MNP Consumer Debt Index Jumps 10 Points to Highest Level Indicating Increasing Optimism Among Indebted Canadians

Canadians are more confident in their ability to absorb interest rate hikes and feel their debt situation has improved

Calgary, Alberta, CANADA


CALGARY, Alberta, July 09, 2018 (GLOBE NEWSWIRE) -- The MNP Consumer Debt Index has jumped ten points since March, signaling an overall improvement in Canadians’ feelings about their debt and increasing optimism among Canadians on issues related to personal finance.

Over sixty per cent (61%) of Canadians feel their debt situation has improved, including nearly one in three (27%) who say their debt situation is better compared to a year ago, and more than one-third (35%) who say their debt situation has improved compared to 5 years ago. Six in ten (57%) believe they will be able to cover all living and family expenses in the next 12 months without going into further debt, an increase of four points since March.

The survey, which is conducted quarterly by Ipsos on behalf of MNP LTD, also found that Canadians are feeling more confident in their ability to absorb additional interest rate increases. When asked specifically about their ability to absorb an interest rate increase of one percentage point, more say they are now in a better position to handle the added expense. Moreover, there has been a decline in the proportion of Canadians who believe an interest rate hike will move them towards bankruptcy (28%, down 5 points). Still, four in ten (42%, down 2 points) say that if interest rates go up much more they are afraid they will be in financial trouble.  

“Canadians might be feeling more optimistic but the question remains: will they actually be able to absorb higher debt servicing costs as rates rise? When you look at the staggering number of people who are teetering on the edge, it’s clear that we are going to start seeing a rise in delinquencies as rates rise,” says Grant Bazian, President at MNP LTD, the country’s largest insolvency practice.

Bazian points to the survey results showing that over a quarter (27%, down 2 points since March) of Canadians still say they have absolutely no wiggle room after paying their bills and debt obligations at the end of the month. While the proportion of Canadians who are $200 or less away from financial insolvency at month end has been on a steady decline since December 2017, four in ten Canadians (44%, down 2 points) continue to fall within this category.

Earlier this month Stats Canada reported that Canadians' household debt ratio saw the biggest drop on record, with many suggesting that new mortgage rules and higher interest rates are helping to slow the pace of borrowing. 

“Make no mistake about it, the level of household indebtedness in Canada is still very concerning,” says Bazian. “As a country, we owe an astounding $599 billion on credit cards and other non-mortgage consumer debt. Two things likely got us to this point: a lack of financial literacy, and credit providers lending to borrowers who are overconfident about their ability to repay.”  

The MNP survey asked Canadians who say their current debt situation has improved what specific measures they have taken. Half (52%) say they reduced their variable expenses such as entertainment, coffee or lunch money. Four in ten (43%) said that updating and sticking to a budget was a success factor in improving their financial situation. One in three (28%) found ways to reduce their fixed expenses such as rent, mortgage payments or car payments. Some decided to take on side gigs, either selling things (23%) or taking on another job (11%). Only six per cent of respondents said they reached out and sought professional help with their debt.

“For those who are in debt and already struggling to make ends meet, slowly pumping the brakes on spending isn’t going to be enough at this point. My advice is to seek help from an accredited debt professional right away. Do not spend one more sleepless night worrying. Help is readily available,” advises Bazian.

The MNP Consumer Debt Index is the most comprehensive survey on consumer debt in Canada. Conducted quarterly by Ipsos on behalf of MNP LTD, the survey measures Canadians’ attitudes about their consumer debt, their perceived ability to pay their bills, endure unexpected expenses, and absorb interest-rate fluctuations. The index has jumped ten points since the last poll in March (from 96 to 106), reaching the highest point since tracking began last year.

Other poll highlights include:

  • Four in ten Canadians (41%) rate their debt situation as excellent, up 5 points since March. 
  • Regionally, British Columbians (47%) are most likely to rate their personal debt situation as excellent, followed by Atlantic Canada (46%), Quebec (44%), Ontario (41%), Alberta (36%), and Saskatchewan and Manitoba (30%). There is also a generational divide, as Boomers (49%) are more likely to rate their debt situation as excellent compared to 37% of Millennials and Gen X’ers.
  • Fewer Canadians say they are already beginning to feel the effects of interest rate increases (38%, down 5 points), while more now say they have a solid understanding of how interest rate increases impact their financial situation (78%, up 4 points). Less than half of Canadians (47%, up 1 point) express concern toward the impacts rising interest rates could have on their financial situation. 
  • While concern over interest rates have softened, a majority (77%) continue to brace themselves for the possibility of an increase and agree that they will be more careful with how they spend their money.
  • Overall concern about rising interest rates have decreased since March, with fewer Canadians concerned about moving towards bankruptcy (28%, down 5 points), repaying their debts (49%, down 2 points), and being put into financial trouble (42%, down 2 points) if interest rates rise. 
  • Overall, Canadians are gaining confidence in their ability to cope with unexpected life changes without taking on more debt. That includes: being able to cope with an unexpected auto repair or purchase (35%, up 7 points), a change in relationship status (36%, up 4 points), and paying for their own or someone else’s education (28%, up 4 points). 
  • Looking to the future, Canadians are far more optimistic: one year from now, 38 per cent of Canadians expect their debt situation to be better, while nine per cent expect it to be worse, giving a net 29 per cent score, the highest since tracking began.  Five years from now, half (50%) of Canadians think their personal debt situation will be better and only eight per cent think it will be worse. The net score has increased 5 points since March (37% to 42%) and 4 points since December (38% to 42%), also the highest since tracking began.
  • Though things may be looking up for some, half (50%) of Canadians are not confident that they will not have any debt in retirement. 

About MNP Debt

MNP LTD, a division of 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 230 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 or get a free checkup for your debt health using the MNP Debt Scale.

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 or 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 June 15 and June 19, 2018. 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 fifth wave of the MNP Consumer Debt Index.

CONTACT

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Britta Bisig, Media Relations

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