Insolvency Stats in Canada 2017

Insolvency Stats in Canada 2017: A Seesaw of Age and Interest Rates in the Maritimes

Insolvency numbers in the Maritimes are falling at a faster rate than Canada’s average, but this statistic could mask an underlying fragility. Economic growth in the region is predicted to fall well short of the Canadian average over the next few years. That could make it very difficult for those with high debt to stay afloat when buffeted by higher interest rates.

The Maritimes economy is weakening

The Maritimes is dealing with an aging population and weaker economy. The Conference Board of Canada, together with Canada’s six largest banks and the Atlantic Provinces Economic Council puts 2018 growth forecasts for the Maritimes at:

  • 1.54% for PEI
  • 1.075% for Nova Scotia
  • 0.9625% for New Brunswick

These are the lowest forecasts in the whole of Canada – except for Newfoundland and Labrador, at 1%. This modest rate of growth is unlikely to support real-term wage rise in the region, and that could mean problems for those with debt in all three provinces.

Why is economic growth tapering off?

After a couple of years of reasonable growth, the stabilizing factors are disappearing. In Nova Scotia, several large scale projects are reaching maturity. These include The Maritime Link Project and Halifax Convention Centre. As such projects come to their end, the important construction sector will slow.

The aging workforce is another factor that will hold back the region, though PEI may fare better because of its ability to attract immigrants and its more vibrant tourism sector.

Even so, as the Maritimes struggle with a slowly growing economy, higher interest rates may push insolvency rates higher.

The aging population – skewing insolvency numbers lower in the Maritimes?

Older residents tend to have lower levels of debt. They are not so affected by rising interest rates, and their living costs are lower and more stable than those of younger people. The aging population may be the main element of the Maritimes’ better-than-average performance in 2017’s Canadian Insolvency Statistics.

Across the country, consumer insolvencies fell by 2.9%, while bankruptcies declined by 8.5%, and consumer proposals increased 2.8%. The table below shows how much better the Maritimes performed:

Maritimes Consumer Insolvency Statistics 2017
(Source: Government of Canada)
  2017 2016 % Change
Prince Edward Island Total 673 802 -16.10
Bankruptcies 387 500 -22.60
Proposals 286 302 -5.30
Nova Scotia Total 5724 5948 -3.80
Bankruptcies 3807 4191 -9.20
Proposals 1917 1757 9.10
New Brunswick Total 4361 4442 -1.80
Bankruptcies 2457 2904 -15.40
Proposals 1904 1538 23.80
Maritimes Total 10758 11192 -3.88
Bankruptcies 6651 7595 -12.43
Proposals 4107 3597 14.18

Interest rates – could they weigh on insolvencies in the Maritimes?

Interest rates are forecast to rise in Canada over the next three years. Average consumer debt in the Maritimes ranges from $22,648 in PEI to $23,412 in New Brunswick (Equifax Canada 2017 Q4 National Consumer Credit Trends Report). As interest rates rise, the interest payments on these debts will rise first and fastest. Interest rates on mortgages will follow.

The combination of the rise in debt servicing costs and an economy that is growing more slowly could hurt the finances of the average Maritime household. Hardest hit will be the younger, more indebted portion of the population.

We are experts in credit counselling, proposals, trustee services, and bankruptcies. If you, or a client of yours, needs our help, contact us today. Or call us toll free 1-888-371-8900.

Photo by Chris Liverani on Unsplash