WATERLOO, ON, March 29 2011 – For the fourth consecutive quarter, Canadian homeowners say debt-reduction remains one of their top financial priorities, according to a recent poll for Manulife Bank of Canada. Nearly three in 10 homeowners rated debt freedom as “10” out of 10 – their top financial priority. More than seven in 10 (71 per cent) rated debt freedom at 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.”
Many struggle to reduce debt
Despite naming ‘debt freedom’ as a top priority, more than four out of 10 say 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 (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 (23 per cent) 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 30-55 had no debt at any time in the past 12 months – relatively unchanged from previous quarters.
Debt freedom a high priority
“It’s encouraging that homeowners are focused on debt reduction, but these results suggest many find it very difficult to make any headway. 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,” suggested Mr. Conick.
Only about a quarter of homeowners seek professional financial advice when it comes to managing debt and day-to-day cash flow.
“People stand a far better chance of reaching their goals if they work with a financial advisor and have a plan in place,” Mr. Conick explained.
“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,” he said. “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.”
Talking among themselves about debt
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 8% 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.
“For many homeowners, the key to reducing this stress and tackling their debt is to seek outside advice, then take action on that advice,” suggests Mr. Conick. “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.”
Manulife Bank launched Canada’s first all-in-one account, Manulife One, in 1999 to help Canadians better manage their finances. The all-in-one account brings all your banking together to simplify your finances so income and savings can work harder to reduce debt faster.
An online financial calculator at manulifeone.ca helps Canadian homeowners understand how much interest they could save and how much more quickly they could become debt-free simply by managing their banking needs more efficiently within a single account.
Manulife Bank believes that by comparing their current way of banking to a more efficient, all-in-one structure, mortgage-holders may gain a better sense of the factors that ultimately drive their interest costs and learn how they could become debt-free more quickly.
The Manulife Bank of Canada poll surveyed 1,000 Canadian homeowners between ages 30 to 55 with household income of more than $50,000. It was conducted online by Research House from February 14-28, 2011
For more information about Manulife One, ask your advisor for a referral or find your closest Manulife Banking Consultant by visiting www.manulifeone.ca.
About Manulife Bank
Established in 1993, Manulife Bank was the first federally regulated bank opened by an insurance company in Canada. It is a Schedule l federally chartered bank and a wholly-owned subsidiary of Manulife Financial. As Canada’s first advisor-based bank, it has successfully grown to nearly $16 billion in assets and serves clients across Canada. Manulife Bank provides its innovative Manulife One account and deposit and loan products through independent financial advisors to help individuals make the most of their financial plan.
About Manulife Financial
Manulife Financial is a leading Canadian-based financial services group operating in 22 countries and territories worldwide. For more than 120 years, clients worldwide have looked to Manulife for strong, reliable, trustworthy and forward-thinking solutions for their most significant financial decisions. Our international network of employees, agents and distribution partners offers financial protection and wealth management products and services to millions of clients around the world. We provide asset management services to institutional customers worldwide as well as reinsurance solutions, specializing in life and property and casualty retrocession. Funds under management by Manulife Financial and its subsidiaries were $475 billion (US$478 billion) as at December 31, 2010. The Company operates as Manulife Financial in Canada and Asia and primarily as John Hancock in the United States.
Manulife Financial Corporation trades as ‘MFC’ on the TSX, NYSE and PSE, and under ‘945’ on the SEHK. Manulife Financial can be found on the Internet at www.manulife.com.