Residential Mortgage Commentary - Debt worries weigh on Canadian consumers

  • First National Financial LP

Most market watchers believe the Bank of Canada has ended its latest round of interest rate hikes.  Inflation is down and some mortgage rates are dropping.  But, debt saddled Canadians still appear to be wary about their finances.

The debt to disposable income ratio for the average Canadian household now stands at 187%, the highest in the G7.  Canadians are putting a record amount of their disposable income toward servicing debt, most of it from rising mortgage payments.

A poll by Nanos Research suggests nearly half of Canadians are worried about making their mortgage payments.  Nanos found that one in two Canadians with a mortgage say they are concerned (24%) or somewhat concerned (28%) about the ability to make their mortgage payments when they renew.

Nearly two-thirds of Canadians between 18 and 35 years old are concerned.  A little more than one-third of Canadians over age 55 are concerned.  Women tended to be more concerned than men.

Insolvency firm MNP, which tends to produce rather pessimistic reports, suggests Canadian attitudes about personal debt have sunk to a new low.  The company’s latest, quarterly Consumer Debt Index shows 63% of respondents are concerned about their ability to repay their debt.

Even though the Bank of Canada is expected to start trimming interest rates this year, it is forecasting on-going mortgage rate hikes.

“Our model predicts that, even if rates begin to fall, the required payment rate on mortgage debt will continue to climb in the coming years,” according to the Bank.

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