Paying bills getting harder, say debt experts
Last Updated: Tuesday, September 30, 2008 | 4:44 PM ET
The Canadian Press
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More Canadians are seeking financial relief through debt counselling agencies after maxing out their home equity and finding they're having trouble making their monthly bills, say experts.
"We are definitely seeing an increase in people that are contacting us that have basically exhausted all [financing] options with their bank," Amanda Miller, sales manager with DebtManagers Canada, said in an interview.
"They are not able to get loans anymore … [and] are not able to refinance their homes, after maxing out the equity in their properties."
DebtManagers, formerly called National Credit Counsellors of Canada, helps people to become debt free and avoid bankruptcy.
Miller could not put a figure on the percentage of the increase in counselling service visits, saying only that it is "not as dramatic" as in the United States, where the economy is in recession and the housing sector is slumping badly.
"Out of every 10 clients maybe one or two are referred to a bankruptcy trustee," she said.
Consumer confidence is being undermined by a number of things. Home values are slipping, more jobs are being cut and volatile markets are pounding investments, said Adrienne Warren, an economist with Scotiabank.
"If you're looking at consolidating debt through your home, it's more difficult to take money out of the home when house prices are flatter or even possibly falling," she said.
Canadian consumers are also cutting back on restaurant spending, taking more meals at home, and shifting their coffee consumption away from cafés to home brewing, RBC Capital Markets said in a note to clients on Tuesday.
High gas prices, slowing job growth, an edging up in mortgage rates, a cooling off in the economy have all combined, she said, to produce an "easing back" in consumer sentiment.
Consumers over at least the next six months are likely to put off the purchase of big-ticket items such as fridges and stoves, said Warren.
"They don't have the same purchasing power that they may have had six months to a year ago, with high gas, food and transportation prices," said Warren.
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