Debt, mental health, and housing emerge as primary COVID concerns

Survey confirms link between mental health and finance, hints at K-shaped recovery among Canadians

Debt, mental health, and housing emerge as primary COVID concerns

The COVID-19 pandemic delivered a financial sucker punch to Canadians, many of whom are still feeling the impact on their debt situation, homeownership prospects, and psychological well-being.

In its latest debt survey, Manulife Bank found that more than a third of Canadians (35%) were financially unprepared going into the pandemic. Nearly three quarters of respondents (74%) reported that it has influenced their financial situation; more than two thirds (69%) said the impact has been negative overall. Among those negatively impacted, 42% estimated that it would be over a year before they can recover to pre-COVID-19 levels.

The outbreak and its ripple effects has left a reported one quarter of Canadians in the survey struggling to keep up with their bills. One in six Canadians said they have been laid off due to COVID-19, and an equal number said they would have been let go if it were not for the government’s program to provide a wage subsidy to workers.

The survey found that on average, Canadians have been devoting nearly half of their income to essentials like food and housing since the onset of the pandemic. More than half of homeowners (58%) and renters (54%) said they worry about making their payments.

Over a third of respondents (35%) expressed significant worries about saving for a home, indicating that many are getting priced out or are just about to be priced out of the market. More than one fourth were also concerned about supporting their children through post-secondary education (28%) or saving for retirement (28%).

“Debt can negatively impact mental health and leave Canadians feeling like their financial goals are unachievable. The pandemic has made that even more pronounced,” said Manulife Bank President and CEO Rick Lunny. “It's so important to have financial flexibility, especially when one looks at purchasing a home – it's easy to feel stressed.”

Among indebted Canadians, 46% said that debt is negatively impacting their mental health, 10 percentage points more than two years ago. There’s also been an increased likelihood of indebted Canadians saying their debt burden is causing them stress (53%, up five points) or keeping them awake at night (35%, up seven points).

“The COVID-19 pandemic is causing many Canadians to experience higher levels of anxiety and fear. Debt is amplifying that, making us feel more vulnerable to uncertainty,” said Dr. Georgia Pomaki, Leader, Mental Health Specialists at Manulife. “One way of strengthening our resilience and sense of security is to think about how we can better prepare ourselves for unforeseen expenses, which will allow us to respond more effectively to issues as they arise.”

The survey also added more definition to the developing picture of a K-shaped pandemic recovery. Even though Canadians overall are ostensibly saving more year-over-year on average (16% of after-tax income, vs. 14% as of fall last year), 24% of respondents this year said they have been saving none of their after-tax income, representing a five-point rise over 2019.

Among indebted Canadians, 24% said everyday living is pushing them to borrow more, suggesting that they’re struggling to make ends meet. That’s against a broader backdrop of fewer Canadians overall reporting that they’re in debt (27% debt-free, vs. 21% a year ago).

The hardest-hit group seemed to be lower-income Canadians aged 40 or below, particularly those dealing with a mortgage or are in debt. Members of this group were more likely to report a severe impact on their financial situation or debt load due to the pandemic, difficulty paying their bills because of the COVID-19 crisis, and not being financially prepared prior to the outbreak.


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