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People have been badly hurt financially in the pandemic, but the overall numbers of debt defaults and insolvencies is lower than pre-pandemic levels. A quick example from data gathered by the Canadian Bankers Association: 0.2 per cent of mortgages were in arrears of the end of May, compared with 0.24 per cent at the end of 2019.

For some insights on how Canadians will manage their debts in the months ahead, let’s check in with Laurie Campbell, director of client financial wellness at licensed insolvency trustees Bromwich+Smith. Ms. Campbell has been one of my go-to sources on debt for ages. Here’s an edited transcript of a Q&A we did by e-mail recently:

Laurie, how many years have you been involved in helping people in debt?

I started in credit counselling 30 years ago when mortgage interest rates were in the double digits and the Canadian household debt-to-income ratio was about 60 per cent. Now mortgage interest rates are at 2 to 3 per cent and the debt-to-income ratio at the beginning of 2021 was over 170 per cent.

Aside from mortgages, borrowing levels in the pandemic have fallen and people have been paying down debts. What letter grade would you assign Canadians for their debt management over the past 18 months?

With discretionary spending reduced significantly, many Canadians took the opportunity to pay down their debt and grow their savings. They earned a B+ (or even an A) if they put a budget in place to keep borrowing low. Others took advantage of rising house prices and low interest rates to upgrade. If they haven’t planned for the inevitable increase in interest rates, they would receive a C.

Now, let’s look ahead. The economy is reopening, and early indications show people are eager to spend. What do you see ahead for nonmortgage debt?

The reopening means people going back to work, with more opportunities to spend. At Bromwich+Smith, we recently completed a survey showing that almost half of Canadians are eager to dine in a restaurant, which is great if it fits your budget. The risk is that people might overdo it and find themselves dealing with overwhelming debt. Well-saved dollars can be spent fairly quickly as opportunities to dine out, travel and shop continue to become more available.

As for mortgages, people buying houses today in communities across the country are taking on a heavy load as a result of high house prices. To what extent do you see high levels of mortgage debt contributing to financial stress in the years ahead, especially as interest rates rise?

That’s definitely a concern. When I first started in credit counselling in the early 90s, there were droves of people who found themselves in a market where they could no longer afford their homes. Many had to walk away from their homes. Interest rates are going to rise, and it may come soon. For Canadians in variable-rate mortgages, and even those who need to renegotiate, this could bring on significant financial stress. The way to avoid it is to build a budget that takes this into account and focus on how any interest rate increase could affect you.

You recently started working for Bromwich+Smith – how is demand for the firm’s services tracking compared with pre-pandemic levels, and what are you forecasting over the next 12 to 24 months?

When the lockdowns first hit Canada, our government was quick to support financially impacted Canadians with a wide variety of programs, many still in place. That caused the rate of insolvency to decline substantially and stay low. Those programs are going to end soon, which will mark the beginning of a return to pre-pandemic insolvency levels. We will see higher levels of bankruptcy and consumer proposals begin in the new year, if not sooner. And while creditors have been rightfully reluctant to collect on outstanding debt, we will see an increase in collections in the fall and new year.

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