As housing affordability continues to be a consistent struggle for Canadians, new data from the Office of the Superintendent of Bankruptcy (OSB) confirms just how bad Canadian household debt is getting.
The new data revealed that 2019 saw the second-highest number of annual consumer insolvency filings ever in Canada, with 137,178 Canadians filing for insolvency, a 9.5% year-over-year growth. This works out to be about 375 Canadians filing a bankruptcy or consumer proposal each day in 2019, according to the Canadian Association of Insolvency and Restructuring Professionals (CAIRP).
Furthermore, 2019 experienced the largest annual gain in nearly ten years, raising serious concerns for the record-level of household indebtedness in Canada.
“The sheer number of Canadians struggling with their finances is alarming but the growth in consumer insolvencies and the accelerating insolvency rate is a symptom of a bigger problem: many who have amassed unmanageable debts have no path out,” explains André Bolduc, board member of CAIRP.
In the last three months of 2019, 35,155 insolvencies were reported in Canada, which is the most in any one quarter since 2010, up 10.2% compared with 31,900 in the same period a year earlier, according to Bloomberg.
Here in Ontario, residents felt the effects of financial stress more compared to other provinces, leading the way with double-digit increases in the number of consumer insolvency filings in 2019, with 44,852 filings reported, a 15.4% increase from the previous year.
Ontario was followed by Newfoundland and Labrador with a 15% increase in filings, Alberta (14.6%), Manitoba (11.4%), and British Columbia (10.34%).
Three provinces experienced more moderate rises, including Quebec (2.7%), PEI (2.5%), and Saskatchewan (1.6%).
“The increase in insolvencies is still partly the result of the interest rate increases that occurred during 2016 to 2018. We know that when the interest rate increases, the insolvency rate increases but there is a two to three-year lag,” explained Bolduc.
“One of the reasons is that a lot of people struggle with debt for years before they seek financial help. That’s partly because many households bury their heads in the sand about the scale of their debts until something tips them over the edge – like a mortgage renewal or an unexpected expense.”
However, Bolduc says many Canadians may start to realize the risks of carrying a high debt load and cut back on their spending.
“If consumers continue to moderate their spending habits, this should help dampen the rate of increase in consumer insolvency filings,” says Bolduc.
“Although, moderated consumer spending may exacerbate the rise in business filings as Canadian businesses deal with lower sales growth and rising business debt levels.”