Consumer Debt Index highlights impact of affordability crisis: More Newfoundlanders say necessities such as food, housing and transportation are less affordable

2022-10-03  4 minute read

Greg Gosse

MNP Consumer Debt Index

  • More than half are $200 or less away or less from not being able to meet all of their financial obligations at month-end (52%, +3pts) — Atlantic Canada was the only region to see an increase since last quarter.
  • Six in 10 say it is becoming less affordable to feed themselves and their family (63%, +18pts), more than any other province.
  • Half say transportation has become less affordable (49%, +7pts).
  • More than half are finding clothing or household necessities less affordable (54%, +14pts), the largest increase from last quarter compared to the other provinces.

StJohnsDowntown

ST. JOHN’S, NL – October 3, 2022 – The impact of this year’s persistent inflation and consecutive interest rate hikes is becoming clear as Atlantic Canadians’ concerns about the effect on their wallets skyrocket. According to the latest MNP Consumer Debt Index, which is conducted quarterly by Ipsos, Atlantic Canadians are the most likely (71%) to say they’re concerned about the impact of rising interest rates on their financial situation compared to the other provinces, increasing by a staggering 15 points since last quarter.

“The rising cost of living means Atlantic Canadians are having to set aside more of their paychecks to pay for basic necessities, which leaves less of a buffer to manage the financial impacts of previous and any future interest rate increases,” says Greg Gosse, a local Licensed Insolvency Trustee with MNP LTD.

Unlike the rest of the provinces which are experiencing a modest improvement since last quarter, more Atlantic Canadians are finding themselves closer to insolvency (52%, +3pts), meaning they’re $200 away or less from not being able to meet all of their financial obligations at the end of the month. The average Atlantic Canadian also has less money to spend overall as they pay more for life’s necessities. The amount the average Atlantic Canadian has left over at month-end has decreased by $312 from the previous quarter to $400. Compared to the other provinces, Atlantic Canadians have experienced the largest drop since last quarter and now have the smallest amount of money left over.

“Atlantic Canadians are in a tougher spot financially than the rest of the provinces, with far less money to spend at the end of each month — and many dangerously close to insolvency,” says Gosse. “With such a reduction in their budgets, any future increases to interest rates or the price of basic necessities could push more individuals to insolvency.”

Six in 10 Atlantic Canadians say they are more concerned about their ability to pay their debts as interest rates rise, (64%, +7pts), and that they will be in financial trouble if interest rates go up much more (61%, +3pts). Significantly fewer (19%, -6pts) say they are better equipped to absorb an interest rate increase of one percentage point than they used to be, while more (27%, +7pts) say their ability to deal with this increase has worsened.

Yet while many Atlantic Canadians are in a vulnerable financial position, a small amount of optimism is surfacing. More are now rating their personal debt situation as excellent (31%, +2pts) and fewer are rate it as terrible (23%, -2pts). When asked to forecast their expected debt situation a year from now, significantly fewer believe their debt situation will worsen (13%, -7pts).

“There may be small hints of optimism, but that could be only temporary as the economic situation here is still playing out. Only time will tell what the full impact will be on Atlantic Canadians. The effects of interest rate hikes tend to show themselves over time, so we may be seeing a false sense of optimism at the moment,” Gosse points out. “I would advise individuals to manage their finances cautiously as the situation continues to unfold.”

Gosse advises households to take a closer look at their budget and test whether 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, Gosse recommends contacting a Licensed Insolvency Trustee who can provide an unbiased assessment of their financial situation and the available debt-relief options. Licensed Insolvency Trustees are government-regulated and are the only professionals who can provide the full range of debt-relief options, including informal debt settlements, Consumer Proposals, and Bankruptcy.

“Some individuals are in denial about the severity of their debt, and many don’t realize how bad their situation really is. Seeking the advice of a Licensed Insolvency Trustee doesn’t have to be a last resort. In fact, waiting too long not only increases the amount of time spent stressing and worrying, but it can also reduce the number of debt relief options available — so reaching out at the first sign of trouble is key,” says Gosse.

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 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 twenty-second 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 and September 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.

National data is available upon request.