January MNP Consumer Debt Index (3 Minute Debt Break)

Canadians’ current debt perception has reached an all time low on MNP's Consumer Debt index. Conducted quarterly by Ipsos on behalf of MNP Limited, the Consumer Debt Index tracks Canadians’ attitudes about their debt and ability to meet their monthly payment obligations. And last month, the Index dropped to 83 points. 

That's down three points from the last quarter and represents the second-lowest level seen in five years. It seems the combination of inflation and higher interest rates is leaving many Canadians feeling quite downbeat about their debt situations. In fact, more people now believe their debt situation has worsened compared to a year ago, while fewer think it's improved.

Here is some insight into what's going on: Credit spending has become a sort of relief valve for many, especially those with lower incomes, to cope with rising costs. However, the burden of repaying this debt is growing due to the increasing interest rates, leading to a more pessimistic view among Canadians about their ability to pay off debts and manage their finances.

About 47% of Canadians regret how much debt they've taken on, a slight increase from the previous quarter. And nearly half are worried about their current level of debt. When it comes to interest rates, there's a lot of concern too. Around 27% feel less capable of handling a one percentage point interest rate increase.

The situation gets a bit more complicated considering the current economic climate. Some households, already stretched thin, might feel compelled to accumulate more debt just to cover basic needs. This can lead to a difficult cycle of increasing debt. In the past year, 18% of Canadians have had to resort to using savings, home equity, or other methods to manage their debts or daily expenses. And a significant number are only making the minimum payments on their debts, including credit cards and lines of credit.

This financial pressure is taking a toll, not just on the wallet but also on mental well-being. With added stress from upcoming holiday bills and mortgage renewals, many are approaching what could be a crisis point, both mentally and financially. The stats are quite telling: 60% of Canadians say their financial situation causes anxiety, and 59% report feeling stressed. Half of them feel more isolated due to their financial circumstances, and 40% are embarrassed about the amount of debt they owe.

For those struggling, seeking help is as important as it would be in a health crisis. There are professionals, like Licensed Insolvency Trustees, who offer free consultations and can provide a range of debt relief options, including Consumer Proposals and Bankruptcy. They can also help develop a personalized plan to manage debt, which is essential… because everyone's financial situation is unique.

Subscribe to MNP 3 Minute Debt Break on your favourite streaming service.