Nearly half of British Columbians are teetering on the edge of financial insolvency heading into the New Year, despite declining interest rates.
According to the latest MNP Consumer Debt Index, conducted quarterly by Ipsos, there was a nine-point increase in the proportion of British Columbians (46 per cent) indicating they are $200 or less away from not being able to pay their bills and debt payments each month.
Nearly one-third say they are already insolvent (31 per cent, +3pts), increasing three points.
“While interest rate cuts initially relieved some financial strain, many British Columbians are starting the New Year in a fragile financial position, and now face holiday bills coming due,” says Linda Paul, a Licensed Insolvency Trustee with MNP LTD.
49 per cent of British Columbians believe they will not be able to cover all of their living and family expenses in the next 12 months without going further into debt, up two points from last quarter.
In addition, the financial cushion for many households is eroding as disposable income shrinks, leaving less room to manage unexpected expenses.
This quarter, provincial residents have on average $97 less left over at the end of the month, decreasing to $996.
The report also states a growing proportion of British Columbians expect their debt situation will worsen one year from now (18 per cent, +2pts), while the proportion who anticipate their situation will improve remains unchanged (30 per cent).
“Less disposable income leaves households less prepared for unexpected expenses or economic impacts,” explains Paul. “For those living on a tight budget, any disruption could quickly snowball into significant financial trouble.”
The possibility of unexpected expenses or life changes also weighs heavily, with over one-third (31 per cent, +4pts) expressing a lack of confidence in their ability to cope with a sudden auto repair or purchase, or a change in their relationship status (32 per cent, +5pts).
42 per cent of British Columbians this quarter are concerned about their ability to repay their debts, even if interest rates decline, marking a six-point decrease.
Additionally, one-third (34 per cent, -7pts) are concerned that rising interest rates could move them towards bankruptcy, down seven points.
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