MNP Consumer Debt Index Reaches Lowest Point Ever Recorded as COVID Lockdown Measures Continue

Pandemic Impact: Declining financial confidence and increasing debt concerns among Canadians  

• Four in 10 not confident they can cover living expenses this year without going further into debt (+4)
• Four in 10 concerned about their current debt (+1)
• Fewer are confident in their ability to weather unexpected expenses without taking on more debt (29%, -3)
• Nearly half say they could be in financial trouble if interest rates increase (+1)
• Three in 10 say they have taken on more debt as a direct result of the pandemic

CALGARY, AB –January 18, 2021 — As pandemic-related economic pain and wage losses continue, there are signs 2020’s financial stressors will continue to exact a toll well into 2021. Now in its fifteenth wave, the MNP Consumer Debt Index has dropped to 89 points, the lowest point since it was introduced in June 2017.

Conducted quarterly by Ipsos on behalf of MNP LTD, the Index tracks Canadians’ attitudes about their debt and ability to meet their monthly payment obligations. It has dropped five points since September to hit its record low, which is also the largest quarterly decline to date. This has largely been fuelled by Canadians’ negative perceptions of their personal finances, current household debt levels, and concerns about weathering more unexpected financial setbacks without taking on more debt.

“We’re almost one year into the coronavirus crisis and financial confidence has reached a new low across the country. Financial anxiety is understandably much higher among those directly impacted by job loss, declining wages and business closures,” says Grant Bazian, president of MNP LTD. “The Index shows financial pressure is mounting for a large proportion of the country.”

Four in 10 (43%) Canadians say they are not confident they can cover their living expenses for the next year without going further into debt, a four-point increase from September. Around the same number feel concerned about their current level of debt (42%, +1) or regret the amount of debt they have taken on (45%, -1).

“Financial comfort and preparedness are key markers of an individual’s overall wellbeing. When we see so many Canadians feeling like they can’t afford living expenses without taking on more debt, that signals more financial upheaval is on the horizon — particularly with so much uncertainty still ahead,” explains Bazian.

Fewer than three in 10 (29%, -3) Canadians are confident in their ability to cope with life-changing events without increasing their debt burden. Similarly, just one in four (25%, -4) feel confident in their ability to cope with loss of employment or a change in wage or seasonal work. Fewer also feel they could cope financially with the death of an immediate family member (23%, -5) or a change in their relationship status (29%, -3).

“Unexpected crises are the single greatest cause of serious financial trouble. One unforeseen event is often enough to send people into a tailspin. Yet the pandemic set multiple life-changing financial disturbances into motion for thousands of Canadians — many of which they either didn’t or couldn’t have prepared for. For already indebted households, any reduction in income or unexpected increase in expenses can have a snowball effect as many take on even more credit just to stay afloat,” explains Bazian.

The survey found nearly three in 10 Canadians (28%) have taken on more debt as a direct result of the pandemic. This includes using credit cards (15%) or lines of credit (8%) to pay off bills, borrowing money from friends or family (10%), taking out a bank loan (3%), or using a payday loan service (3%).

With interest rates at an all-time low, six in 10 (61%) feel now is a good time to buy things they otherwise might not be able to afford. Nearly half (47%) say they’re more relaxed about carrying debt than they usually are. This may be why fewer (22%) say they are losing sleep due to COVID-19 economic concerns (-12 since June) or the recession (20%, -5 since June).

“Low interest rates may be providing unwarranted comfort. Some risk being lulled into a false sense of security that will put them in a debt trap,” cautions Bazian. “When people try to manage their financial turmoil by taking on additional debt, the results can be disastrous. It’s like trying to fill one hole by digging another.”

The survey highlighted the risks of heavy reliance on credit: almost half of Canadians (47%, +1) are afraid they could end up in financial trouble when interest rates begin to reverse course. Accumulating personal debt is also keeping some up at night, with one in four (24%) indicating debt worries are interfering with their sleep, up 3 points since June. The story is similar for those worrying how they’ll pay their bills (20%, -2 pts) or afford essentials for their family (19%, unchanged).

Bazian says shame and pride often cause deeply indebted individuals to draw their situation out for far too long. Some may face aggressive collections activity or debt-relief scams, resulting in more stress and sleepless nights.

“A Consumer Proposal or Bankruptcy may be a necessary step for some. Others simply need reputable advice to develop a budget and a plan to deal with their debt. Everyone’s situation is different, which is why they need customized, unbiased advice from a professional,” says Bazian.

Licensed Insolvency Trustees are the only federally regulated professionals who can guarantee legal protection from creditors and help people make informed choices to deal with their financial difficulties.

MNP’s national team of Licensed Insolvency Trustees offer Free Confidential Consultations to help severely indebted Canadians learn their options, understand their rights, and determine the best path forward.

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 230 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 fifteenth wave, the Index currently stands at 89 points, the lowest reading ever recorded, on the heels of a record-lows in March and September of 2020. Visit MNPdebt.ca/CDI to learn more.

The latest data, representing the fifteenth wave of the MNP Consumer Debt Index, was compiled by Ipsos on behalf of MNP LTD between December 1-3, 2020. 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 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.

A summary of some of the provincial data is available by request.