Posthaste: Canadians reporting insolvency hits record high just before Bank of Canada expected to hike interest rate

financialpost.com:

Good morning,

In the week in which the Bank of Canada is expected to raise interest rates yet again a barometer of how Canadians are feeling about their finances is flashing red.

The quarterly MNP Consumer Debt Index out this morning showed that Canadians who report being insolvent have reached a record high.

More than half of the 2,000 Canadians interviewed for the survey conducted by Ipsos reported that they were $200 or less away from not being able to meet their financial obligations, up six percentage points from the last quarter.

This includes 35 per cent of respondents who said they already don’t make enough to cover their bills and debt payments, making them insolvent, the highest proportion since the index started five years ago.

“Battered by inflation and higher interest rates, a record number of Canadians say they can’t pay their bills and debt obligations each month,” says Grant Bazian, president of insolvency firm MNP Ltd. “The escalating burden of household bills and food prices has intensified Canadians’ financial anxiety — and is further compounded by increased debt-servicing costs, particularly for those who are deeply indebted.”

Since the Bank of Canada started to aggressively raise interest rates in March of last year Canadians have found their finances stretched further and further. The central bank hiked its rate from the pandemic low of 0.25 per cent to 4.50 per cent until pausing early this year.

The index that measures Canadians’ attitudes towards their debt and gauges their ability to pay their bills hit a low of 77 last December but then rebounded in March after the Bank’s pause.

Since then the Bank hiked another 25 basis points to 4.75 in June and the index has slid dramatically, shedding six