Despite an improved debt picture, financial worries and affordability challenges are holding many Canadians back
The debt pressures brought by COVID may be receding for households across Canada, but other lingering challenges and concerns are still preventing many from getting into the spirit of the holidays.
In the latest edition of Manulife Bank’s bi-annual Debt Survey, 68% of Canadians polled said they have some form of non-mortgage debt, compared to 73% earlier in the pandemic and 76% before that. Over the course of the COVID crisis, the share of Canadians carrying most forms of debt has either declined or remained flat, the study found.
“This shows us that during the pandemic, many Canadians have been doing an admirable job of paying down their debt and planning for their future,” said Rick Lunny, president & CEO of Manulife Bank.
But while fewer Canadians overall are saddled with debt compared to last year, only 22% of respondents said they’re raising their holiday spending budget this year, compared to 28% in Fall 2018. Over the same period, the share of respondents saying they planned to buy gifts this season dropped five percentage points to 61%.
External financial pressures could be weighing on Canadians. Around two fifths (42%) said their spending is outpacing their income. Beyond that, 88% expressed concerns about Canada’s elevated inflation rate, and nearly two thirds (64%) share the feeling that the cost of living has gone up.
Housing affordability was another dominant theme. Among respondents who don’t own a home, with nearly three quarters (73%) said they want to own one but can’t afford it. A 71% majority of Canadians also expressed worries about housing prices in their local community, and 87% believe Canada is facing an affordable housing crisis; both of those statistics are higher relative to findings from this past spring.
“Despite housing prices being at record highs, home ownership is achievable in the current interest rate environment – for those who can make the down payment,” said Lunny. “That’s why flexible financial planning is imperative. No matter what your situation is or the environment we operate in, people need to have a good understanding of where their money goes, how they can minimize their current spending and how they can find ways to save more towards their goals.”
The survey also shed light on COVID’s continuing toll on Canadians’ well-being, with 31% of respondents perceiving that their overall mental health has worsened over the past year compared to just 12% who feel it’s improved. The future also looks bleak for more than 77% of Canadians who were worried about the potential for more lockdowns and pandemic restrictions.
