Consumer insolvencies jumped nearly 20 per cent in September from a year ago, according to federal data released Friday, suggesting financial strain is rising at the household level.
In total, there were close to 12,000 consumer insolvencies filed across the country in September, compared with about 10,000 a year earlier, the Office of the Superintendent of Bankruptcy said. Insolvencies are comprised of both bankruptcies and proposals – the latter being an offer to pay back a percentage of money owed, extend the payment timeline, or both.
The September figures are not a one-off increase in insolvencies, but part of a sustained pick-up that suggests Canadians are struggling to adapt to an era of slightly higher interest rates.
Over the 12-month period ending in September, there were more than 133,000 consumer insolvencies filed, or 8.5 per cent greater than the previous 12-month period. That easily outpaces population growth.
In percentage terms, the largest increases over the past year have been in Alberta, Newfoundland and Labrador and Ontario.
Rising insolvencies stand in contrast to a labour market that, broadly speaking, has experienced a surge of hiring over the past year along with stronger wage gains.
There are, however, pockets of weakness appearing in household finances. The household debt-service ratio – or the percentage of disposable income that goes toward debt payments – has risen to a record 14.9 per cent, according to Statistics Canada. For two consecutive quarters, the interest portion of debt servicing has exceeded that of capital repayments.
Moreover, the household savings rate now stands at 1.7 per cent, close to the lowest it’s been in six decades.
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