Despite the Bank of Canada’s aggressive interest rate cuts, Canadians are increasingly worried about their personal finances, with many feeling they’re teetering on the edge of financial instability. According to a new report from MNP LTD, 50% of Canadians now say they are $200 or less away from being unable to meet their monthly bills and debt obligations.
The MNP Consumer Debt Index, a comprehensive measure of Canadians’ ability to manage debt, reached an all-time low in the final quarter of 2024. The index dropped 12 percentage points to a mere eight points, a historic low since its inception in 2017.
The latest survey, conducted by Ipsos between December 6 and 17, included responses from over 2,000 Canadians. It captured sentiment following the Bank of Canada’s 50-basis-point rate cut on December 11, which reduced the policy rate to 3.25%. While the central bank’s benchmark rate broadly impacts borrowing costs, including mortgages, its benefits are not yet evident to many households.
Grant Bazian, president of MNP LTD, noted that the financial relief from rate cuts takes time to filter through the economy. “The lag definitely weighs into the survey,” Bazian told Global News, adding that many Canadians are still grappling with the rapid rate hikes implemented since 2022.
Renewing mortgages at higher rates has compounded financial pressures for many households, leading to a surge in monthly payments. This is reflected in the growing anxiety captured in the MNP Debt Index, with 41% of respondents expressing fear about job losses within their households—a nine-percentage-point increase and the highest level recorded.
The survey highlights broader financial stress among Canadians. Over half of respondents (51%) expect to incur more debt to cover living expenses in the coming year, while one in five Canadians plan to rely on credit cards to manage rising costs, according to a recent TransUnion report.
Unexpected expenses, such as car repairs, are also a significant concern. Many households are struggling to maintain financial stability amid ongoing economic uncertainty, compounded by fears of job losses, geopolitical tensions, and a looming federal election.
Bazian remains cautiously optimistic that Canadians’ financial outlook will improve as the effects of rate cuts begin to materialize. “If the Bank of Canada continues on this path, we could see a gradual easing of financial pressures,” he said. However, fewer Canadians share this optimism—only 27% expect their debt situation to improve within a year, down four percentage points from previous surveys.
The holiday season often exacerbates financial strain, with additional expenses for gifts and celebrations. As Canadians enter the new year, many hope to regain control over their finances, though the path to recovery may depend heavily on economic stability and further central bank actions.