Nearly half of mortgage holders say they are going deeper into debt to keep up home loan payments amid increased cost of living and higher interest rates, according to a survey report by the Financial Consumer Agency of Canada (FCAC).
In a survey that examines the financial well-being of Canadians, FCAC researchers found that homeowners with mortgages reported having more debt, which increased 16.1 percent to almost 47.7 percent from August 2020 to December 2022.
As first reported by Blacklock’s Reporter, the findings showed that the number of homeowners without a mortgage reporting more debt rose from nearly 30 percent to 41 percent. Among renters, that proportion rose by 12.7 percent to 57.5 percent.
“Two-thirds of mortgage holders report having trouble meeting their financial commitments,” said the June 13 report, while noting over one-third of Canadians (35.5 percent) have a mortgage.
The report added that mortgage holders who are able to keep up with their financial commitments without problems have dropped by over one-fifth since August 2020.
“Only 1 in 3 mortgage holders now say they can meet their financial commitments without difficulty,” researchers wrote.
Draw on Savings
The findings were based on monthly questionnaires with 1,000 Canadians aged 18 and over. The results were drawn from surveys predating the last two Bank of Canada rate increases that hiked the benchmark charge on inter-bank loans from 4.5 to 5 percent—the highest rate in 22 years.
The FCAC said the proportion of mortgage holders who need to draw on their savings “due to the economic context” has risen by 20 percentage points since August 2020.
“An increasing percentage of Canadians are spending more than they earn,” the report said. “The percentage of mortgage holders doing so is now the highest it has been since the survey began.”
In addition, homeowners with or without mortgages are increasingly borrowing money to meet their daily expenses compared to renters, with an increase of 12.2, 13.2, and 5.4 percentage points, respectively, during the survey period.
The researchers noted that stress levels for mortgage holders are growing at a faster rate than those without a mortgage and those who rent.
As of December 2022, the gap between the stress levels of homeowners with and without a mortgage was the highest it had been since the survey began, 16.7 percent versus 7.8 percent in the summer of 2020, they wrote.
The Bank of Canada’s next interest rate announcement is due Sept. 6. Bank Governor Tiff Macklem told reporters July 12 that high rates will continue into 2024. “It is too early to be talking about interest rate cuts,” he said.