Some Canadians are feeling a little more optimistic about their debt with the prospect of interest rate reductions on the horizon, according to MNP.
The insolvency firm’s Consumer Debt Index shows a significant rebound in the first quarter of 2024 after 12 months of weak results, according to its latest report.
More than a quarter of Canadians believe their current debt situation is better than a year ago.
Fewer Canadian households than last quarter, 41%, say they are concerned about their current level of debt.
“The situation is not as gloomy as it was: this is what emerges mainly from the last report,” underlined the president of MNP, Grant Bazian, in a press release.
But despite the surge in consumer confidence, Canadian households are still feeling the pressure, he added, as more mortgage renewals loom and the cost of living continues to rise.
Half of those surveyed say they are concerned about what MNP describes as “social pressure,” meaning they are afraid to spend money on their lifestyle or social obligations.
“Many Canadians feel overwhelmed and discouraged by the costs associated with social events, whether birthdays, weddings or graduations. Some people risk making their situation worse because they simply cannot afford to participate,” said Mr. Bazian.
Fewer Canadians than before say they are concerned about their ability to repay their debts, but nearly half of participants said they were $200 or less away from not meeting all of their financial obligations, a figure that did not not changed from the last report.
The Bank of Canada appears poised to begin cutting its key rate this year, as inflation has eased significantly from its peaks.
The central bank’s rate hike took them to levels higher than they had been in years. As Canadians’ mortgages came up for renewal, they faced significantly higher monthly payments on their homes, while rental costs also climbed.
Four years after the start of the COVID-19 pandemic, a third of Canadians said they were in a worse financial situation than before the pandemic, particularly among low-income people and those aged 35 to 54, said MNP.