Low interest rates and rising costs leading many British Columbians down ever-riskier path to borrow more

More than half are likely to pile on more consumer debt before the end of the year, including one in five who will use buy now, pay later options.

Night view of Vancouver port, downtown lighting up the streets and water

VANCOUVER, BC – October 4, 2021 –The latest MNP Consumer Debt Index raises red flags about British Columbians’ plans to borrow more — and in potentially riskier ways — to make ends meet or finance their purchasing habits heading into the holiday season.

More than half (56%) are at least somewhat likely to borrow more before the end of this year, including three in 10 (31%) who say they’re inclined to use a credit card that already carries a balance. Buy now, pay later (BNPL) options which have boomed alongside the pandemic-induced spike in online shopping and financial instability will likely be the method of payment for one in five (21%) British Columbians this fall. Around the same number (24%) are looking at purchase finance options, and 13 percent say they’re likely to apply for a new credit card. Moreover, one in 10 (8%) are considering a payday loan.

“Buy now, pay later options may be enticing to those with tight finances, but they’re not always good value for consumers — and they enable some to spend beyond their means without fully understanding what they’re signing up for,” says Linda Paul, a Licensed Insolvency Trustee with MNP LTD in the Lower Mainland. She cautions British Columbians about the allure of borrowing through quick credit and BNPL options increasingly touted by online retailers.

“Beware of payment terms, fees, and interest charges to access any type of retail incentive that offers the instant gratification of buying goods now and paying later,” she cautions. “These credit options benefit the lenders. The longer it takes to repay the debt, the more profit they earn in the form of high interest and various fees for processing and/or late payments.”

Rock bottom interest rates have British Columbians feeling more comfortable increasing their debt. Notably, half (48%) say they are more relaxed about carrying debt than usual with interest rates so low — up six points since last quarter. Moreover, six in 10 (62%) say low interest rates provide them with a good opportunity to buy things they otherwise couldn’t afford.

But British Columbians also know the low interest environment must end at some point. With nearly four in 10 (38%, +1pt) reporting they are $200 away or less from financial insolvency — including three in 10 (27%, +6pts) who say they already don’t make enough to cover their bills and debt payments — it’s unsurprising the majority (54%, +1pt) are concerned about the impact of rising interest rates on their financial situation. Four in 10 (40%, +6pts) worry rising interest rates could move them toward Bankruptcy.

“Every time you borrow, you’re taking a financial risk. Changes to interest rates, income, emergency expenses, or unexpected events all have the potential to derail your repayment intentions. Before taking out any type of credit — no matter how low the interest rate — it’s critical to know the monthly obligation and how long it will take to pay the debt in full — and weigh the risks of unexpected events,” says Paul.

With the uncertainty around the fourth wave of COVID-19, British Columbians express some concern about their ability to cope with life changes without increasing their debt load. Compared to the other provinces, they’re the most likely to say they could not cope financially with an unexpected auto repair (26%, +8pts). Meanwhile, many say they could not cope with having an illness and being unable to work (32%, +5pts). British Columbians are also the most likely (37%) to express a lack of confidence in their ability to cope financially with a loss of employment or a change in work without going into debt — a significant 10-point jump since last quarter.

“Households in the province are facing headwinds with the rising cost of living. With the price of necessities increasing, some may take on more credit to make ends meet, while others will have less room in the budget for debt repayment,” says Paul.

Affordability concerns are widespread in British Columbia, with a large proportion believing life’s necessities have become more expensive over the past year. Forty percent say it is becoming less affordable to feed themselves and their family. Three in 10 (30%) say housing costs are less affordable, and around the same number say clothing or household necessities (34%) and transportation (27%) are costing more. More British Columbians also say it’s becoming harder to put money aside for savings (39%) or towards their debt (28%).

“Unmanageable debt is stressful enough, but you don’t have to face it alone. Licensed Insolvency Trustees can help. We are qualified professionals specifically trained to get people out of debt and find relief from financial stress,” says Paul.

Every British Columbian can obtain a free and confidential assessment of their financial situation with a Licensed Insolvency Trustee. As the only government-regulated debt professionals, they provide a full range of debt-relief options, including Consumer Proposals, informal debt settlements and Bankruptcies.

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.

The Index has dipped by two points since last quarter to 95 points, having remained steadily below the established benchmark of 100 points for the last two years.

The latest data, representing the eighteenth wave of the MNP Consumer Debt Index, was compiled by Ipsos on behalf of MNP LTD between September 3-7, 2021. For this survey, a sample of 2,001 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.