Consumer Debt Index Highlights Impact of Affordability Crisis: More Canadians Say Necessities Such as Food, Housing and Transportation are Less Affordable

• Younger Canadians hit hardest with the largest decrease in finances available at month-end, dropping $273 since last quarter to $606.
• Over half of Canadians now say it is less affordable to feed themselves and their family, a five point increase since last quarter (52%,+5pts).
• Number of Canadians who say transportation has become less affordable jumps 9 points (45%,+9pts).
• Nearly half of Canadians are finding clothing or household necessities less affordable (45%,+5pts).

CALGARY, Alberta, Oct. 03, 2022 (GLOBE NEWSWIRE) -- The impact of this year’s consecutive interest rate hikes and persistent inflation is becoming clear, as Canadians are seeing the effect on their wallets. According to the latest MNP Consumer Debt Index, which is conducted quarterly by Ipsos on behalf of MNP LTD, with the cost of living soaring, more Canadians say life’s necessities are becoming less affordable. Compared to December 2021, significantly more say it is becoming less affordable to feed themselves and their family (52%,+5pts), put money aside for savings (49%,+5pts), pay for transportation (45%,+9pts), pay for clothing or other household necessities (45%,+5pts) and pay for housing (37%,+2pts).

“Canadians are putting more of their paychecks towards paying for basic necessities as the cost of living rises, which in turn is leaving less of a financial buffer to manage the impacts of current and potential future interest rate hikes,” says Grant Bazian, president of MNP LTD., the country’s largest insolvency firm.

While fewer Canadians find themselves closer to insolvency than last quarter (46%,-6pts), meaning they are $200 away or less from not being able to meet all of their financial obligations, the average Canadian has less money overall to spend at month-end as they pay more for life’s necessities. The amount the average Canadian has left over at month-end continues to drop, decreasing $37 from the previous quarter to $654. Younger Canadians are being hit particularly hard; those aged 18-34 noticed the largest decrease in their average month-end finances, which dropped a whopping $273 to $606.

“We are seeing a modest improvement in the number of Canadians who are at risk of insolvency since last quarter, however, it is important to note that nearly half of Canadians are still just $200 away from not being able to cover their bills and debt obligations. With less overall room in their budgets, any future increases to interest rates or the prices of everyday items could push individuals closer to insolvency,” says Bazian. “Younger Canadians are feeling the squeeze of inflation more than the rest, and will be more vulnerable to economic changes as a result.”

Yet while many Canadians are in a vulnerable financial position, there is some optimism surfacing. More are now rating their personal debt situation as excellent (43%,+5pts) and fewer are rating it as terrible (14%,-4pts). When asked to forecast their expected debt situation a year from now, three in ten expect their debt situation to improve (30%, unchanged), but fewer now believe it will worsen (11%,-4pts).

“This newfound optimism may be temporary, as the economic situation here in Canada is still unfolding. The effects of interest rate hikes tend to reveal themselves over time, so we may be seeing a false sense of optimism right now,” Bazian points out. “We have also generally seen higher levels of optimism during the summer, followed by Canadians becoming more pessimistic heading into the winter months. I would encourage individuals to be cautious with their finances heading into this fall and winter, as only time will tell the full impact of our economic situation.”

Bazian advises households to take a closer look at their budget and test whether or not they would be able to cover all of their bills if the costs of their daily purchases and debts continue to rise. If more debt would be required to subsidize those bills, Bazian says they should seek the help of a Licensed Insolvency Trustee who can provide an unbiased, customized assessment of their financial situation and present the available debt-relief options. Only Licensed Insolvency Trustees, who are government-regulated, can provide the full range of debt-relief options which include informal debt settlements, consumer proposals and bankruptcies.

“Some mistakenly perceive that their situation isn’t as bad as it really is or are in denial about how bad it is. In both cases, they unfortunately often delay seeking help. Waiting too long not only reduces the amount of debt relief options available to them but also increases the amount of time spent stressing and worrying,” says Bazian. “Seeking the help of a Licensed Insolvency Trustee doesn’t have to be a last resort. Reaching out early at the first signs of distress will help ensure individuals get a fresh start sooner.”

Now in its 22^nd wave, the MNP Consumer Debt Index has continued to rebound after seeing its lowest recorded score in March 2022, increasing two points from last quarter. The Index, which tracks Canadians’ attitudes about their debt situation and their ability to meet their monthly payment obligations, now sits at 92 points, still remaining well below pre-pandemic levels and relatively low compared to any other September waves.

About MNP LTD

MNP LTD, a division of the national accounting firm MNP LLP, is the largest insolvency practice in Canada. For more than 50 years, our experienced team of Licensed Insolvency Trustees and advisors have been working with individuals to help them recover from times of financial distress and regain control of their finances. With more than 240 Canadian offices from coast-to-coast, MNP helps thousands of Canadians each year who are struggling with an overwhelming amount of debt. Visit MNPdebt.ca to contact a Licensed Insolvency Trustee or use our free Do it Yourself (DIY) debt assessment tools. For regular, bite-sized insights about debt and personal finances, subscribe to the MNP 3 Minute Debt Break Podcast.

About the MNP Consumer Debt Index

The MNP Consumer Debt Index measures Canadians’ attitudes toward their consumer debt and gauges their ability to pay their bills, endure unexpected expenses, and absorb interest-rate fluctuations without approaching insolvency. Conducted by Ipsos and updated quarterly, the Index is an industry-leading barometer of financial pressure or relief among Canadians.

Now in its 22^nd wave, the Index has increased two points since last quarter to 92 points, although still remaining well below its benchmark score established five years ago. Visit MNPdebt.ca/CDI to learn more.

The data was compiled by Ipsos on behalf of MNP LTD between September 6-13 2022. For this survey, a sample of 2,000 Canadians aged 18 years and over was interviewed. Weighting was then employed to balance demographics to ensure that the sample's composition reflects that of the adult population according to Census data and to provide results intended to approximate the sample universe. The precision of Ipsos online polls is measured using a credibility interval. In this case, the poll is accurate to within ±2.5 percentage points, 19 times out of 20, had all Canadian adults been polled. The credibility interval will be wider among subsets of the population. All sample surveys and polls may be subject to other sources of error, including, but not limited to coverage error, and measurement error.

Provincial data is available upon request.

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