Report finds nearly half of Canadians concerned about going into pandemic-related debt

President of MNP LTD, Grant Bazian said, “a significant proportion of Canadians appear to be ready to emerge from their bubbles and go straight into shopping malls, restaurants and airplanes to celebrate the pandemic wind down.”

“For many, the financial damage will likely linger for years even as they regain employment and try to cope with new debts they may have accumulated.”

Bazian believes that part of the reason some Canadians felt the pandemic worsened their debt or created more debt is because six in 10 (57 per cent) said they have taken advantage of low interest rates to make purchases that may not have normally fit their budget. On the flip side, 65 per cent of respondents said they reduced their spending over the course of COVID-19.

Bazian cautions Canadians “not to erase hard-won gains.”

“It is understandable that many are seeking post-pandemic indulgences or making home upgrades, but the ability to do so is by no means universal. Those who went into lockdown already deeply indebted and then experienced prolonged financial disruption are vulnerable right now, and they should not rush to return to pre-pandemic spending habits.”

With the potential for a rise in interest rates, 43 per cent of respondents said they are concerned that if rates do go up much more, they could wind up in financial trouble. 34 per cent said rising interest rates could potentially drive them towards bankruptcy. 32 per cent of Canadian home-owners report being ‘house poor’, meaning they don’t have much left after paying home-related bills.

The survey found that approximately 5.5 million homeowners are susceptible to financial disruptions like rising interest rates or a change in their job situation. As a result, 20 per cent of responding homeowners said they regret the amount of debt they took on to purchase their home. Bazian recommends those feeling overwhelmed by their bills to seek financial advice.

“As life slowly gets back to normal, the money management behaviours influenced during the pandemic can help all Canadians positively reshape their financial futures. Spend less, save more, and make emergency funds a priority.”

The poll also found that younger Canadians were more likely to say that both their debt situation is worse than it was pre-pandemic and that COVID-19 created more debt burden for themselves. After a seven-point increase last wave, the MNP Consumer Debt Index now sits at 97 points (up one point). MNP noted that the relative stability from the last sizeable increase is “an encouraging sign of the country’s overall economic recovery, the pandemic continues to affect Canadians differently.”

ALBERTA

Results showed that nearly half of Albertans doubt they can cover living expenses this year without going into further debt. Albertans are most likely to say they are more concerned about their ability to repay their debts than they used to be, at 54 per cent, compared to the other provinces in Canada.

Despite this alarming figure, only 25 per cent of Alberta respondents reported being insolvent or unable to pay their monthly bills and debt repayments. 33 per cent said they plan to spend more than they normally would as they get back into the economy.

Donna Carson, a Licensed Insolvency Trustee with MNP LTD said, “many Albertans appear to be eager to return to shopping, restaurants and travelling to spend as a way to celebrate the pandemic wind down.”

“For others, the pandemic brought about financial damage that will likely linger for many years even as income returns and they try to cope with new debts they may have accumulated.”

Interestingly, as consumer spending flows back into previously closed areas of the economy, MNP noted that Albertans are finding themselves with more money at months-end after paying their bills. Households reported having more money left over than they did in March ($810, up $190). 42 per cent said they are more related about carrying debt than they usually are, however, Albertans are the least likely (34 per cent) to feel their debt situation is better now than it was before the pandemic started.

Carson said, “even those who didn’t lose a job due to COVID may have made cautionary adjustments to their household budgets or changed their spending habits.”

“Still, there is evidence that many have already or will need to take on debt as a result of the pandemic. It is understandable that many are seeking post-pandemic indulgences, but those who went into lockdown already deeply indebted and then experienced prolonged financial disruption are vulnerable right now. They should not rush to return to pre-pandemic spending habits.”

It was noted that homeowners in Alberta with an outstanding mortgage may be at risk. 32 per cent of Albertans who own a home said they consider themselves ‘house poor’ and all told, about three-quarters of a million homeowners in the province are susceptible to financial disruptions like an interest rate increase or change in their employment. 26 per cent if Albertan homeowners said they regret the amount of debt they took on to buy their home.

The MNP Consumer Debt Index can be accessed here.

by Justin Goulet

Report finds nearly half of Canadians concerned about going into pandemic-related debt

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