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

MNP Consumer Debt Index – January 2021

MNP Consumer Debt Index reaches the lowest point ever as pandemic drives down financial confidence and increases debt concerns among Canadians.

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

• Four in ten not confident they can cover living expenses this year without going further into debt (+4).
• Four in ten are 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 ten say they have taken on more debt as a direct result of the pandemic.

CALGARY, Alberta, Jan. 18, 2021 (GLOBE NEWSWIRE) — As the pandemic-related economic pain and wage loss continues, there are signs that the financial stressors of 2020 will continue to take their toll well into the New Year. Now in its fifteenth wave, the MNP Consumer Debt Index has reached the lowest point since inception. Conducted quarterly by Ipsos on behalf of MNP LTD, the Index tracks Canadians’ attitudes about their debt situation and their ability to meet their monthly payment obligations. Compared to September, it has dropped 5 points to stand at 89 points – marking the lowest level ever recorded and the largest quarterly decline since the Index was created back in June 2017. The record low was fuelled by Canadians’ negative perceptions of their personal finances, current household debt levels, and their concerns about weathering unexpected financial setbacks without taking on more debt.

“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 Grant Bazian, president of MNP LTD.

Four in ten (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 aspects 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, it signals that more financial upheaval may be on the horizon – particularly with so much uncertainty still ahead,” explains Bazian.

No more than three in ten (29%, -3) are confident in their ability to cope with life-changing events without increasing their debt burden. Just one in four Canadians (25%, -4) feel confident in their ability to cope with loss of employment or a change in wage or seasonal work. Fewer Canadians feel confident in their ability to cope financially with the death of an immediate family member (23%, -5), and a change in their relationship status (29%, -3) without increasing their debt load.

“The single greatest cause of serious financial trouble can be an unexpected crisis. And the pandemic was the crisis that set into motion many unexpected life-changing financial disturbances that no one prepared for. For already indebted Canadians, any reduction in household income or an increase in unexpected expenses can have a snowball effect on debt as many take on even more credit to stay afloat,” explains Bazian.

The survey found that as many as three in ten 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 low, six in ten (61%) feel that now is a good time to buy things that they otherwise might not be able to afford. Nearly half (47%) say that with current interest rates so low, 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 individuals experiencing financial turmoil try to manage it by taking on additional debt, the results can be disastrous. They end up trying to fill a hole by digging another one,” says Bazian.

The survey highlighted the risks of heavy reliance on credit: almost half of Canadians (47%, +1) are afraid that if interest rates go up, they could end up in financial trouble. Accumulating personal debt is also keeping some up at night, with one in four (24%) indicating their debt keeps them awake from worry, up 3 points since June. Just as many are kept up at night worrying how they’ll pay their bills (20%, -2 pts) or be able to afford essentials for their family (19%, unchanged).

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

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.

“A consumer proposal or bankruptcy may be a necessary step for some, but 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.

To help severely indebted Canadians understand their rights and determine the best path forward, MNP’s national team of Licensed Insolvency Trustees offers free consultations.

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 Canadian 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 this year. Visit MNPdebt.ca/CDI to learn more.

The latest data, representing the fourteenth 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 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.

CONTACT

Angela Joyce, Media Relations

p. 1.403.681.9286
e. angela.joyce@mnp.ca

A photo accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/ddab19ff-12d0-40b1-b417-ed747da3ad62