A new poll by Ipsos carried out on behalf of MNP LTD has found that nearly half (47%) of Ontarians are still experiencing disruption to either their own work situation or that of someone else in their household in the form of lay-offs, reduced pay, or fewer working hours. Over the past few months, various financial relief measures from the government, banks, and businesses have helped cushion the financial blow of the pandemic for many Ontarian households. However, as these measures evolve or come to an end, the pandemic is still impacting household income for many.
“A large number of Ontarians are still experiencing COVID-related disruptions to their household income. For those who were already struggling with debt problems prior to the pandemic, those problems will only be amplified as creditors start to collect deferred payments, and the short-term financial relief runs out,” says David Gowling, a Licensed Insolvency Trustee with MNP LTD.
Fifteen per cent of Ontarians say they are currently working reduced hours or receiving reduced pay, with another eight per cent saying that someone in their household is experiencing the same situation.
“While we have yet to see data that confirms Ontarians have taken on substantially more debt since the onset of the pandemic, it would be fair to say that some will be forced to depend on credit once government relief and deferral measures run out,” explains Gowling. “This can create a cycle of debt which is difficult to break, though. The problem is they will be borrowing against future paychecks, and ultimately leaving a hole in their next paycheck.”
About one in ten (7%) Ontarians say that they’ve had to postpone payments on bills, credit cards, and taxes. This translates to about 1,032,000 Ontarians.
“To those who are already deep in debt and are now unable to keep up with payments, I would recommend seeking out professional debt advice now, before borrowing more to make ends meet,” says Gowling. He and his team offer free consultations via videoconferencing and by phone to anyone experiencing debt-related financial challenges.
Gowling says that historic low-interest rates may be giving some a false sense of security that will result in increased borrowing. In addition, as eviction moratoriums end, those who are most vulnerable may turn to high-interest credit.
Nationally, 45 per cent of Canadians who are currently receiving COVID-19-related financial support from the government say they will take on more debt in some form or another when that ends, an increase of 10 points since June. Two in ten say they will use their line of credit (18%, +6) or borrow from friends and family (19%, +3). One in ten (11%, +4) say they will take out a bank loan. Two in ten (21%, +4) Canadians will use their credit cards to make ends meet when relief measures end. About one in ten (8%, +4) say they will use a payday loan service.
“Homeowners in the province will have to make some hard decisions if they were already overleveraged prior to the pandemic,” says Gowling. “Those in fixed-income and lower-income households are going to have an even tougher time. Many can expect significant setbacks for years and years if they decide to take on high-interest loans to stay afloat.”
Two in ten (21%) Canadian homeowners say they will be forced to defer their mortgage payments, and 16 per cent say they would have to sell their home to make ends meet once COVID-19-related support ends.
“We know the pandemic has caused uncertainty for many. One thing we can be sure of, though, is that Ontarians with underlying debt issues are not going to see those issues go away. Yes, the pandemic has provided a temporary delay, but eventually, they will have to deal with those debts,” explains Gowling.
He points to the fact that insolvencies are down significantly compared to last year as a result of pandemic-related financial support. The latest stats from the Office of Superintendent of Bankruptcy show that insolvencies in Ontario were down 36.3 per cent in July compared to the same month last year and 4.5 per cent for the twelve-month period ending July 31, 2020.
Once COVID-related benefits end, insolvencies are expected to increase significantly. According to the survey, about one in ten (11%, +5) Canadians currently receiving benefits indicate they will declare bankruptcy if the financial support ends. Around the same number (10%, +3) say they will file a consumer proposal to address their debt.
“A Licensed Insolvency Trustee can offer support and guidance regarding a range of debt-relief options to help individuals choose the best solution for their personal situation. Sometimes, a consumer proposal or bankruptcy may be the right choice, while other times, people simply need help developing a customized plan to manage their debt,” says Gowling.
Government-regulated Licensed Insolvency Trustees provide advice to Canadians struggling financially and, where appropriate, can even help them avoid bankruptcy by facilitating an agreement with their creditors. They can also guarantee legal protection from creditors through the consumer proposal or bankruptcy process.
“Professional help is available to get Ontarians who are struggling with debt back on track. Debt is not something people have to face alone,” he says.
Those in need of debt advice can visit MNPdebt.ca to book an appointment or to start a live chat.
Other survey highlights include:
- Nationwide, about one in ten (7%) say that they’ve had to postpone payments on bills, credit cards, and taxes, translating to about 2 million Canadians. This proportion reaches 11% among those who rent their home. Among those who own their home, 5% say they’ve had to defer their mortgage payments.
- Two in ten (21%) homeowners nationwide currently receiving government financial support say they will need to defer their mortgage payments if government financial support ends.
- Other plans for when COVID-19-related government financial support ends:
- Nearly half (45%, -1) of Canadians say they will likely have to cut back on consumer spending and expenses.
- Three in ten (31%, +1) say they will use their savings to pay their bills.
- Fifteen per cent (15%, +2) say they will sell assets like their car, investments or rental property.