More Canadians feel they are on the brink of bankruptcy, according to a new survey highlighting the toll of increasingly hefty debt loads.
The Ipsos poll conducted by MNP Ltd. found 46 per cent of respondents come within $200 of insolvency every month, a six per cent jump from the previous survey by the chartered accountancy and business advisory firm in September.
“Many Canadians don’t have enough in the budget to make ends meet, let alone address their underlying indebtedness,” MNP Ltd. President Grant Bazian wrote in a news release. “Many have so little wiggle room that any increase in living costs or interest payments can tip them over the edge. That’s what we are seeing happen right now.”
The amount Canadians owe compared to what they earn ticked higher in the third quarter, according to Statistics Canada. The agency said in December that Canadians had $1.78 in credit market debt for every dollar of disposable income.
The rising cost of servicing that debt is upping the pressure.
The Bank of Canada increased its benchmark rate three times last year to 1.75 per cent. The bank paused its path to a neutral range at its most recent meeting on Jan. 9, citing moderating global economic growth and weaker oil prices. However, its statement indicated “the policy interest rate will need to rise over time.”
That has more than half (51 per cent) of those polled feeling concerned about their financial situation. Thirty-nine per cent said rising interest rates could move them towards bankruptcy, a five point increase since September.
Nearly half (45 per cent) said they will not be able to cover all of their living and family expenses in the next year without piling on more debt. Less than four-in-ten said they are confident they can financially cope with an unexpected life-changing event.
“For most, the cause of trouble appears to be long term accumulated debt. It may have been acquired over many years and they managed to pay the monthly interest until now,” Bazian wrote. “They just can’t carry it any longer at higher interest rates.”
Saskatchewan and Manitoba residents were found to be most worried about insolvency, 56 per cent and 48 per cent, respectively. British Columbia residents were the most optimistic, with 41 per cent citing concern.
Optimism about a brighter financial future has declined since September, the survey found. Thirty-six per cent of participants said they expect their debt situation to improve over the next year. Forty-seven per cent said they expect progress after five years.