TORONTO – Half of Canadians are “flotagin” $200 away from being unable to cover their monthly bills and debt payments, according to MNP Ltd.’s latest quarterly consumer debt report. And a third of Canadians say they are already insolvent. 

These are the findings of a survey conducted by Ipsos for MNP Ltd. between December 6 and 17, 2024, among a sample of 2,003 Canadians: according to it, fewer Canadians expect their debt situation to improve in the coming year, while a growing number believe it will get worse. And more than half say they don’t think they can cover all of their living expenses for themselves and their families in the coming year without accumulating more debt.

MNP’s Consumer Debt Index, which measures Canadians’ attitudes toward their debt and their ability to pay their bills, has fallen to its second-lowest level since it began tracking it in 2017 (see the details in the whole report, here).

“I think they have so much debt and it’s becoming harder and harder to service it” says Grant Bazian, president of MNP Ltd., “even though interest rates are falling”. The Bank of Canada has cut its key interest rate significantly from recent highs, now sitting at 3.25% after five consecutive cuts last year, down from 5%. And the central bank is expected to continue cutting rates this year. But it doesn’t seem to be enough. “We’re still seeing a lot of people concerned about interest rates where they are” says Bazian.

Canadians’ disposable income continues to shrink, and many feel unprepared to deal with a potential unexpected financial event, such as a car repair or purchase or job loss. “We’re still seeing a growing number of people anticipating that their financial situation will get worse, that they will have a harder time paying off their debts in the future” states Bazian.

The “financial cushion” for Canadians is also shrinking, with respondents saying they had nearly 16% less disposable income at the end of the month on average compared to the previous quarter. “Many Canadians are already tightening their finances, reassessing budgets, and exploring cost-cutting measures to manage rising costs or debt repayment. Unfortunately, even substantial sacrifices may fall short of providing meaningful financial relief in some cases, despite lower interest rates” underlines Bazian.

Also, there’s another problem: Canadians are experiencing job anxiety, with two in five respondents worried that someone in their household may lose their job. And according to Bazian, this figure is the highest in the history of the MNP Ltd. report. This is probably also due to the fact that the general trend of the unemployment rate in Canada is constantly increasing: despite a slight drop in December to 6.7%, in fact, according to Statistics Canada, unemployment is still high.

In three words: a perfect storm.

Pic by Vilius Kukanauskas from Pixabay