Survey finds more Canadians are living beyond their means
Over 60 per cent of Canadians are spending 37 per cent of their income on housing, and 51 per cent say if they lost their main source of income they would default on their mortgage payments after a few months.
This is according to a new survey by Leger, done for the online mortgage marketplace called Rate Filter. Andy Hill, a co-founder of Rate Filter based in Vancouver, says that in the 2021 census showed that 30 per cent of Canadians were paying more than 30 per cent of their income on housing.
According to The Canadian Mortgage and Housing Association, in order for housing to be affordable, Canadians should not be paying more than 30 per cent of their pre-tax income on housing.
Now, it’s double that. Although Hill cautions that the sample size used in the Leger survey is only 1500 Canadians, compared to the census which tries to reach everyone.
Part of the reason the cost of housing has gone up so much is the Bank of Canada interest rates hikes. The prime lending rate was 2.45 per cent a year-and-a-half ago. Now it’s at 7.2 per cent. That’s an increase of almost five per cent.
High interest rates mean that some Canadians are paying much higher interest rates on their mortgages now than they were 18 months ago, contributing to the financial precarity more people are experiencing.
Hill calls the Bank of Canada “a blunt tool” that can be used to adjust the economy. In this case, the bank is raising interest rates in an attempt to even out inflation, or the high costs of goods and services Canadians have been experiencing, which started bubbling in the pandemic.
Along with inflation and high interest rates, Canadians are carrying more debt than ever before, Hill says.
All of these things along with a shortage of housing are contributing to what Hill calls “historic financial times.” Rate Filter wanted to do a survey to have data to mark these times, he said.