Atlantic Canadians are Under the Most Financial Pressure Thanks to Inflation
HALIFAX — A new survey from insolvency specialists MNP Ltd. suggests Atlantic Canadians are scared of the current economic conditions and can’t afford for interest rates and inflation to get any worse.
Most alarming is the fact that 64 per cent of Atlantic Canadians (more than any other province) believe they will be in “financial trouble” if interest rates go up any higher.
In that case, Atlantic Canadians dodged a bullet in April. The Bank of Canada considered raising interest rates once again this month before ultimately deciding to hold steady. Although it’s clear there’s still a possibility of rate hikes in the future.
In its summary of deliberations, the central bank says its governing council considered another rate hike. The bank believes there will still be challenges bringing interest rates down to manageable levels and worries about waiting too long to address it.
Another concerning stat is that exactly half of Atlantic Canadians say they are a mere $200 or less away from not being able to pay all their bills. Once again, this is worse than any other region in Canada. Thirty-one per cent already say they don’t make enough money to cover their expenses without going further into debt. Not surprisingly, MNP says insolvency cases in Atlantic Canada are trending upward.
“The findings do say that some Atlantic Canadian households are feeling more optimistic but there’s still a lot of concern for many,” said Tina Powell, a Halifax-based insolvency trustee for MNP, in an interview with Huddle. “This report does show that 69 per cent are still concerned about their ability to pay their debts, that’s the highest of all provinces. Many of them are feeling the impact of the interest rate hike and inflation and are struggling to service their debt and they have literally run out of all available options.”
“There was soft collection action over the period of a pandemic and we knew that wouldn’t continue. Now, households are feeling increased pressure from the creditors, and they may face things like wage garnishment and harassing collection calls. That is usually the tipping point when somebody decides to be proactive and take steps to deal with their debt.”
Meanwhile, the average Atlantic Canadian household has just $580 left over in discretionary spending at the end of each month, lower than any other province. This is also $83 less compared to when MNP did their survey last quarter.
Not surprisingly, Atlantic Canadians are among the most pessimistic about current, and future, economic conditions. Thirty-six per cent feel that the state of the economy was worse than they expected during the last six months.
Fifty-eight per cent of those surveyed, meanwhile, believe the worst part of this economic cycle is yet to come. Once again, this is the most pessimistic in all of Canada. Only 12 per cent of people believe the worst of these financial hardships is behind us.
Given such depressing stats, it’s not surprising that Powell is seeing more desperate people in her office. She says many of her clients are just servicing the interest payments on their debt and are even resorting to payday loans to get by.
“There are many households who are literally paying hundreds of dollars or more each month in interest, just trying to service their debt, and many of them are resorting to the predatory high-interest lenders to cover up any deficiencies in their budgets. And that puts them into a debt cycle that near impossible to get out,” she said.
While it may be impossible for everyday consumers to change the trajectory of the economy, there are ways for everyone to take better control of their debt problems. Powell says there is still social stigma over money troubles, debt, and bankruptcy, that many don’t seek help until they hit financial rock bottom. She says reaching out for help with a professional in the early stages of hardship can save people a lot of stress, and a lot of money.
“People are often very reluctant to seek debt assistance because of the stigma,” said Powell. “Many of these households would benefit greatly from speaking with a licensed insolvency trustee. We are the only debt professionals that can offer unbiased customized debt advice and solutions.”
“Some households may simply benefit from restructuring their budget. Some may have assets that they can use to pay down their debt. But the longer people wait, the less options are available, especially when you have creditors breathing down your neck who are threatening garnishment of wages and asset seizure.”
Derek Montague is a Huddle reporter in Halifax. Send him your feedback and story ideas: [email protected].