People were in trouble financially pre-pandemic and that financial pit has only grown deeper over the last year
Author of the article: Josh Aldrich
jaldrich@postmedia.com
Publishing date: Apr 18, 2022
Carson said for a homeowner with a $400,000, 25-year mortgage at 3.5 per cent, the increase amounts to an extra $65,000 in interest, or about $300 per month.
The Consumer Debt Index shows 52 per cent of Alberta households were within $200 of not making all of their financial obligations at the end of the month. It is the highest mark in Canada and feeds into 61 per cent of Albertans being concerned about rising interest rates.
Anupam Das, a professor of economics at Mount Royal University, called the situation a “vicious cycle.” As people struggle to manage expenses during inflation or job loss, they have borrowed more money. Rising interest rates puts them further in debt and their monthly expenses increase beyond their means.
Meanwhile, raising the interest rate will take months to have an effect on slowing inflation. This means that while people are grappling with higher interest they will also continue to be faced with increased costs for everyday goods.
For Das, the concern goes beyond individuals.
“If people start becoming bankrupt like that, then of course the whole housing market will collapse, which will have an overall impact on the economy,” he said, while preaching caution as the numbers represent potential bankruptcies and not active filings.
Alberta also has one of the highest unemployment rates in Canada at 6.5 per cent.
Das said Albertans are still largely at the mercy of a volatile oil and gas sector, which has large effects on the population and helps feed a red-hot real estate and rental market.
Carson said not everyone being pushed closer to bankruptcy will end up filing. Some will get their financial house in order through a number of different tools, while others will file for a restructuring of some kind or file a consumer proposal.
She said the important thing is to set pride aside and to talk to a licensed professional about options.
“Fear of the unknown is scary,” said Carson, emphasizing the need to sit down and write out a complete budget and financial picture. “Rip the Band-Aid off and see where I am at today. If I don’t know where I am today I’m not going to get to where I want tomorrow.”
Publishing date: Apr 18, 2022
Calgary's downtown with homes in the foreground on Tuesday, January 25, 2022. PHOTO BY DARREN MAKOWICHUK/POSTMEDIA
MNP released its Consumer Debt Index on Monday, and while the picture was not good for Canadians in general from the effects of the rising interest rate coupled with a soaring cost of living, Alberta was in worse shape than the rest of the country.
Donna Carson, a licensed insolvency trustee, said the issue predates the pandemic and was compounded by the 2014-15 recession. And those financial challenges have grown over the past year.
“The thought in the back of my mind during the pandemic has been, ‘Where has that debt gone during COVID, it didn’t just disappear,’ ” she said.
Carson said pre-pandemic, about 1,450 Albertans a month filed for consumer bankruptcy. Those numbers dropped by 30 per cent during the pandemic, but have jumped in the past few months by 18 per cent to almost 1,200 filings a month.
The poll was conducted by Ipsos for MNP between March 9 and 15.
The Bank of Canada has raised the interest rate twice this year in a bid to curb inflation — from 0.25 per cent at the beginning of the year to 0.5 per cent March 2, and to one per cent April 13. It is likely not the final increase this year.
MNP released its Consumer Debt Index on Monday, and while the picture was not good for Canadians in general from the effects of the rising interest rate coupled with a soaring cost of living, Alberta was in worse shape than the rest of the country.
Donna Carson, a licensed insolvency trustee, said the issue predates the pandemic and was compounded by the 2014-15 recession. And those financial challenges have grown over the past year.
“The thought in the back of my mind during the pandemic has been, ‘Where has that debt gone during COVID, it didn’t just disappear,’ ” she said.
Carson said pre-pandemic, about 1,450 Albertans a month filed for consumer bankruptcy. Those numbers dropped by 30 per cent during the pandemic, but have jumped in the past few months by 18 per cent to almost 1,200 filings a month.
The poll was conducted by Ipsos for MNP between March 9 and 15.
The Bank of Canada has raised the interest rate twice this year in a bid to curb inflation — from 0.25 per cent at the beginning of the year to 0.5 per cent March 2, and to one per cent April 13. It is likely not the final increase this year.
Carson said for a homeowner with a $400,000, 25-year mortgage at 3.5 per cent, the increase amounts to an extra $65,000 in interest, or about $300 per month.
The Consumer Debt Index shows 52 per cent of Alberta households were within $200 of not making all of their financial obligations at the end of the month. It is the highest mark in Canada and feeds into 61 per cent of Albertans being concerned about rising interest rates.
Anupam Das, a professor of economics at Mount Royal University, called the situation a “vicious cycle.” As people struggle to manage expenses during inflation or job loss, they have borrowed more money. Rising interest rates puts them further in debt and their monthly expenses increase beyond their means.
Meanwhile, raising the interest rate will take months to have an effect on slowing inflation. This means that while people are grappling with higher interest they will also continue to be faced with increased costs for everyday goods.
For Das, the concern goes beyond individuals.
“If people start becoming bankrupt like that, then of course the whole housing market will collapse, which will have an overall impact on the economy,” he said, while preaching caution as the numbers represent potential bankruptcies and not active filings.
Alberta also has one of the highest unemployment rates in Canada at 6.5 per cent.
Das said Albertans are still largely at the mercy of a volatile oil and gas sector, which has large effects on the population and helps feed a red-hot real estate and rental market.
Carson said not everyone being pushed closer to bankruptcy will end up filing. Some will get their financial house in order through a number of different tools, while others will file for a restructuring of some kind or file a consumer proposal.
She said the important thing is to set pride aside and to talk to a licensed professional about options.
“Fear of the unknown is scary,” said Carson, emphasizing the need to sit down and write out a complete budget and financial picture. “Rip the Band-Aid off and see where I am at today. If I don’t know where I am today I’m not going to get to where I want tomorrow.”
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