Homeowners worried about finances as inflation, interest rates squeeze budgets
Posted June 3, 2022 7:25 am.
Last Updated June 3, 2022 7:41 am.
Rising interest rates and soaring inflation are hitting many homeowners hard, with those who bought during the pandemic especially worried about the squeeze on their household budgets.
A recent analysis has found new monthly mortgage payments on a typical home went up $800 between October 2021 and April 2022.
Since then, we’ve seen another 0.5 per cent jump in the Bank of Canada’s key overnight rate. There are predictions of up to a 0.75 percentage point hike in July, and at least two more rate increases are expected this year after that.
Add the steep inflation rate pushing up the cost of basic necessities and you get a sense of the vice tightening on the finances of many Canadians.
New research from Leger finds 40 per cent of homeowners are feeling the financial pinch right now, especially those who bought during the red-hot housing market through the pandemic when rates were at a historic low of 0.25 per cent.
Half of those who say they’re worried bought their homes within the last two years.
“Inflation is pushing the cost of essential goods higher and rising interest rates are squeezing anyone with a variable mortgage rate, home equity lines of credit, or other floating rate mortgage product,” said John Shmuel, managing editor of RATESDOTCA.
“Many homeowners will be searching for ways to cut their household budgets to accommodate this hike in expenses.”
The survey, for RATESDOTCA and BNN Bloomberg, finds younger Canadians — those aged 18 to 34 — are the most likely to say they are concerned about their finances. Almost two-thirds (62 per cent) of those are first-time homebuyers. Those aged 55 and older are more likely to say they are not concerned about their finances.
Fewer than half of Canadians asked say they can afford an extra $500 in monthly costs right now.
Only 10 per cent could deal with an unexpected expense over $1,000.