One in three living paycheque to paycheque as hopes for rate cut dim following strong jobs data
Nearly two-thirds of Canadians say they need interest rates to fall, according to the latest MNP Consumer Debt Index, which held steady at 88 points this quarter.
The demand for rate relief comes amid growing financial anxiety, especially among younger and lower-income households, as the cost of living and economic uncertainty continue to mount.
Widespread anxiety
The survey reveals that 64% of respondents want interest rates to decrease, which the Bank of Canada kept at 2.75%. More than a third (36%) of Canadians report feeling anxious or stressed about their finances, while a quarter say they’re delaying major life decisions (26%) or constantly managing unexpected expenses (24%).
“Canadians have not witnessed such economic uncertainty since the COVID-19 pandemic. While financial perceptions have somewhat stabilized, many households feel like their lives are on hold, stuck in a financial holding pattern as they wait for the proverbial dust to settle,” Grant Bazian, president of insolvency firm MNP LTD, said in the report. “Many Canadians are hesitant to make major financial or life decisions due to persistent economic pressures and a backdrop of global volatility.”
Even with interest rates on pause for now, 41% of Canadians say they are concerned rising rates could push them toward bankruptcy, up three points from the last quarter. A significant number (45%, +2 pts) also express concern about their ability to repay existing debts, even if rates eventually fall.
“Persistent fears remain around interest rates,” Bazian added. “For some households, the damage has already been done.”
Despite these concerns, a rate cut from the BoC appears increasingly unlikely in the near term.
The central bank has held rates steady in its last two announcements and is weighing ongoing global trade disputes. Threats from former US president Donald Trump to impose tariffs on Canadian and other imports have added new uncertainty.
The June Consumer Price Index is expected to show inflation ticking up to 1.9% from 1.7% in May. Stronger-than-expected job growth in June also reduced expectations of a July rate cut. Market odds of a rate cut on July 30 have fallen to 13%, down from 27% prior to the employment report.
Stability amid volatility
Despite the bleak picture for many, there are modest signs of financial improvement. The average amount left over at month’s end rose to $916, up $49 from the previous quarter and the second-highest amount since tracking began in 2017. The largest gains came from Canadians aged 55 and older (+$84) and households earning $60,000–$100,000 (+$260).
Canadians’ net personal debt rating held relatively steady at 21 points (-1 pt), maintaining gains from earlier in the year after rebounding from a record low of eight points in December 2024.
Bazian noted these are “small but encouraging signs” that some Canadians are starting to regain financial footing. “While challenges remain, any movement toward greater stability is meaningful in this environment,” he said.
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Still, Bazian noted that around 14 million Canadians remain close to financial insolvency, with minimal capacity to handle unexpected costs.
The survey found that 42% of Canadians are $200 or less away from financial insolvency each month. Of those, 27% say they are already financially insolvent. Additionally, 46% regret the amount of debt they’ve taken on, up three points, while 44% are concerned about their current debt load.
Financial stress is disproportionately affecting younger Canadians aged 18–34 and those with household incomes below $40,000. Among 18–34-year-olds, 45% report financial anxiety, and 37% say they’re living paycheque to paycheque. Households with incomes under $40,000 show similar distress, with 44% feeling anxious and 45% reporting the same month-to-month struggle.
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