Does it feel like the cost of daily living is constantly going up? Are you struggling to pay your bills? Is it starting to feel like it’s too much to handle? Many Canadians are stressed about their finances.
Thanks to factors like inflation and high interest rates, it’s more expensive to borrow money, pay down debt, and even to buy groceries. Find out what’s contributing to Prince Edward Island household debt and what you can do if you’re barely making ends meet.
P.E.I. Consumer Debt
According to Equifax, the average debt (excluding mortgages) for Prince Edward Island (P.E.I.) residents in Q3 2023 was $22,247. This is slightly higher than the national average of $21,013.
While debt was down by 0.25% from the previous year, delinquency rates have gone up by nearly 22%, less than the national average of 29%. Delinquency rates represent missed payments across a variety of credit products.
What is causing an increase in delinquency rates? Likely a combination of higher mortgage interest rates and debt rates, as well as an increase in the cost of living. For many, they don’t have enough disposable income to cover everything.
P.E.I. Consumer Price Index (CPI)
The Consumer Price Index (CPI) measures the change in price over time that consumers pay for a basket of goods and services. In Canada, the CPI for November 2023 was 3.1%. This means the price of goods and services increased by an average of 3.1% from the previous year. Some of the main contributors to this increase include mortgage interest costs, food purchases, and rent.
The CPI increase in P.E.I. was the lowest in Canada at 0.4% in November 2023. This was down from 1.7% in October 2023.
Goods and services that contributed to this increase include:
- Mortgage interest cost
- Food from restaurants
- Vehicle insurance premiums
- Purchase/leasing of vehicles
- Vehicle parts, maintenance, and repairs
Goods and services that helped to bring the overall CPI in P.E.I. down include:
- Fuel oil and other fuels
- Gas
- Phone services
- Childcare and housekeeping services
- Rent
Bankruptcy and Insolvencies in P.E.I.
Nationally, Bankruptcies and Consumer Proposals increased from Q3 2022 to Q3 2023. Bankruptcies increased by 2.3%, and Consumer Proposals by nearly 23%.
In P.E.I., Bankruptcies decreased by nearly 29% from Q3 2022 to Q3 2023, but Consumer Proposals increased by nearly 34%.
What is Contributing to Prince Edward Island Household Debt?
There are a variety of factors that are contributing to Prince Edward Island Household debt and debt across the nation, including:
Inflation
While inflation has come down since the CPI reached an average of over 8% in 2022, residents are still feeling the impact of inflation. A 2023 report by the Prince Edward Island Employment Standard Board found many residents are concerned with poverty, food insecurity, and housing insecurity. This is especially true for lower-income earners who are limited in their options for dealing with rising prices.
Living wages
Despite two increases to the minimum wage in 2023, from $13.70 to $14.50 in January 2023, and another increase to $15.00 an hour in October 2023, some are suggesting more increases are needed.
A 2020 report from the Canadian Centre for Policy Alternatives found the living wage for Charlottetown was $19.30 per hour. The living wage represents how much a household needs “to cover all basic necessities and enjoy a decent quality of life.”
House Prices
Another factor contributing to an increase in Prince Edward Island household debt is that the cost of housing is rising faster than wages.
It doesn’t matter if you plan to rent or buy, it might be challenging to find an affordable place to live. The benchmark price for a single-family home in P.E.I., as of August 2023, was $367,400. The average cost for rent and utilities in P.E.I. is $995 per month.
To get approved for a mortgage of $350,000, you’ll likely need an income of $90,000 before taxes and a low debt-to-income ratio. Yet the average income in P.E.I. is $56,500, and the median income is $48,400.
Mortgage rates
If you own a home and have a mortgage renewal coming up, you’re probably starting to think about how you’ll manage the rising interest rate.
A 2023 Mortgage Renewal Study by Royal LePage found that 68% of Canadians in Atlantic Canada are concerned about their upcoming renewal. Of those concerned, 22% are considering extending their amortization period while 18% are thinking about reducing their next mortgage terms or switching to a new lender.
How to Cope With Rising Personal Debt in P.E.I.
If your household spending is getting out of hand and you can no longer pay your bills, there is help available. A Licensed Insolvency Trustee (LIT) can assess your debt situation and recommend a debt strategy, such as:
Credit Counselling
If you need help with budgeting or managing your credit, a LIT can provide one-on-one credit counselling sessions. Your LIT can assess your debt issues and provide tailored education and tips to help you get out of debt.
Consumer Proposal
In a Proposal, you and your LIT work together to create an offer to your creditors to pay a percentage of your debt, extend the time you have to pay, or both. A LIT is the only professional in Canada who can administer a Consumer Proposal.
Bankruptcy
Filing for Bankruptcy is typically the last resort but might be the best option for those with an overwhelming amount of debt. Bankruptcy can eliminate many of your unsecured debts, but some of your assets may not be exempt from seizure. Filing for Bankruptcy will also drop your credit score and stay on your credit report for numerous years.
Speak with a Licensed Insolvency Trustee
If your debt is getting out of hand and you don’t know what to do, we’re here to help. Allan Marshall & Associates can work with you to find a solution to your debt problems. Don’t wait. Give us a call at 1-888-371-8900, or contact us online. If you live in Prince Edward Island, you can also make an appointment to visit us in person at one of our offices in Charlottetown or Summerside.
