Low interest rates and rising costs leading many Manitoba and Saskatchewan residents 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 10 who will use buy now, pay later options. 

WINNIPEG, MB – October 4, 2021 –The latest MNP Consumer Debt Index raises red flags about Manitoba and Saskatchewan residents’ plans to borrow more — and in potentially risker 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 (30%) 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 10 (11%) Manitoba and Saskatchewan residents this fall. One in five (18%) are looking at purchase finance options and 13 percent say they’re likely to apply for a new credit card.

“The buy now, pay later options we are increasingly seeing online may seem attractive to those with tight finances, but they may be enabling some to spend beyond their means without fully understanding what they’re signing up for,” says Tanya Reynolds, a Licensed Insolvency Trustee with MNP LTD in Winnipeg. She cautions Manitoba and Saskatchewan residents about the allure of borrowing more through quick credit and BNPL offers increasingly touted by online retailers.

“Remember, these credit options benefit lenders the longer people stay in debt because of the high interest costs and various fees for processing and/or late payments. Be sure you understand the payment terms, fees, and interest charges.”

Rock bottom interest rates have left Manitoba and Saskatchewan residents feeling more comfortable with increasing their debt. Notably, four in 10 (41%) say they’re more comfortable with carrying debt than usual, down one point since last quarter. Moreover, half (53%) say low interest rates provide them with a good opportunity to buy things they otherwise couldn’t afford.

But Reynolds cautions Manitoba and Saskatchewan residents the low interest environment must end at some point. Tied with Alberta, Manitoba and Saskatchewan residents are the most likely (50%, +4pts) to report they’re $200 or less away from financial insolvency. This includes a quarter (25%, +6pts) who say they already don’t make enough to cover their bills and debt payments. It’s therefore surprising that Manitoba and Saskatchewan residents are the least likely (46%, -5pts) to be concerned about how rising interest rates will affect their financial situation — the only region to see a decline since last quarter. They are also the least likely (26%, -4pts) to worry rising interest rates could move them toward Bankruptcy.

“You’re taking a financial risk every time you borrow. 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 repay the debt — and to weigh the risks of unexpected events like interest rate increases, income loss, and emergency expenses that can derail your repayment plans,” says Reynolds.

With the uncertainty around the fourth wave of COVID-19, Manitoba and Saskatchewan residents express some concern about their ability to cope with life changes without increasing their debt load. Many say they could not financially cope with an unexpected auto repair (24%, -3pts) or having an illness and being unable to work (29%, +3pts). Three in 10 (29%, +3pts) are not confident they could cope with a loss of employment or a change in work without going into debt.

“Another issue we see playing out in our research is households are struggling more with the rising cost of living. Price increases may also be leading some to take on more credit to make ends meet, while others will have less room in the budget for debt repayment,” says Reynolds.

Affordability concerns are widespread across Manitoba and Saskatchewan, with a large proportion believing life’s necessities have become more expensive over the past year. Compared to other regions, Manitoba and Saskatchewan residents are the most likely (40%) to say clothing or household necessities are costing more. Thirty-seven percent say it’s becoming less affordable to feed themselves and their family. One in three say housing costs (34%) and transportation (35%) are less affordable. More Manitoba and Saskatchewan residents also say it’s becoming harder to put money aside for savings (44%) or towards their debt (30%).

“Professional help is available for severely indebted individuals. Licensed Insolvency Trustees are qualified professionals specifically trained to get you out of debt. We can help you find relief from financial stress,” says Reynolds.

Every Manitoba and Saskatchewan resident 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.