Vancouver – In their recent Ipsos business report, MNP notes that British Columbia consumer insolvencies jump 11 per cent in the second quarter. Cash-strapped Canadians may be treating homes like ATMs to pay bills
Underscoring British Columbians’ financial vulnerabilities when it comes to consumer debt, the latest official figures from the Office of the Superintendent of Bankruptcy (OSB) continue to reinforce the mounting strain on many households in the province. The number of British Columbians who filed for insolvency in the second quarter of 2019 was up 11.1 per cent compared to the first quarter and up 5.2 per cent compared to the same quarter of last year.
Lana Gilbertson, a Vancouver-based Licensed Insolvency Trustee with MNP LTD, the country’s largest insolvency firm, says that many people in the province may still be ramping up borrowing against their homes to pay other debts, even as the real estate market appears to be slowing. She says that home equity lines of credit (HELOCs) have emerged as one of the biggest contributors to the growth of household debt, particularly in markets like BC where real estate values have surged over the last decade.
“There is a lot of uncertainty that comes with HELOCs so this type of debt is particularly troublesome for those who don’t have firm financial footing. It can put people on the fast track to an endless cycle of debt, especially if the borrower accumulates more debt on the credit cards after paying them off with a HELOC,” says Gilbertson.
According to a new survey conducted by Ipsos on behalf of MNP LTD, three in ten (27%) Canadian homeowners with a HELOC say they have used the funds borrowed to pay down other debts. Over a third (36%) say they have used the money to do things they otherwise wouldn’t have been able to do, such as home renovations.