“Burdened by debts” – Canadians are struggling as their debts are growing

We are sacrificing our vacations, going out less often, taking on a second job or returning to work although we didn’t plan to do it. We are cutting back on such essentials as food and clothing.

As debts grow, many Canadians are already feeling the burden and making difficult choices as they try to pay off debts. Several recent reports show that the situation is getting worse.

According to the Canada Mortgage and Housing Corporation, the national consumer debt reached a new international record (the highest debt-to-GDP ratio among the G7 countries), and credit card and car loan delinquencies are going up. It means that homeowners may start to default on their mortgages.

Even Canada’s Big Five banks are affected. This week, their quarterly earnings took a hit as they put aside billions of dollars to protect themselves from bad loans. One finance expert believes it will make it even more difficult to get a loan as the banks are reducing their own spending.

It all comes with a price. The recent report by BDO Debt Solutions shows that 30% of respondents to an online poll conducted in April feel “overwhelmed by debt and don’t know what to do about it.”

At the beginning of the pandemic, when mortgage rates remained low, the government provided massive support and banks weren’t actively collecting missed loan or credit card payments. It all just “masked the fact that people were using credit to make ends meet,” noted Mike Braga, senior vice president at BDO.

“Now that we are returning to normal from a business perspective, collections are growing and interest rates are rising”, – noted Braga. You have this perfect wave of all borrowers with debts that they thought they could cope with, but it turns out they can’t.”

In order to pay off their debts, more than half of respondents said they were reducing expenses on non-essentials, 43% reported cutting back on some essentials, and 26% said they would think about getting an extra job.

We want to reaffirm our commitment to the hundreds of Canadian homeowners we help each year by consolidating credit card and high interest debt into one affordable mortgage payment and freeing up extra money for everyday expenses. This is especially important today, in an era of growing unsecure debt and a sharp rise in the cost of living.