Interest rates, housing affordability, and ongoing economic uncertainty continue to stress Canadian households
Canadians have begun the new year expecting tougher financial conditions ahead and concerned about their levels of debt.
The latest MNP Consumer Debt Index, conducted quarterly by Ipsos, shows 71% of Canadians anticipate the cost of living will worsen, alongside broad expectations that overall economic conditions will deteriorate in 2026.
Most believe the national economy will weaken (59%) and housing affordability will erode further (59%). Concerns extend to interest rates and inflation (54%), job market stability (52%), and Canada’s relationship with the United States (51%).
Day-to-day expenses are also top of mind, with Canadians expecting higher taxes (53%), rising transportation costs (50%), and increasing healthcare expenses (48%). Meanwhile, 62% worry about growing poverty and inequality, and two thirds (66%) are concerned about government deficits and debt.
“There is a widespread sense that household finances will come under increasing pressure, fueling heightened anxiety about economic security in the year ahead,” explains Grant Bazian, president of MNP LTD, the country’s largest insolvency firm. “Canadians expect most aspects of daily life to worsen rather than improve in 2026.”
A break in seasonal debt trends
Despite the gloomy outlook, there are modest indicators of improving household resilience. The MNP Consumer Debt Index rose one point to 87 — the first December increase since the Index began, defying the usual year-end decline in debt sentiment.
The share of Canadians living within $200 of financial shortfall dropped to 41%, down seven points from the previous quarter and the lowest level recorded since the pandemic. Average leftover funds after monthly expenses climbed by $163 to $907.
But financial vulnerability remains widespread with fewer than half of Canadians (47%) reporting having six months of emergency savings, leaving many exposed to unexpected disruptions.
“Despite pessimism about 2026, there are signs of cautious optimism, breaking from the Index’s usual seasonal decline and suggesting that some households are entering the new year with slightly more financial breathing room,” explains Bazian. “Whether Canadians respond to financial stress by taking action or avoiding their debt often comes down to how much financial flexibility they feel they have. For some, their breathing room has improved, enabling them to make adjustments and seek solutions. For others, ongoing economic uncertainty continues to drive debt avoidance. Sustained financial pressure is prompting both decisive action and withdrawal among Canadians.”
Fight, flight or freeze
Canadians are splitting into distinct behavioural camps when facing money stress. Nearly six in ten (59%) report taking a “fight” approach by revisiting budgets (43%), trying to consolidate debt (12%), or seeking professional advice (11%).
At the same time, nearly one third (32%) are leaning toward a “flight” response — avoiding financial conversations (15%), refusing to think about financial obligations (12%), or using credit to cover necessities (17%). Another 15% say they feel frozen, unsure how to begin addressing financial strain.
“Even when there are small signs of financial improvement, the concern with many Canadians being in financial flight mode is that it can create a false sense of short-term relief,” says Bazian. “Avoiding bills and conversations about finances or relying more heavily on credit can make financial stress feel manageable in the moment, but those behaviours often allow problems to grow quietly in the background. As Canadians head into an uncertain year, that can make it harder to regain control later on.”
Younger adults are especially vulnerable. Over half of Canadians aged 18–34 (51%) exhibit flight behaviours, while 23% in this age group report feeling financially paralyzed. Lower-income Canadians also show elevated avoidance patterns, with 34% of those earning under $40,000 reporting flight responses.
Interest rate anxiety persists
Interest rates remain a dominant source of concern. Even with the Bank of Canada holding its policy rate at 2.25%, nearly two thirds of Canadians (64%) say they urgently need rates to fall. Meanwhile, 48% remain worried about their ability to repay debt, and 44% fear a future rate hike could push them toward bankruptcy.
“Even where Canadians see some improvement in their own debt situation, confidence about the year ahead remains fragile, particularly among those carrying high levels of debt,” says Bazian. “For these households, ongoing affordability challenges and borrowing costs leave little room for error as they head into 2026.”
Despite elevated anxiety, relatively few Canadians are seeking professional financial guidance. Only 11% report consulting a financial professional as part of their response to money stress. Meanwhile, 15% avoid discussing finances with family or professionals altogether, and 12% avoid thinking about financial responsibilities.
“Too many Canadians are trying to navigate financial challenges in isolation. There are government-regulated professionals available to help indebted Canadians understand debt-relief options, make informed decisions, and prevent financial stress from escalating,” says Bazian.
