As Canadians take steps to safeguard their finances amid ongoing economic uncertainty, the MNP Consumer Debt Index—conducted quarterly by Ipsos—has rebounded to 88 points this quarter, marking a nine-point increase from the previous quarter and signaling a more optimistic outlook on personal finances.
Reflecting Canadians’ shift toward financial caution, three-quarters (74%) say they have cut back on spending due to uncertainty, with women (77%) and those aged 35-54 (81%) being the most likely to have reduced spending. Around the same proportion (73%) say they are delaying major purchases or investments, said MNP.
“The improvement we are seeing in Canadians’ feelings toward their personal finances follows two Bank of Canada interest rate cuts this year. And while uncertainty remains around U.S. tariffs, their on-again, off-again nature may be providing Canadians with some optimism for the future—especially since these tariffs have yet to make a full impact on household budgets,” said Grant Bazian, president of MNP LTD, the country’s largest insolvency firm.
“Lower interest rates, along with the budget adjustments Canadians have already made, seem to be providing some breathing room.
“In comparison to the previous quarter, the results suggest that Canadians are taking proactive steps to reduce spending and lessen their reliance on credit as they brace for potential financial challenges on the horizon.
“Four in 10 Canadians still report being on the brink of insolvency, and more than a quarter have no financial cushion, no flexibility, or wiggle room in their budgets. Individuals without a safety net will likely face economic hardship when faced with rising costs and housing expenses, or a potential loss of income.”
Lower Interest Rates Offer Relief, but Many Remain Concerned
The proportion of Canadians concerned about the impact of rising interest rates remains near the highest level on record (60%, +1pt). However, thanks in part to the interest rate reductions this year, overall concerns about the broader impact of interest rates have declined. Fewer Canadians this quarter are worried about their ability to repay debts, even if rates decrease (43%, -7pts). Nearly a quarter (24%, +4pts) now feel better equipped to absorb a one-percentage-point rate increase, while the percentage (21%, -6pts) who feel less prepared has decreased. More than half (52%, -5pts) continue to worry about falling into financial trouble if rates rise, and nearly two in five (38%, -8pts) fear that rising rates could push them toward bankruptcy, said MNP.
A majority of Canadians (81%) say the current economic uncertainty has made them more cautious about taking on new debt – a sentiment that is consistent across genders, age groups, regions and income levels. A higher proportion this quarter believes they will be able to cover living expenses in the next year without needing more credit (58%, +9pts) and fewer regret the amount of debt they have taken on (43%, -6pts).
Canadians’ net personal debt rating (positive minus negative) has rebounded 14 points from last quarter’s all-time low. Additionally, fewer Canadians (43%, -7pts) report being just $200 or less away from financial insolvency, unable to meet their bills and debt obligations each month. This is due to significantly fewer saying they are already insolvent (26%, -9pts), added MNP.
“Well over half (58%) of Canadians express heightened concern about their ability to pay off debt due to ongoing uncertainty. This concern extends to broader financial stability, with about two in five worried about the possibility of someone in their household losing their job (38%, -3pts),” it said.
Canadians Bracing for Increased Housing Costs
Two in five (44%) Canadians say they are bracing for an increase in housing costs within the next year. Renters have a higher expectation of rising costs than homeowners, with two in three (65%) expecting their housing costs to increase within the next year, and nearly one-third of homeowners (30%) agreeing their housing costs will rise. Lower income earners may be impacted the most, with half (52%) of those earning under $40,000 expecting an increase, compared to one-third (34%) of those earning $100,000 or more. Younger Canadians under the age of 55 are more likely to expect an increase compared to those 55 and older, said the MNP report.
“More than four million mortgages—roughly 60% of all outstanding mortgages in Canada—are set to renew by the end of 2026 at potentially higher rates. This is just one example of the rising expenses, compounded by ongoing economic uncertainty, that those teetering on the edge can’t afford,” noted Bazian.
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