates having remained low in 2021, Canadians have taken advantage of favourable rates to make purchases that might not normally have been within their budget,” Bazian added. “Now add the pressure of holiday bills coming due and potential interest rate increases around the corner, and you can see how many Canadians are approaching a tipping point.”
As many as 46% of Canadians are $200 away or less from insolvency, a level that was essentially unchanged from the previous quarter. This share includes 27% who said that they already don’t earn enough to cover their financial obligations in the first place.
Another 31% of respondents told MNP that they are finding debt servicing even more difficult, and 20% said that establishing a savings fund has become much less affordable.
“It is getting harder for Canadians to see the light at the end of the tunnel. 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 losses, and COVID-related health concerns,” said Bazian.
