Mortgages tend to "crowd out" other financial accountabilities
Mortgage rate hikes have a significant negative impact on Canadians’ household finances, according to a new survey by Angus Reid Institute.
Nearly six in 10 (58%) Canadian mortgage holders said that their payments “crowd out” their other financial accountabilities. The situation is even more glaring among renters (74%), Angus Reid reported.
As many as two-thirds (65%) of these respondent groups said that their household food budget suffered due to rate hikes. Among these, 92% have adjusted their budgets accordingly, with 72% no longer going for takeout and 62% switching to cheaper brands.
While 42% said that they can easily manage their payments, 46% admitted that they are now more judicious when it comes to discretionary spending.
“Inflation, the runaway horse the Bank of Canada is trying to wrangle this year, is clearly not doing Canadians any favours,” Angus Reid said. “But few homeowners with a mortgage or renters have wiggle room to accommodate increases to the largest line item in their budget as interest rates rise.”
Nearly half (49%) of households earning six figures annually said they can easily service their mortgage debt, while one-third of those in households with lower incomes say the same. Among lower-income households, 53% said that they are more careful with their discretionary spending because of their mortgage payments.
“Canada’s central bank is carefully wielding a weapon to fight inflation – the benchmark interest rate, which affects the cost of money across the country – with an eye on a hot housing market that gained a significant number of mortgaged buyers during the pandemic,” Angus Reid said. “The bank is expected to continue to raise rates this year to fight inflation, and the impact could be significant on those with variable rate mortgages and those whose fixed rate mortgages coming up for renewal soon.”