Rising interest rates and a rapid increase in food prices are just a few of the reasons behind why insolvency rates among Ontarians have reached an all-time high.
A recent index report indicates a large portion of the province’s population struggles to make ends meet every month, many stating they are just a few hundred dollars away from being unable to pay their bills.
According to the latest MNP Consumer Debt Index released in July, one-third of the province reported insolvency, indicating they can’t cover their monthly bills and debt payments, the highest proportion recorded since the report’s inception five years ago. Meanwhile, more than half included in the index stated they are $200 or less away from not being able to cover their monthly costs,
Data cited the number of those struggling with their financial obligations has increased by six per cent compared to April’s report, more than any other province.
“Without much wiggle room in their budgets, households in Ontario run the risk of falling into arrears on payments, as a result of the current financial pressures and the dramatic increase in the cost of living,” said Caryl Newbery-Mitchell, a licensed insolvency trustee with MNP LTD. “When someone falls into arrears and their bills like credit cards are past due, late fees kick in and interest accrues rapidly, which makes it very challenging to catch up on payments.”
The MNP Consumer Debt Index declined by six points in July, as more Ontarians expressed regret over their financial decisions this quarter.
Many also said they are concerned about their ability to pay off their debts while interest rates continue to go up, with over half claiming they will be in financial trouble if rates go up any further, leading the majority of those surveyed to be more careful about spending and reel in savings wherever possible.
“Even though households are exercising restraint with their discretionary spending, the reality is that for some, there is no room for further cutbacks. Once they have already cut back on their entertainment costs and have switched to the cheapest grocery store items, they are finding they are still struggling to put food on the table or pay for other essentials like their rent or mortgage,” said Newbery-Mitchell.
The average Ontarian reported an increase of approximately $230 in their weekly expenditure on essential items compared to last year. Newbery-Mitchell added many individuals have started to make difficult financial decisions about which bills get priority, and which they may have to delay or not pay at all.
Newbery-Mitchell advises those struggling to keep their head above water to contact their lender is the best first step to take to see if a payment plan is possible.
“If a borrower begins to lag behind on their payments without making prior arrangements with their lenders, that is a red flag that they are in need of financial help,” she said.
The data used in the index report was compiled between June 1 to 6, and 2,000 Canadians 18-years-old and over were interviewed.
