MNP Consumer Debt Index plunges 15 points to all-time low as interest rates, inflation and affordability have many Canadians concerned about their debt

• Nearly half say they’re concerned about their current level of debt (47% +7 pts).
• Half say they regret the amount of debt they’ve taken on in life (49%, +7 pts).
• Seven in 10 say they’re already feeling the effects of interest rate increases (68%, +11 pts).
• Three in five say they’re more concerned about their ability to pay their debts as interest rates rise (64%, +9 pts).
• Three in five say they will be in financial trouble if interest rates go up much more (59%, +9 pts).

CALGARY, AB – January 16, 2023 – The quarterly MNP Consumer Debt Index has taken a drastic plunge to 77 points, dropping a record 15 points from last quarter and marking an all-time low since the Index was created more than five years ago. The unprecedented quarterly decline underscores the anxiety Canadians feel about their debt situation amid rising interest rates, persistent inflation, and heightened affordability concerns.

Conducted quarterly by Ipsos, the latest survey data reveals a record 47 percent of Canadians are concerned about their current level of debt, up seven points from last quarter. More Canadians also say they regret the amount of debt they’ve taken on in life (49%, +7 pts) this quarter. Fewer are confident in their ability to cover all of their living/family expenses in the next year without going further into debt (51%, -5 pts).

“This major shift in Canadians’ attitudes towards their personal debt is a reflection of the rapidly rising interest rates and persistent inflation this past year,” says Grant Bazian, president of MNP LTD, the country’s largest insolvency firm. “Many are seeing a double whammy with inflation eroding household budgets at one end and sharply rising borrowing costs at the other. Households that are over-leveraged or financially fragile may be reaching a breaking point.”

After last year’s rapidly rising interest rates, Canadians are feeling significantly worse about their ability to absorb interest rate increases. Seven in 10 (68%) say they’re already feeling the effects of interest rate increases, making a massive 11-point jump since last quarter. Spiking nine points from last quarter, significantly more now say their ability to absorb an interest rate increase of one percentage point has worsened (26%). Three in five say they’re more concerned about their ability to pay their debts as interest rates rise (64%, +9pts), and nearly six in 10 will be in financial trouble if interest rates go up much more (59%, +9pts). Canadians with household income less than $40K and those aged 18-34 and 35-54 are most likely to feel the effects of interest rate increases, be concerned about their ability to repay their debts, and be concerned they could be in financial trouble if interest rates continue to climb.

Rising costs are being felt by a growing proportion of Canadians. More than half report it’s less affordable to feed themselves and their family (57%, +5 pts) and put money aside for savings (56%, +7 pts). About half also say transportation (50%, +5pts), clothing or other household necessities (51%, +6 pts) and housing (45%, +8pts) are becoming less affordable.

“The typical lower and some middle-income household spends nearly all its income each month, leaving little wiggle room to accommodate an increase in expenses and debt carrying costs. These Canadians are struggling to maintain their standard of living, and often they resort to taking on more debt,” explains Bazian.

More Canadians are already resorting to reducing their debt repayments or taking on more debt to make ends meet. Compared to December 2021, more say they’ve paid only the minimum balance on their credit card (26%, +5 pts), borrowed money they can’t afford to pay back quickly (18%, +7 pts), or paid the minimum balance on their line of credit (17%, +6 pts). One in five say they’ll use their savings to pay bills (21%, +3 pts) while one in 10 say they’ll use their credit card to pay their bills (14%, +1 point) or borrow from friends or family (13%, +5 pts). A third say they plan on reducing their consumer expenses to make ends meet (36%), increasing four points since last quarter.

“More individuals are being forced to make tough financial decisions to try to stay afloat. Unfortunately, taking on more debt can have lasting financial impacts and push some into a debt spiral. These kinds of financial struggles often trigger stress and anxiety which can have a significant impact on mental health,” says Bazian.

Remaining consistent since last quarter, nearly half (45%, -1 point) of Canadians report that they’re $200 away or less from not being able to meet all of their financial obligations, including three in 10 (30%, unchanged) who say they already don’t make enough to cover their bills and debt obligations.

“Canadians should be aware of financial red flags that may point to the need for professional debt guidance as the holiday bills begin to arrive this month,” says Bazian. “The best course of action for anyone who is unable to cover their bills or anticipate missed payments, or who plans to use other forms of credit to pay bills, is to seek help from a debt professional like a Licensed Insolvency Trustee before the problem progresses further.”

Debt-relief options can include striking a deal with creditors through an informal debt settlement, consolidating all debts into one monthly payment, making a debt repayment plan through a Consumer Proposal, or declaring Bankruptcy.

Bazian explains that individuals often miss the initial warning signs or feel shameful about seeking help, causing the debt to snowball, and in some cases leaving the individual with fewer options.

“Each debt situation is different, which is why it’s best to start with a free, confidential review of your financial situation by a Licensed Insolvency Trustee who will outline in detail all of the options available,” advises Bazian.

Licensed Insolvency Trustees are the only federally-regulated debt professionals who can provide unbiased and customized financial assessments and advice on all available options. MNP offers free consultations across Canada.

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 has 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-third wave, the Index has plunged 15 points since last quarter to 77 points, the largest drop on record and an all-time low since the MNP Consumer Debt Index’s inception more than five years ago. Visit MNPdebt.ca/CDI to learn more.

The data was compiled by Ipsos on behalf of MNP LTD between December 1 and December 6, 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.

Provincial data is available upon request.