A recent poll conducted by the MNP Consumer Debt Index has found that Canadians are feeling more confident than ever about covering their bills for the next 12 months without going further into debt. The index, which measures attitudes toward debt and vulnerability to insolvency, has rebounded from a record low in early March at the start of the COVID-19 pandemic.
A Glimmer of Hope Amidst Uncertainty
The latest survey found that significantly more Canadians (43 per cent) rate their current debt situation as excellent compared to pre-pandemic levels. Forty per cent said they are less concerned about their debt, and 27% believe their debt is better now than it was a year ago.
This newfound optimism can be attributed to the government’s relief measures and lower household spending during the pandemic. The survey revealed that Canadians have been able to save more money by working from home, reducing their expenses on gas and travel costs.
The Impact of Pandemic Relief Measures
Grant Bazian, president of insolvency accountancy firm MNP LTD, attributes the increased optimism to the pandemic relief measures: "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."
Bazian warns, however, that this newfound optimism may be short-lived: "What’s more is that many found it easier to spend less over the last few months since they were required to stay home. But it won’t take much to push debtors back into dangerous territory once the economy reopens."
Debt Levels and Financial Insolvency
The survey also found that the number of Canadians who say they are $200 or less away from financial insolvency at month-end decreased six points since early March to 43 per cent. Insolvency filings fell by 51% in May compared to the year before as government support, mortgage deferrals, and more flexible creditors temporarily eased the burden on households.
Bazian cautions that while the current situation may seem manageable, it won’t take much for debtors to fall back into trouble: "It’s difficult to predict how many Canadians will require some form of debt-relief as a result of COVID, but it’s not too much of a leap to say it will likely be as unprecedented as the scope of the pandemic itself."
The Road Ahead
While Canadians may feel more optimistic about their financial situations, Bazian warns that creditors will soon turn up the heat once the economy reopens. "We expect creditors to increase monthly payments or extend the term of loans, pushing households deeper in debt."
As the country slowly emerges from the pandemic, it is essential for individuals and families to be aware of their financial situation and take proactive steps to manage their debt levels.
Key Takeaways
- Canadians are feeling more confident about covering their bills without going further into debt.
- The number of Canadians who say they are $200 or less away from financial insolvency at month-end decreased six points since early March to 43 per cent.
- Insolvency filings fell by 51% in May compared to the year before as government support, mortgage deferrals, and more flexible creditors temporarily eased the burden on households.
By understanding the current financial landscape and being proactive about managing debt levels, Canadians can navigate this uncertain time with greater confidence.
