Posthaste: Canadians' concerns about their finances hit pandemic high — yet low rates are driving them to take on more debt

Good Morning!

At no point in this pandemic that has turned lives upside-down have Canadians been as concerned about their finances as they are now, a survey has revealed.

The MNP Consumer Debt Index, released today, plunged to it lowest since it started in 2017, dropping 5 points since September in the largest quarterly decline ever.

The survey is conducted quarterly by Ipsos for insolvency trustees MNP to track Canadians’ attitudes about their debt situation and their ability to meet monthly payments.

The lower the reading, the more pessimistic Canadians are feeling and this poll, taken in December, found that negative perceptions about personal finances and household debt are rising, along with concerns about weathering setbacks.

“Almost one year into the coronavirus crisis, the financial confidence of Canadians has reached a low point. The virus has understandably created significantly more financial anxiety for those directly impacted by job loss, declining wages and business closures. The Index shows that financial pressure is mounting for a large proportion of the country,” says MNP president Grant Bazian.

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, an increase of four points from September.

“When we see so many Canadians feeling like they can’t afford living expenses without taking on more debt, it signals that more financial upheaval is on the horizon – particularly with so much uncertainty still ahead,” said Bazian.

More (42%) are concerned about their current level of debt and 45% regret the amount of debt they have taken on. Just one in four respondents feel confident in their ability to cope with loss of employment or change in wages.

Yet the survey also found that about three in 10 Canadians (28%) have taken on more debt as a direct result of the pandemic.

And perhaps most worrying, 61% of respondents thought with interest rates low now is a good time to buy things that they otherwise might not be able to afford.

In Ontario those numbers are even higher (63%), a sign that Ontarians could be setting themselves up for a “painful debt reckoning,” said MNP.

Three in 10 Ontarians (29%) say they’ve taken on more debt as a direct result of the pandemic, with the biggest percentage, 17%, saying it was on credit cards.

“Those who are already cash-strapped, saddled with debt, and struggling to navigate risk being lulled into a debt trap,” said Caryl Newbery-Mitchell, an insolvency trustee with MNP in Toronto. “The results can be disastrous when individuals in financial trouble try to cope by taking on additional debt. It’s like trying to fill one hole by digging another.”

Respondents were worried about this as well. Almost half (47%) said they were afraid that if interest rates go up they could land in financial trouble. About a quarter said their debt was keeping them awake at night, up 3 points since June.

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