After years of inflation, high interest rates, and the rising cost of living, Canadians are feeling the financial pinch. According to Statistics Canada, the increase in the cost of living is leading to higher debt levels and impacting Canadian’s ability to save and build wealth. This is especially true for lower-income and younger age brackets. But what about New Brunswick (NB) household debt? Are NB residents feeling the same financial stress as other Canadians?
This article reviews the current state of Canadian household debt and how it compares to household debt in NB.
Canadian Household Debt
A recent poll by Ipsos Reid found that nearly half (46%) of Canadians carry some form of non-mortgage-related debt. Of this 46%, almost half (48%) said they find the process of trying to pay off their debt stressful. Thirty-three percent of Canadians carrying non-mortgage debt admit that they question whether they have sufficient knowledge or skills to understand how fluctuating interest rates can impact their debts. To top it off, 24% said they don’t think they could come up with $500 in cash tomorrow without borrowing or selling something.
What Do All of These Debt Statistics Mean?
A lot of Canadians are carrying around debt, feeling stressed about their finances, and don’t necessarily know how to manage.
Canadian debt and delinquency rates
Additional data from TransUnion’s Q2 2023 Credit Industry Insights Report found that the average consumer debt balance sits at $126,000, up 1.25% from the previous year.
Average consumer delinquency rates for those who have missed a payment for 90 days or more have also risen across the country, up nearly 8% over the previous year. This suggests that more Canadians are turning to credit to help cover the high cost of living.
Canadian credit card debt
The percentage of Canadians holding an outstanding credit card balance has also increased by 3.3% from Q1 to Q2 2023. The average credit card balance rose to $4,000, a 9% increase from the prior year. In addition, the number of Canadians taking on higher credit balances increased, with subprime consumers experiencing the highest growth rate at nearly 9%.
Canadian debt service ratio
Lenders often look at a borrower’s debt-to-service ratio to assess how risky it is to lend money. The debt service ratio measures the proportion of disposable income that is put towards debt payments, including the principal and interest. The household debt service ratio looks at whether the borrower has enough money to cover their current debt obligations.
According to Statistics Canada, the household debt service ratio for Canadians as of Q2 2023 is nearly 15%. As the debt service ratio rises, Canadian households are spending more of their disposable income on debt repayment.
Canadian Consumer Price Index
The latest Consumer Price Index (CPI) for October 2023, rose 3.1% from the previous year but dropped 3.8% from September. Lower gas prices are helping to promote this deceleration.
The largest contributors to the year-over-year increase include mortgage rates, food prices, and rent prices. The CPI went up in all provinces, including NB.
Canadian insolvencies
Canadian insolvencies rose by nearly 42% from Q3 2022 to Q3 2023.6 Bankruptcies went up by nearly 38%, while proposals rose by 56%.
New Brunswick Household Debt
How does household debt look in New Brunswick compared to the rest of Canada? While consumer debt levels and delinquency rates are not as high as the national average, the data is still trending in the same direction.
The average consumer credit debt in New Brunswick is nearly half of the Canadian average at $65,859. This is up nearly 1% from Q1 2023 and over 2% from the previous year.
While consumer delinquency rates for payments 90 days or more past due have decreased in NB by over 6% from Q1 to Q2, delinquency rates have increased by over 2% since the previous year.
New Brunswick Consumer Price Index
The latest CPI for New Brunswick (October 2023), showed a 2.8% increase year over year. This is down from 4% in September.
New Brunswick insolvencies
Consumer insolvencies are on the rise in New Brunswick. While total consumer Bankruptcies fell by nearly 16% from the prior year, there was a 32% increase in Consumer Proposals.6 If New Brunswick household debt continues to rise, the number of insolvencies could follow suit.
What Is Causing High New Brunswick Household Debt?
The factors causing high rates of personal debt in New Brunswick are largely the same as the rest of the country. The effects of inflation, the rising cost of living, and high interest rates are all taking a toll on New Brunswick finances.
Inflation and a rising cost of living
While inflation rates have dropped, the effects are still present. The cost of everything from groceries to eating out and rent has increased since last year. The cost of rent in New Brunswick rose by nearly 9% from October 2022 to 2023. As more money goes to covering daily expenses, there is less available for debt repayment and household savings.
Interest rates
Thanks to higher interest rates, it’s more expensive to borrow. This is an issue as more people are turning to their credit cards and other borrowing options to help cover the high cost of living. With higher interest rates, many people are finding it harder to keep up with their debts and struggling to make even minimum payments.
Strategies to Deal With Rising Debt
If you’re struggling to pay your debts, you may benefit from professional help. A Licensed Insolvency Trustee (LIT) can assess your debt situation and recommend a path forward. Depending on the extent of your debt, an LIT may suggest one of the following debt solutions:
Credit counselling
In credit counselling, an LIT can provide guidance on topics such as budgeting, debt management, and how to improve your credit score. The goal is to provide information and strategies to help you take control of your debt.
Consumer Proposal
A Consumer Proposal is a legal process that can only be administered by an LIT. In a Proposal, you work with your LIT to create a plan to repay your creditors a percentage of what you owe, extend the time you have to pay, or both. You then have up to five years to pay back your debts.
Bankruptcy
Bankruptcy is a legal process that can eliminate many of your unsecured debts. In exchange, you have to sell some of your assets. While no one wants to file for Bankruptcy, the purpose is to give honest Canadians down on their financial luck another chance. Like a Consumer Proposal, an LIT is the only professional who can administer a Bankruptcy proceeding.
Need Debt Help? Speak to a Licensed Insolvency Trustee
Whether you’re struggling to earn a living wage and pay off your debts or your household spending is out of control, we can help. You don’t have to deal with your debt alone.
At Allan Marshall & Associates, a Licensed Insolvency Trustee can assess your debt and help you find a solution. We have offices throughout New Brunswick. For a free, no-obligation consultation give us a call at 1-800-371-8900 or reach us online.
