More than half of Canadians say they are $200 away or less from not being able to pay all of their bills at the end of the month, a report by insolvency firm MNP Ltd. said, as higher interest rates and a rising cost of living have stretched budgets.
At 52 per cent, that’s up six percentage points from the proportion of Canadians who said the same in April.
The escalating burden of household bills and food prices has intensified Canadians’ financial anxiety and is further compounded by increased debt-servicing costs, particularly for those who are deeply indebted, MNP president Grant Bazian said in a press release Monday.
MNP’s consumer debt index fell to 83 points in its latest reading compared with 89 points in April as Canadians expressed a more negative attitude toward their personal finances and debt.
The report noted that 35 per cent of respondents say they already don’t make enough to cover their bills and debt payments, up from 30 per cent in April and a record high for the survey. It also said a record 48 per cent of those surveyed are concerned about their current level of debt.
Household debt has been identified as a key risk for the economy by the Bank of Canada, which is scheduled to make its next interest rate decision on Wednesday.
Sixty-nine per cent of those surveyed by MNP said they’re feeling the effects of interest rates, and 66 per cent said they’re worried about their ability to pay their debts as rates rise, with around three in five respondents expecting to be in financial trouble if rates go up much further.
“Even if households are curbing discretionary expenses and spending more cautiously, many households have reached a point where there is nothing left to cut back on. They have already switched to the cheapest options at the grocery store and trimmed their entertainment costs, and they still find themselves struggling with essential financial obligations like their mortgage or rent and putting food on the table,” said Bazian.
“This situation forces individuals to make difficult decisions regarding which bills they can prioritize and which they may have to postpone or forgo altogether.”
A separate report on Monday from TransUnion found that 15 per cent of Canadians have cut back on retirement savings, while more than a third said they are preparing for a possible recession by building up savings (and more than a third think Canada is already in a recession).
The survey by the credit reporting agency found that more than half of Canadians are cutting back on discretionary spending, with many cancelling digital services, subscriptions or memberships.
“Concerns around inflation, rising interest rates, housing affordability, and the perceived threat of a potential recession are affecting how Canadians are managing their household finances,” said TransUnion Canada’s Matt Fabian, director of financial services research and consulting in the press release Monday.