Canadian households in some provinces are renegotiating debt payments at a record clip, as the financial squeeze from high interest rates continues to take its toll.
“Household debt, declining purchasing power due to rising inflation and the sharp rise in interest rates are putting pressure on households’ finances,” Charles St-Arnaud, chief economist at Alberta Central credit union, said in a note on the latest data from the Office of the Superintendent of Bankruptcy.
For February, proposals to renegotiate loans rose 31.2 per cent in Ontario from the same time last year, overtaking the previous high from November 2023. In Saskatchewan, loan renegotiations were up seven per cent year over year, also a record. Across the country, total proposals to renegotiate were up 28.6 per cent year over year and 404 per cent from 2007, when the bankruptcy superintendent began keeping records for provinces. All provinces, St-Arnaud said, set new February records for loan renegotiations.
In the current economic climate, it makes sense that more people are seeking to renegotiate their debt, St-Arnaud said.
“I think the big reason is people still have income,” the Calgary-based economist said. Banks, he said, are more likely to prefer to extend the terms of amortization on a mortgage, for example, to help people manage higher interest rates.
“March might be the all-time high (for loan renegotiations) however you look at it,” St-Arnaud said.
The numbers, released late last month, also reveal how the debt-renegotiation picture has deteriorated since the pandemic hit.
“I consider 2019 the last normal period. Being back and above (those levels) shows there’s greater financial stress than pre-pandemic,” St-Arnaud said, explaining why he
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