For the fourth consecutive quarter, Canadian homeowners say debt-reduction remains one of their top financial priorities, according to a recent poll commissioned by Manulife Bank of Canada.
Nearly three-in-10 homeowners rated debt freedom as a “10” out of 10 as their top financial priority. Seventy-one per cent rated debt freedom at an 8, 9 or 10 out of 10.
“Canadians are clearly working hard to get a grip on their debts,” said Doug Conick, president and CEO of Manulife Bank of Canada. “Perhaps more homeowners are coming to the conclusion that effective debt management is a low-risk way to make their money work harder.”
Despite naming “debt freedom” as a top priority, more than four out of 10 said they either lost ground or merely held steady in their fight to reduce household borrowing in the past year in the online poll of 1,000 homeowners conducted by Research House in mid-February.
Among those who failed to reduce their debt over the past 12 months, the largest group at 27 per cent saw their debts actually increase, while another 15 per cent had the same amount of debt as they did a year ago.
Among the 51 per cent who did reduce their debt over the past year, only eight per cent reduced their debt by more than expected.
Less than a quarter of homeowners in the survey reported their debt reduction met their expectations, while another 20 per cent reported their debt reduction was less than expected.
Eight per cent of homeowners aged 30 to 55 had no debt at any time in the past 12 months, which is relatively unchanged from previous quarters.
“It’s encouraging that homeowners are focused on debt reduction, but these results suggest many find it very difficult to make any headway,” said Cornick. “One potential explanation for these findings isn’t a lack of desire to be debt-free, but rather the need for advice, guidance and expertise.”
Only about a quarter of homeowners seek professional financial advice when it comes to managing debt and day-to-day cash flow.
“Often homeowners don’t have either the expertise or time to learn about the best options available to them, so they miss opportunities to reduce their debts,” added Conick. “More advisors are addressing this gap by helping their clients not only manage their debt, but also by integrating debt management into their overall financial plans.”
When it comes to managing household debt in a two-adult household, 58 per cent said one partner was mainly or entirely responsible for managing household debt. Forty-two per cent of two-adult households said responsibility for managing household debt is equally shared.
In general, it appears that couples are speaking to each other when it comes to household debt. Nearly 60 per cent indicate that they review household debt with their partner at least once per month. A further 16 per cent do so every couple of months. Only eight per cent indicate that they review household debt with their partner once per year or less.
Despite the communication, debt can be a source of stress, with 30 per cent stating that balancing debt repayment with other financial needs is a significant source of stress.
“There are products available to help not only reduce debt payments, but also to make it easier for the household to track their debts and know exactly where they stand financially,” added Conick.