Reports reveal majority of those straining under sheltering costs are also struggling to stick to their food budgets
New data from the non-profit Angus Reid Institute shows how even before the upward march of the benchmark interest rate begins, household budgets are already getting squeezed under the weight of mortgage and rental costs.
In a new survey, three-fifths of Canadian mortgage holders (58%) said their payments eat into other parts of their budget. Three-quarters of renters (74%) feel the same way about their rent.
Among these Canadians homeowners and renters, 65% said adhering to the food budget is a challenge. A 92% majority said they have taken steps to adapt, including 72% who’ve cut out takeout costs and 62% who are buying cheaper brands at the store.
With an eye on a hot property market that gained a considerable number of mortgaged purchasers during the pandemic, Canada's central bank is carefully wielding a weapon to battle inflation - the benchmark interest rate, which impacts the cost of money across the country.
The Bank of Canada has lifted the benchmark rate for the first time since 2018. It now stands at 0.5 percent, up from 0.25 percent during the pandemic to keep the economy afloat when COVID-19 forced business closures and layoffs. The bank is anticipated to keep raising rates this year to combat inflation, and the impact on people with variable rate mortgages and those whose fixed rate mortgages come up for renewal could be significant.
The expense of payments is already crushing most mortgage holders' budgets. While two-fifths of respondents (42%) believe they can easily manage their payments, a larger proportion (46%) say they must be careful with their discretionary spending. One in ten people (11%) say it limits their lifestyle, and a small percentage (1%), say it's a genuine hardship to keep up with their hefty mortgage payments:
Homeowners with annual household earnings of less than $100,000 are less likely than those with greater incomes to report they have money left over after their mortgage payments.
Half of households earning six figures per year (49%) think they can easily manage their mortgage payments, while one-third of those earning less say the same. Meanwhile, nearly half of lower-income households (53%) believe their mortgage payments force them to limit their discretionary spending, compared to just 39% of those living above the $400,000 income threshold.
Men and women also have slightly different views on how stressful their mortgage is. One-third of women (34%) believe their mortgage is simple to manage, whereas half of men (49%) say the same.
At the same time, renters are having a harder difficulty dealing with the high cost of housing than mortgage holders. This is happening as vacancy rates in numerous areas decrease, forcing low-income people out. Nearly half (45%) say they must be careful with their spending on extras, 17% say their rent restricts their lifestyle, and one in ten (12%) say they are struggling to make ends meet because of their rent. One-third of renters over the age of 54 say they have no trouble paying their rent each month, the highest percentage of any age group.
When compared to individuals who do not have children, homeowners with younger children are nearly equally likely to indicate that their mortgage payments are easy or challenging. Three-in-ten (29%) of renters in households without children under the age of 13 say they have no trouble paying their rent; one-in-five (18%) of renters with children under the age of 13 say the same. Most people in both groups struggle to afford this necessary cost of living.
