We apologize, but this video has failed to load.

Try refreshing your browser, or
tap here to see other videos from our team.

Posthaste: Signs that Canadians are struggling with their debt load are rising Back to video

We apologize, but this video has failed to load.

Try refreshing your browser, or
tap here to see other videos from our team.

Play Video

Good morning,

Signs are beginning to appear that debt problems in Canada are on the rise.

The number of Canadian insolvencies in November hit a high not seen since March 2020, a month of widespread lockdowns at the beginning of the pandemic.

There were 9,784 insolvency filings in November, the highest number in 32 months, and 17.5 per cent higher than a year ago, according to numbers recently released by the Office of the Superintendent of Bankruptcy.

“This is the first time we have seen numbers close to pre-pandemic levels,” said Michelle Statz, a licensed insolvency trustee at Bromwich + Smith.

Soaring inflation and rising interest rates have taken a toll on household finances, and now the strain is starting to show up in the numbers.

Charles St.-Arnaud, chief economist at Alberta Central, said in a note that November’s increase was the first after two straight months of declines, suggesting that the rising trend seen in the spring of 2022 could be returning.

Insolvencies, which include bankruptcies and proposals, a renegotiation of terms with creditors, climbed 4.7 per cent in November from the month before.

Despite November’s increase, insolvencies still remain below pre-pandemic levels. However, proposals are up sharply over the past year and are now above their pre-pandemic levels in B.C., Alberta, Saskatchewan and Manitoba.

“This situation suggests a rise in households struggling with their debt load,” said St.-Arnaud.

British Columbia, Nova Scotia, Ontario and New Brunswick saw the biggest increases in insolvencies year over year at 32.5 per cent, 27.4 per cent, 23.9 per cent and 15.6 per cent respectively.

According to CIBC’s annual financial priorities poll, a quarter of Canadians said they took on more debt in 2022. Among the top reasons were the increased cost of living, expenses exceeding income and the higher cost of borrowing.

St-Arnaud says insolvencies are likely to rise in coming months as record levels of household debt, declining purchasing power because of decades-high inflation and the steep rise in interest rates put more pressure on household finances. As the economy slows further there is likely to be a rise in unemployment, he said, which will push more households into insolvency.

The question, he says, is whether the strength of the labour market with its almost historically low jobless rate and the savings accumulated during the pandemic will continue to provide relief.

Unfortunately, Canadians may only have begun to feel the bite of higher borrowing costs.

With the Bank of Canada expected to raise its key rate to 4.5 per cent this month, TD Economics predicts that the debt service ratio will hit a record high of 16 per cent by the second half of this year, surpassing the pre-pandemic peak of 15 per cent.

With interest rates forecast to remain at higher levels over 2023, TD expects much of Canadians’ pandemic savings will go to paying the higher costs of debt.

_____________________________________________________________

Was this newsletter forwarded to you? Sign up here to get it delivered to your inbox.
_____________________________________________________________________

OK so this isn’t a chart exactly, but it’s still interesting. The image above shows the hole in the ozone over the South Pole in October, 2022 and the good news is it’s shrinking. Between September and October the hole size spanned an area of 23.2 million square kilometres — which sounds like a lot. But that’s smaller than last year and much smaller than in 2006 when the hole peaked at 27.5 million square kilometres.

“Over time, steady progress is being made, and the hole is getting smaller,” said Paul Newman, chief scientist for Earth sciences at NASA’s Goddard Space Flight Center in Greenbelt, Maryland. “… overall, we see it decreasing through the past two decades. The elimination of ozone-depleting substances through the Montreal Protocol is shrinking the hole.”

If you remember, the hole in the ozone — the layer in the stratosphere that protects the earth from the sun’s radiation — was discovered in the 1980s. In 1987, countries around the world signed the Montreal Protocol, which aimed to protect and repair the layer by slashing the use of ozone-depleting gases — for example, those used in aerosol sprays. It’s the only United Nations treaty that has been ratified by all 198 UN member states, says the World Economic Forum.

And it worked. Use of chlorofluorocarbons (CFCs), the gases used in aerosol cans, dropped from 800,000 tonnes in 1989 to 156 tonnes in 2014, said the WEF.

If the Montreal Protocol is fully implemented the ozone layer is projected to recover by 2050. It should also help to reduce the global temperature by 0.5 degrees C by 2100, according to the United Nations Environment Programme, making it one of the most successful global agreements of all time.

___________________________________________________

___________________________________________________

_______________________________________________________

Tax Free Savings Accounts are a great way to grow your money but Canadians who don’t appreciate the nuances of the TFSA recontribution or transfer rules could find themselves in trouble with the taxman for over-contributing. Tax expert Jamie Golombek has the story of how an ‘honest mistake’ landed one taxpayer with a hefty bill from the Canada Revenue Agency. Read more

____________________________________________________

Today’s Posthaste was written by Pamela Heaven, @pamheaven, with additional reporting from The Canadian Press, Thomson Reuters and Bloomberg.

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