After reaching a record low in early March, the MNP Consumer Debt Index has climbed three points to 96, with increasing optimism about personal finances, said a new report released on Monday.
The quarterly poll, which is conducted by Ipsos on behalf of MNP LTD, found that Canadians feel more confident than ever about being able to cover their living expenses for the next 12 months without going further into debt (61 per cent, +3). Compared to pre-pandemic levels, significantly more Canadians rate their current debt situation as excellent (43 per cent, +5), said the report.
The report said the new-found optimism can also be seen in measures showing that fewer regret the amount of debt they have taken on in life (44 per cent, -3) and are less concerned about their current level of debt (40 per cent, -6). Over a quarter (27 per cent, +1) perceive their debt situation to be better now than it was a year ago and over a third (35 per cent, +1) believe that it is better now than it was five years ago.
“The fact that many Canadians are more optimistic or even hopeful about their personal debt situation is likely a result of the pandemic relief measures. But it could also be the result of Canadians comparing their own circumstances to what is playing out in other parts of the world,” said Grant Bazian, president of MNP LTD, in a news release. “What’s more is that many found it easier to spend less over the last few months since they were required to stay home.”
“COVID-19 dramatically altered consumer spending since restaurants, theatres, malls and other bastions of discretionary spending were closed. Even with marginal increases in groceries, utilities and online shopping, many households have reported significant savings which, in some cases, have made them feel more capable of keeping up with previously unsustainable debt payments.
“Even if spending doesn’t immediately return to pre-pandemic levels, it wouldn’t take much to push many households back into dangerous territory. Just a few hundred dollars per month – less than one unexpected car repair or a loss in overtime pay – may be enough to once again tip the scales toward an insolvency scenario. As the economy begins to re-open we should also expect to see a range of efforts from creditors to catch people up. Whether that takes the form of increased monthly payments or extended loan terms, the net result will likely see most households further behind and deeper in debt.”
According to the report, the number of Canadians who say they are $200 or less away from financial insolvency at month-end decreased six points since early March (43 per cent, -6). This proportion includes 22 per cent who report already being insolvent and not being able to cover their bills and debt payments, it said.