Concern about repaying debt grows among Newfoundlanders amid persistently high interest rates, inflation and affordability struggles, MNP Consumer Debt Index finds

• Seven in 10 say they’re more concerned about their ability to pay their debts as interest rates rise (73%, +9 pts), more than any other province.
• Seven in 10 say they’re already feeling the effects of interest rate increases (71%, +7 pts).
• A third say they plan to reduce their discretionary spending to make ends meet (36%) — up nine points since last quarter, the largest jump amongst the provinces.
• Half say they’re concerned about their current level of debt (50% +1 point).

ST. JOHN’S, NL, January 16, 2023 – Amid heightened affordability concerns, the proportion of Atlantic Canadians that are worried about making debt payments jumped nine points compared to last quarter. The latest quarterly MNP Consumer Debt Index finds Atlantic Canadians are the most likely to say they’re more concerned about their ability to pay their debts as interest rates rise (73%, +9 pts) compared to the other provinces. Seven in 10 Atlantic Canadians (71%) say they’re already feeling the effects of interest rate increases, a significant seven-point jump since last quarter. Spiking by five points, more now say their ability to absorb an interest rate increase of one percentage point has worsened (24%). Three in five say they’ll be in financial trouble if interest rates go up much more (62%, +1 point).

The MNP Consumer Debt Index is conducted quarterly by Ipsos to track Canadians’ attitudes about their debt situation and their ability to meet their monthly payment obligations. It has taken a drastic plunge to 77 points, down a record 15 points from the last quarter, marking an all-time low since the Index was created more than five years ago.

“This change in Atlantic Canadians’ attitudes towards their personal finances mirrors the persistent inflation and continual interest hikes over the last year,” says Greg Gosse, a local Licensed Insolvency Trustee with MNP LTD. “Overleveraged households are being hit with a double whammy — not only dealing with inflation but also an escalating cost of borrowing that is eating away at their household budgets.”

A third of Atlantic Canadians say they plan to reduce their discretionary spending to make ends meet (36%), increasing nine points since the previous quarter, the largest jump amongst the provinces. Half say they’re concerned about their current level of debt (50%, +1 point).

While significantly fewer say they regret the amount of debt they’ve taken on in life (46%, -13 pts), that proportion has merely regressed to the national average and still represents a sizable minority.

More Atlantic Canadians are feeling the effects of rising costs. Nearly three in five say putting money aside for savings (57%, +3 pts) and transportation (53%, +4 pts) is less affordable. More than two in five say housing (45%, +6 pts) is becoming less affordable. The proportion who say feeding themselves and their family (62%, -1 point) and clothing or other household necessities (53%, -1 point) are less affordable both remain above the national average.

“More households are putting nearly all their income towards bills each month and have very little wiggle room. They may not have the financial cushion necessary to accommodate an increase in their expenses and debt-carrying costs. Many will resort to taking on more debt to maintain their standard of living,” explains Gosse.

More Atlantic Canadians are likely already reducing their debt payments or taking on more debt to make ends meet. Compared to December 2021, more say they have paid the minimum balance on their line of credit (20%, +6 pts), borrowed money they can’t afford to pay back quickly (18%, +3 pts), will use their savings to pay their bills (18%, +2 pts) or plan to borrow from friends or family (18%, +2 pts). A quarter of households say they have paid only the minimum balance on their credit card (25%, +1 point), while one in 10 say they will use their credit card to pay their bills (14%, +2 pts).

“More individuals are feeling the pressure to make tough financial choices as they try to keep up. Taking on more debt can have long-term financial impacts. In some cases, people can end up falling into a debt spiral. There are often mental health impacts as well; stress and anxiety can be triggered by these kinds of financial struggles,” says Gosse.

Fewer Atlantic Canadians are dangerously close to insolvency this quarter as more households have scaled back their discretionary spending in anticipation of a potentially tough year ahead. Nearly half (45%, -7 pts) of Atlantic Canadians report that they are $200 away or less from not being able to meet all of their financial obligations at month’s end. This includes three in 10 (27%, -11 pts) who say they already don’t make enough to cover their bills and debt obligations. Slightly more are confident they can cover all of their living/family expenses in the next year without going further into debt (52%, +3 pts).

“With the holiday bills arriving this month, Atlantic Canadians should remain on high alert for any financial red flags that may point to the need for professional debt guidance,” says Gosse. “Those unable to cover their bills or anticipate missed payments, or who plan to use other forms of credit to pay bills should seek help from a Licensed Insolvency Trustee before the problem progresses further.”

Debt-relief options can include striking a deal with creditors through an informal debt settlement, consolidating all debts into one monthly payment, making a debt repayment plan through a Consumer Proposal, or declaring Bankruptcy.

Gosse explains that individuals often miss the initial warning signs or feel shameful about seeking help. This can cause the debt to snowball, and in some cases leave the individual with fewer options.

“Each person’s debt situation is unique, which is why meeting with a Licensed Insolvency Trustee for a free, confidential financial review is the best place to start. They will walk through all of the debt relief options available and offer an expert opinion on which would provide the most permanent and cost-effective solution,” advises Gosse.

Licensed Insolvency Trustees are federal-regulated and are the only debt professionals in Canada who are qualified to advise on all the debt relief options available. MNP offers free consultations across Canada.

About MNP LTD

MNP LTD, a division of the national accounting firm MNP LLP, is the largest insolvency practice in Canada. For more than 50 years, our experienced team of Licensed Insolvency Trustees and advisors has been working with individuals to help them recover from times of financial distress and regain control of their finances. With more than 240 offices from coast to coast, MNP helps thousands of Canadians each year who are struggling with an overwhelming amount of debt. Visit MNPdebt.ca to contact a Licensed Insolvency Trustee or use our free Do it Yourself (DIY) debt assessment tools. For regular, bite-sized insights about debt and personal finances, subscribe to the MNP 3-Minute Debt Break Podcast.

About the MNP Consumer Debt Index

The MNP Consumer Debt Index measures Canadians’ attitudes toward their consumer debt and gauges their ability to pay their bills, endure unexpected expenses, and absorb interest-rate fluctuations without approaching insolvency. Conducted by Ipsos and updated quarterly, the Index is an industry-leading barometer of financial pressure or relief among Canadians.

Now in its twenty-third wave, the Index has plunged 15 points since last quarter to 77 points, an all-time low since the MNP Consumer Debt Index’s inception more than five years ago. Visit MNPdebt.ca/CDI to learn more.

The data was compiled by Ipsos on behalf of MNP LTD between December 1 and December 6, 2022. For this survey, a sample of 2,000 Canadians aged 18 years and over was interviewed. Weighting was then employed to balance demographics to ensure that the sample's composition reflects that of the adult population according to Census data, and to provide results intended to approximate the sample universe. The precision of Ipsos online polls is measured using a credibility interval. In this case, the poll is accurate to within ±2.5 percentage points, 19 times out of 20, had all Canadian adults been polled. The credibility interval will be wider among subsets of the population. All sample surveys and polls may be subject to other sources of error, including, but not limited to, coverage error and measurement error.

National data is available upon request.