Canada’s highly indebted households didn’t see their finances improve during the pandemic. Many did get a lot more neat stuff they couldn’t afford without low interest rates though. That’s the takeaway from the MNP Consumer Debt Index, conducted quarterly by Ipsos. The poll found a third of Canadians consider themselves “house poor.” Even more are falling behind on bills, and won’t be able to make ends meet without more debt.
A Third of Canadians Are Now “House Poor”
Millions of Canadians are house poor, according to the latest survey data. A third (32%) of Canadians who own a home claim to be “house poor.” This is when a household devotes so much of their income to housing, they can’t afford much else.
Additionally, the survey found a fifth of homeowners said they regret their purchase. This is due entirely to the financial impact, and not because of the kitchen tile. All in, the firm estimates 5.5 million Canadians are vulnerable to financial shock. That’s a fancy way of saying rising interest rates or loss of job could blow up their budget.
Half of Canadians Can’t Cover Their Expenses Without More Debt
Canadian households are struggling with finances, even beyond homeowners. Almost half (45%) won’t be able to cover their living expenses in 12 months, without taking on more debt. The sentiment is spreading too — 51% said they’re now worried about their debt repayment.
The index also shows the number of people unable to pay their bills is rising to the highest level recorded. It shows 30% of households are unable to meet all of their financial commitments. This was the highest level since the index was created in 2017. Though it won’t show up like it did back then… at least for now.
Delinquencies, and insolvencies have been unusually low these days. This is due to lenders accommodating borrowers, and hoping they resume bill payment. The only thing worse than losing money is having to report a delinquency. They would much rather someone pay their bills, over stiffing them or seeking to discharge the debt. This means the only people defaulting really have to. Not exactly an accurate view of reality, but clearly it’s easier for economists and politicians to understand.
Over Half of Canadians Are Worse Off After The Pandemic
Despite the narrative of pent-up savings, and soaring incomes — a lot of people are worse off. Three in ten Canadians feel the pandemic made their debt problems worse. Three in five (2x the previous rate) used the pandemic’s low rates to buy something they couldn’t otherwise afford. But, really… Who doesn’t splurge on something they can’t afford during a pandemic?
There are a lot of data points that paint a picture of stronger household finances during the pandemic. The household savings rate, for example, is often used to show household strength. In reality, further analysis reveals most of those savings are with the wealthiest of households. The one percent saved a buttload of money during the pandemic, not households in general. Though that doesn’t quite have the same ring to it.
The reality is Canada’s highly indebted households were… well, highly indebted before the pandemic. Shutting down most of retail and asking people to work from home didn’t fix that. In fact, it made it worse. A lot worse for some. It doesn’t take a genius to figure out why most households are now worried about the cost of living.
Like this post? Like us on Facebook for the next one in your feed.