MNP Debt Index Continues to Recover from All-time Low but Still Lower Year over Year

Toronto, ON, October 25, 2022 — The quarterly MNP Debt Index has continued to rebound and now sits at 92 points, up 2 points from last quarter after seeing its lowest recorded score in March 2022. While many Canadians are feeling more confident in their ability to manage their debt than last quarter, this newfound optimism may be temporary as the underlying economic situation in Canada is deteriorating. Moreover, the summer has historically shown higher levels of optimism, which has followed with Canadians becoming more pessimistic as the winter months approach.

Fewer in a Precarious Position, But Average Canadian has Less Money at Month’s End

Less than half (46%, -6) of Canadians report that they are $200 away or less from not being able to meet all of their financial obligations, including three in ten (30%, -4) who say they already don’t make enough to cover their bills and debt payments. Renters (35%) are significantly more likely to say they don’t make enough to cover their bills and debt payment than homeowners (22%). While a decline in the proportion of those at risk of insolvency represents a modest improvement since the previous quarter, the average amount of money that Canadians have left over at the end of the month has continued to decrease and now sits at $654, down $37 from the previous quarter, as Canadians are paying more for life’s necessities. Notably, Canadians ages 18-34 has noticed the largest decrease in their average month-end finances ($606, -$273), underscoring the squeeze that inflation is putting on the pocketbooks of the younger generation.

Atlantic Canadians have experienced the largest decrease among provinces to report having the most money left at month-end ($400, -$312). Saskatchewanians/Manitobans has reported the largest increase in disposable income at month-end this quarter provinces ($713, +$127) but still falls slightly short behind British Columbia ($753, -$118). Quebecers have seen an improvement after a consistent decline in money at month-end since September 2021 ($622, +$71).

Canadians Perception on Personal Debt Slightly Improves

Canadians are feeling better about their debt than they did last quarter. More Canadians are now rating their personal debt situation as excellent (43%, +5) and fewer are rating it as terrible (14%, -4).  

When Canadians were asked about their current debt situation compared to one year ago, nearly one in four perceive their current debt situation to be better (23%, +1). The proportion that rated their current debt situation as much worse compared to a year ago has remained consistent with the previous quarter (14%, -1). When asked to forecast their expected debt situation year from now, three in ten Canadians expect their debt situation to improve (30%, unchanged) but fewer believe it will worsen (11%, -4). Looking five years into the future, four in ten (40%, +3) believe their debt situation will be much better, while fewer believe that their debt situation will worsen (10%, -4).

Canadians More Confident in Ability to Absorb Interest Rate Hikes but Concerns Remain

Canadians are more optimistic about their ability to absorb an interest rate increase, however, this may be false optimism since the effect of interest rate hikes tends to reveal itself over time. When asked their ability to absorb an interest rate increase of 1 percentage point, one-quarter (25%, +4) say they are better equipped to deal with this increase than they used to be, while fewer (17%, -7) say their ability to deal with this increase has worsened. When the question was rephrased to ask their ability to absorb an interest rate increase of an extra $130, one-fifth (21%, +2) say their ability to absorb this increase is much better, while a quarter (27%, -6) say it is much worse.

Over half of Canadians agree they are concerned about the impact of rising interest rates on their financial situation (59%, +1), which is the highest point we’ve measured since the start of the debt index. Two in five Canadians say that they are concerned about their current level of debt (40%, -1) and that they regret the amount of debt they’ve taken on in life (42%, unchanged). Home renters are significantly more likely to be concerned about the impact of rising interest rates on their financial situation (renters 34% vs. owners 29%), to regret the amount of debt they have taken on (renters 31% vs. owners 19%), and to be concerned with their current level of debt (renters 23% vs. owners 16%). Although there are high levels of concerns regarding rising interest rates, more than half are confident with their ability to cover all living/family expenses in the next year without going further into debt (56%, +1), leaving 43% not confident, down two-points from last quarter.

Furthermore, most Canadians (84%, +2) agree that with interest rates rising they will be more careful with how they spend their money. While a majority of Canadians are more conscious with their spending, more than half (57%, -2) say that they’re already beginning to feel the effects of interest rate increase, and many say that as interest rates rise, they are more concerned about their ability to pay their debts (55%, -1). Meanwhile, half (50%, unchanged) of Canadians say that if interest rates go up much more, they will be in financial trouble and one-third (36%, -3) say that rising rates could drive them closer to bankruptcy, although this is showing a modest improvement.

Women and Albertans are most likely to agree they will be more careful with how they spend their money due to rising interest rates. Canadians with less than $40K household income are most likely to feel the effects of interest rate increases, to be concerned with their ability to repay their debts, to say that rising rates would cause them to face financial trouble, and to fear that rising interest rates are moving them close towards bankruptcy. Furthermore, as interest rates rises, renters are significantly more concerned with their ability to repay their debts (renters 63% vs. owners 48%), to be afraid they will be in financial trouble (renters 59% vs. owners 41%), and to say that rising rates could move them towards bankruptcy (renters 45% vs. owners 27%).

Canadians Say Life Becoming Less Affordable

As many are feeling the pinch of rising costs of living, Canadians are saying that the affordability of necessities such as housing, transportation, food, and clothing has continued to fall even lower since December 2021. Among a list of everyday essentials, one half (52%, +5) of Canadians has noted that feeding themselves and their family is less affordable, while only slightly fewer say that putting money aside for savings (49%, +5), transportation (45%, +9), and clothing or other household necessities (45%, +5) is becoming less affordable in every category, a greater proportion of Canadians say things are becoming less affordable.

Moreover, consistent with the findings in March 2022, one-third (32%, unchanged) say they plan on reducing their consumer expenses to make ends meet. Nearly two in ten say they will use their savings to pay their bills (18%, +1), and just over one in ten say they will use their credit card to pay their bills (13%, +1). Fewer than 1 in 10 respondents say they will do some other action, such as borrowing from friends or family (8%, unchanged), use a Buy Now Pay Later method (6%, +2), use line of credit to pay bills (6%, -2), sell their assets (6%, -1), defer payments on bills (6%, unchanged), get professional advice (6%, -1), or apply for government assistance (5%, +1).

About the Study

These are some of the findings of an Ipsos poll conducted between September 6-13 2022, on behalf of MNP LTD. 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.

For more information about the MNP Consumer Debt Index, please visit mnpdebt.ca/CDI.

For more information on this news release, please contact:

Sean Simpson
Senior Vice President, Canada, Public Affairs
[email protected]

Raymond Vuong
Research Analyst, Canada, Public Affairs
[email protected]

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