Debt is impacting higher income Canadians.
According to a new survey, indebtedness is increasingly afflicting both low- and high-income earners as living expenses rise faster than household income. The study, by personal insolvency firm Hoyes, Michalos & Associates, found that, in 2019, average household expenses, which include housing, food and transportation costs, grew by 6.4%. Meanwhile, average household income rose 5.5%.
Hoyes, Michalos & Associates reviewed 5,800 personal insolvencies in Ontario that were filed with its firm between January 1, 2019 and December 31, 2019 for their study. The average indebted Ontarian had $264 available in monthly funds to repay debts in 2019, down from $273 the year before, according to the study. At the same time, average consumer debt loads increased 1.9% last year to $58,923, higher than the average of $57,840 for 2018.
That means that the average debtor has fewer funds available to meet debt obligations, even as those debts grew in size, the study states. It also found that the average indebted person in Ontario is getting younger. In 2019, the average age of a debtor declined by almost 8.5 months, the lowest level since the study began in 2011. Those under the age of 40 now account for almost half (47.1%) of all insolvencies.
To make matters worse, people are taking on more expensive and riskier types of debt, according to the study. In particular, payday loans, known for their exorbitant interest rates, have become increasingly popular, outpacing credit cards in 2019 as the main driver of consumer insolvencies. In 2019, 39% of debtors carried at least one loan from a high-cost payday lender. That compares to 37% in 2018.