Canadians increasingly pessimistic about their ability to absorb higher interest rates and cover their monthly bills

• One in three Canadians say they are unable to cover their monthly bills, up eight points since September.
  
• Half are more concerned about their ability to repay debts, up three points since September.
• Average Canadian left with $112 less at the end of the month compared to last quarter.

CALGARY, Alberta, Jan. 15, 2018 (GLOBE NEWSWIRE) --  Canadians are growing increasingly concerned about their ability to repay debts and have seen their household budgets tighten significantly since interest rates began to rise in July, according to the latest MNP Consumer Debt Index. The quarterly survey, conducted by Ipsos on behalf of MNP LTD, paints a concerning picture; one in three (33%) Canadians now say that they are unable to cover their monthly bills and debt repayments, an increase of eight points since the September results.

Those who are making ends meet have significantly fewer dollars left in their pocket at the end of the month. On average, Canadians say they are left with $631 after bills and debt obligations, which represents a fifteen per cent decrease from last quarter ($743), and twenty-nine per cent cut since June ($892). Nearly half (48%) of Canadians say they are within $200 of not being able to pay their bills and debt obligations, up six points.

“The results highlight just how financially vulnerable Canadians are. Even small interest rate increases result in escalating financial strain and anxiety,” says Grant Bazian, President at MNP LTD, the country’s largest personal insolvency practice.

Four in ten (42%) Canadians say that if interest rates go up much more, they are afraid they will be in financial trouble. In fact, financial insolvency is a real worry for many, with one in three (32%) agreeing they’re concerned that rising interest rates could move them towards bankruptcy, an increase of four points since September.

Despite the fact that over seventy per cent said that as interest rates rise, they’ll be more careful with how they spend their money, nearly half (48%) of Canadians still anticipate having to go further into debt to cover their expenses over the next year, up five points.

“The psychological effects of the Bank of Canada interest rate increases might not match up with Canadians’ intended behaviors yet. While Canadians say they are heeding rate increase warnings, they are still reliant on credit to make their household budgets work. The result may be a dangerous debt trap that will be impossible for some to ever get out of,” says Bazian. 

One in three Canadians (34%) agree they are concerned about their current level of debt and nearly four in ten (38%) regret how much debt they’ve taken on in their life. Almost sixty per cent of Canadians do not think they’ll be debt free in retirement (55%, up four points since September, six points since June).  

Millennials and Gen X’ers are the most likely to express concerns about the potential fallout of higher interest rates and to be already feeling the effects of the recent interest rate increases. In fact, a staggering fifty per cent of both groups indicate that if interest rates go up much more they will be in financial trouble.  

 “We have a whole generation of Canadian consumers who have never experienced anything but rock bottom interest rates, and many of them have financed everything in their lives –  from education, to houses, to cars, and even everyday purchases – without really putting much thought into debt servicing costs. On top of that, low returns for savers has undermined the notion that saving is a worthwhile activity so most young people don’t have a cushion to handle any kind of unexpected expenses,” says Bazian.

The survey found millennials are least likely to have a solid understanding of how interest rates impact their finances.

The MNP Consumer Debt Index is the most comprehensive survey on consumer debt in Canada. It gauges Canadians’ perceived ability to pay their bills, endure unexpected expenses, and absorb interest-rate fluctuations without approaching insolvency. The results have been compiled into Canada’s first national debt index; an aggregate measure of how Canadians feel about debt, how their debt situation has evolved in the last five years, and how they feel about their debt situation looking forward. The index has fallen by two points to 100 from 102 in September, signaling a slight worsening of debt sentiment in Canada.

“With interest rates on the rise, Canadians are more stretched financially than they have ever been before. I wouldn’t say we’re at a major tipping point yet, but likely not far off,” adds Bazian.  

About MNP Debt

MNP LTD, a division of MNP LLP, is one of the largest personal insolvency practices in Canada. For more than 50 years, our experienced team of Licensed Insolvency Trustees and advisors have been working collaboratively with individuals to help them recover from times of financial distress and regain control of their finances. With more than 220 Canadian offices from coast-to-coast, MNP helps thousands of Canadians each year who are struggling with an overwhelming amount of debt. Visit www.MNPdebt.ca to contact a Licensed Insolvency Trustee.

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, follow a budget, and absorb interest-rate fluctuations without approaching insolvency. Conducted by Ipsos and updated quarterly, the Index is an industry-leading barometer of financial pressure /relief among Canadians. Visit www.MNPdebt.ca/CDI to learn more.

The latest Index data was compiled by Ipsos on behalf of MNP LTD between December 8th to December 13th, 2017. For this survey, a sample of 2,001 Canadians from the Ipsos I-Say panel was interviewed online. The precision of online polls is measured using a credibility interval. In this case, the results are accurate to within +/- 2.5 percentage points, 19 times out of 20, of what the results would have been had all Canadian adults been polled. Credibility intervals are wider among subsets of the population. This represents the third wave of the MNP Consumer Debt Index.

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