Following two consecutive interest rate pauses, the MNP Consumer Debt Index – conducted quarterly by Ipsos – is holding steady at 88 points this quarter.
Still, nearly two-thirds of Canadians say they desperately need interest rates to go down, relatively consistent since last quarter (64%, +1pt). Despite the Index stabilizing, ongoing economic uncertainty and the cost of living continue to weigh on households. More than one-third (36%) of Canadians report feeling anxious or stressed about their financial situation, while one-quarter say they feel like they’re having to put their life on hold (26%) or are constantly putting out financial fires, facing one unexpected cost after another (24%), said the report.
“Canadians have not witnessed such economic uncertainty since the pandemic. We see some stability in financial perception, but many households feel like their lives are on hold, stuck in a financial holding pattern as they wait for the proverbial dust to settle,” said Grant Bazian, president of MNP LTD, the country’s largest insolvency firm.
“Given the persistent economic pressures and a backdrop of global volatility, many are hesitant to make major financial or life decisions, unsure of what lies ahead.
“Even after two interest rate pauses, those making careful choices and delaying major decisions may be struggling to get ahead amid the current uncertainty around costs and income. For many vulnerable households–particularly younger adults and lower-income Canadians–it may feel like they’re constantly putting out financial fires.”
Younger adults and lower-income households are consistently among the most likely to report financial strain and feeling stalled. One-third (33%) of Canadians aged 18-34 say they feel stalled–having to put their lives on hold–while those with household incomes under $40K (30%) are also the most likely to feel stalled. Young Canadians aged 18-34 (45%) and those with household incomes less than $40K (44%) are the most likely to report feeling anxious or stressed about their financial situation. One-third (32%) of Canadians feel stuck living paycheque to paycheque, with those aged 18-34 (37%) and 35-54 (39%), and those earning less than $40K (45%), being the most likely to feel this way. However, younger Canadians aged 18-34 (32%) are also the least likely to say they are feeling cautious with how they manage their money due to current financial pressures, compared to 37% of Canadians overall, said MNP.
“In response to current financial pressures, two in five Canadians (41%) have reduced discretionary spending, one-third (33%) are increasing savings or building emergency funds, and more than one-quarter (27%) are prioritizing debt repayment. Nearly one-quarter (23%) of Canadians are putting important life goals–such as buying a home, starting a family or changing careers–on hold. Younger Canadians aged 18-34 are the most likely to delay these types of milestones (33%),” said the MNP report.
Future Expectations Mixed Amid Lingering Interest Rate Concerns
Despite interest rates holding steady twice this year, more Canadians this quarter say they are concerned rising interest rates could drive them toward bankruptcy (41%, +3pts). Furthermore, even if rates were to decline, a significant proportion of Canadians (45%, +2pts) remains concerned about their ability to repay debt, said MNP.
“There are some persistent fears around interest rates,” added Bazian. “For some households, the damage has already been done. After years of rising costs, high interest rates, and depleted savings, there may be some deep anxieties about what could still be to come.”
As Canadians look to the future, one-third (33%, +3pts) expect their debt situation to improve one year from now, and a larger proportion (40%, +1pt) believe it will improve in five years. However, 13% say they expect their debt to worsen over both horizons. Fewer this quarter believe they will be able to cover all living expenses in the next year without needing more debt (54%, -4pts), explained MNP.
Millions Remain Close to Insolvency
While some households are managing to set a little more aside, a significant proportion of Canadians remain on precarious financial footing.
“About 14 million Canadians say they are close to financial insolvency, with little to no room to absorb an unexpected expense or income disruption,” said Bazian.
“Two in five Canadians (42%, -1pt) report they are $200 or less away from financial insolvency each month. That includes more than a quarter (27%, +1pt) who say they already don’t make enough to cover their bills and debt payments,” noted the report.
Related Retail Insider stories:
