Canadians are feeling better about their level of debt and there’s increasing optimism on issues related to personal finance, says a new report released on Monday by MNP.
Its Consumer Debt Index found that 61 per cent of Canadians feel their debt situation has improved, including 27 per cent who say their debt situation is better compared to a year ago, and 35 per cent who say their debt situation has improved compared to five years ago.
It also found that 57 per cent believe they will be able to cover all living and family expenses in the next 12 months without going into further debt, an increase since March.
“Canadians might be feeling more optimistic but the question remains: will they actually be able to absorb higher debt servicing costs as rates rise? When you look at the staggering number of people who are teetering on the edge, it’s clear that we are going to start seeing a rise in delinquencies as rates rise,” said Grant Bazian, president at MNP LLP, the country’s largest insolvency practice.
The survey showing that 27 per cent of Canadians still say they have absolutely no wiggle room after paying their bills and debt obligations at the end of the month. While the proportion of Canadians who are $200 or less away from financial insolvency at month end has been on a steady decline since December 2017, 44 per cent continue to fall within this category, added MNP.
“Make no mistake about it, the level of household indebtedness in Canada is still very concerning,” said Bazian. “As a country, we owe an astounding $599 billion on credit cards and other non-mortgage consumer debt. Two things likely got us to this point: a lack of financial literacy, and credit providers lending to borrowers who are overconfident about their ability to repay.”
Regionally, British Columbians (47 per cent) are most likely to rate their personal debt situation as excellent, followed by Atlantic Canada (46 per cent), Quebec (44 per cent), Ontario (41 per cent), Alberta (36 per cent), and Saskatchewan and Manitoba (30 per cent).
MNP said there is also a generational divide, as baby boomers (49 per cent) are more likely to rate their debt situation as excellent compared to 37 per cent of millenials and generation Xers.
Respected business writer Mario Toneguzzi is a veteran Calgary-based journalist who worked for 35 years for the Calgary Herald in various capacities, including 12 years as a senior business writer.