Here’s another sign interest rates have more Canadians walking a financial tightrope


debt-1110-ph

debt-1110-ph

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 highlighted that period in his note.

Overall, the number of households forced to renegotiate the terms of loans was 36 per cent above pre-pandemic levels.

The provinces seeing the biggest change were Manitoba at 83.1 per cent, British Columbia at 76.6 per cent and Saskatchewan at 59.8 per cent. Alberta and Ontario have experienced smaller increases at 48.9 per cent and 39.4 per cent, respectively.

St-Arnaud said a slowing economy could increase the pressure if unemployment starts to rise, and that the next few months will be critical.

“We will be watching to see whether insolvencies deteriorate more than seasonal patterns suggest over that period,” he said.

Business insolvencies, meanwhile, fell in February but continued to top out above 2019 levels. They were 106.3 per cent higher than the period prior to the pandemic, rising the most in British Columbia, Ontario, Quebec and New Brunswick.

“In Ontario, Quebec and New Brunswick, the rise in business insolvencies is mainly the result of higher bankruptcies, while proposals (a renegotiation of loans) are playing a bigger role in B.C.,” St-Arnaud said.

Business insolvencies accounted for five per cent of total insolvencies, St-Arnaud said.

“We will be looking to see whether the CEBA repayments lead to more business bankruptcies,” he said.

The $60,000 Canada Emergency Business Account (CEBA) loans were given out to almost 900,000 businesses and non-profit organizations to help them survive the pandemic. Up to one-third of the loans was forgiven for those who repaid the remaining two-thirds by Jan. 18 — otherwise, the debt became a three-year loan with five per cent annual interest.

— With additional reporting from The Canadian Press


Sign up here to get Posthaste delivered straight to your inbox.


Oil prices reached their highest levels in five months this week, and economists say that could make the Bank of Canada a “little concerned” as it figures out the right time to cut interest rates.

Read the full story here.


  • Canadian Imperial Bank of Commerce holds its annual general meeting in Toronto.

  • Canadian Western Bank holds its annual general meeting in Edmonton.

  • CI Financial Corp. holds an extraordinary general meeting in Toronto.

  • Today’s data: International merchandise trade numbers for February, United States trade balance, initial and continuing jobless claims

  • Earnings: Dollarama Inc., TransAlta Renewables Inc., AGF Management Ltd.


Stock markets, April 4, 2024



It’s tempting to treat a tax refund like a surprise windfall, but even though you might not have been expecting it, it’s your money and worth putting to good use. Whether to use your tax refund to pay down debt or save depends on your individual financial situation and goals. Here are some things to consider as you make your decision. Keep reading here.


Are you worried about having enough for retirement? Do you need to adjust your portfolio? Are you wondering how to make ends meet? Drop us a line at aholloway@postmedia.com with your contact info and the general gist of your problem and we’ll try to find some experts to help you out while writing a Family Finance story about it (we’ll keep your name out of it, of course). If you have a simpler question, the crack team at FP Answers led by Julie Cazzin or one of our columnists can give it a shot.


McLister on mortgages

Want to learn more about mortgages? Mortgage strategist Robert McLister’s Financial Post column can help navigate the complex sector, from the latest trends to financing opportunities you won’t want to miss. Read them here


Today’s Posthaste was written by Gigi Suhanic, with additional reporting from Financial Post staff, The Canadian Press and Bloomberg.

Have a story idea, pitch, embargoed report, or a suggestion for this newsletter? Email us at posthaste@postmedia.com.


Bookmark our website and support our journalism: Don’t miss the business news you need to know — add financialpost.com to your bookmarks and sign up for our newsletters here.



Source link

Leave a Reply

Your email address will not be published. Required fields are marked *