Canadians ‘drowning in debt’ as 47% struggle to cover costs: MNP

Authored by bnnbloomberg.ca and submitted by n0tfakenews

Nearly half of Canadians are facing a debt trap, according to a new survey that thrusts highly-leveraged households into the spotlight ahead of an upcoming interest rate decision by the Bank of Canada.

Forty-seven per cent of respondents to a survey conducted on behalf of insolvency firm MNP said they don’t expect to be able to cover basic living expenses over the next year without taking on more debt.

A slightly greater proportion (48 per cent) of respondents said they have less than $200 remaining at the end of the month after covering living expenses and debt payments; that was up four percentage points compared to the previous survey in June.

On average, respondents to the survey said they had $557 left after paying their monthly bills and obligations, marking a decrease of $142 from June.

“Household debt has eased marginally and the current holding pattern on interest rates may be giving Canadians a sense of optimism about their finances,” said Grant Bazian, president of MNP LTD, in a release Monday. “Still, the fact remains that many are drowning in debt and most don’t have a clear path to repayment."

The lack of financial buffer is leaving certain Canadians particularly vulnerable to the unexpected. Indeed, the survey showed seven out of every 10 respondents were not confident about being able to handle an abrupt setback like divorce, unemployment, or death in the family.

“Unexpected expenses can plague people regardless of age or income but they're most devastating for people who already have a large amount of debt,” Bazian said. “Our research shows that most households do not have enough cash for inevitable life events like a car repair.”

The new anecdotal evidence of tight household finances comes ahead of a policy announcement by the Bank of Canada on Wednesday that will break a prolonged period of silence on monetary policy.

In the most recent official speech by a member of the Bank’s governing council on Sept. 5, Deputy Governor Lawrence Schembri said elevated household debt levels “remain the main risk to Canadian financial stability.” He also pointed out, however, that current tighter mortgage rules are helping to improve the quality of that debt.

The MNP survey of 2,002 Canadians was compiled by Ipsos from Sept. 4 to Sept. 9. MNP said the results are accurate within 2.5 percentage points, 19 times out of 20.

Boatsnbuds on October 28th, 2019 at 15:50 UTC »

Insane housing cost increases over the last 20 or 25 years are the reason. Most people are spending way too much on shelter, and there's no easy fix for that problem.

balkan89 on October 28th, 2019 at 14:24 UTC »

dang... the next recession will really fuck us up. we got through 08' relatively unscathed, but that won't be the case going forward with all the debt we have thanks to ridiculous housing costs.

DontStopMeNow6 on October 28th, 2019 at 13:50 UTC »

Duh.

How can anyone be expected to save, buy a house, pay off student debt, AND plan for retirement when everything costs so much, but wages haven't changed in 30 years?