Economic Outlook: Burdened by debt and rising housing costs, three-in-ten Canadians ‘struggling’ to get by
Number of mortgage holders voicing difficulty with housing costs up 11 points compared to last June
June 5, 2023 – Inflation has proven a difficult foe for the Bank of Canada to defeat. After the central bank paused for two rate cycles, economists are speculating that a rate hike may be forthcoming as soon as this week after higher-than-expected inflation numbers in May and economic growth in the first quarter of 2023.
This would spell more trouble for the more than half (54%) of renters and approaching half (45%) of mortgage-holders who say they are already finding their monthly payment for housing tough or very difficult to manage, according to new data from the non-profit Angus Reid Institute.
Interest rates have risen significantly since the beginning of 2022 as the Bank of Canada has tried to cool rising inflation. This has affected both homeowners with mortgages as the cost of borrowing has gone up and renters, many of whose landlords are affected by the interest rate increases. Indeed, since June 2022, both renters and owners are more likely to report difficulties paying their rent or mortgage, respectively. One year ago, one-in-five (19%) renters reported it was very difficult, now one-quarter (24%) say the same. The proportion of owners who find their mortgage difficult to manage has risen from one-third (34%) to 45 per cent.
Housing affordability is just one gust among many financial headwinds faced by Canadians at the moment. The cost of groceries, too, have increased, often faster than the core inflation rate itself. As the cost of these two necessities have risen, many Canadians have used credit to keep up. Overall consumer debt has hit a record high in Canada, and any further rate increases from the Bank of Canada would put pressure on Canadians holding credit card balances and other loans. Already, one-quarter (26%) say their debt is a major source of stress for them. Two-in-five (42%) worry about their debt in a more minor way. This figure is higher among mortgage holders (30% major source of stress, 51% minor source).
Overall, half (46%) say they are in worse shape financially than they were last June. Two-in-five (39%) are holding steady, while a handful (14%) say they are trending positively. These numbers have been fairly consistent since the beginning of 2022, when concerning inflation trends first caused the bank to act.
More Key Findings:
- The Angus Reid Institute Economic Stress Index finds one-in-five Canadians (21%) Thriving, one-quarter (26%) Comfortable, one-in-five (22%) Uncomfortable and three-in-ten (31%) Struggling. The latter figure has increased six points from June of last year.
- Both men (41%) and women (33%) between the ages of 35 and 54 are more likely than their older and younger peers to be Struggling financially.
- One third (32%) Canadians figure they will be worse off financially next year. This financial pessimism rises to nearly two-thirds (63%) among the Struggling financially.
About ARI
The Angus Reid Institute (ARI) was founded in October 2014 by pollster and sociologist, Dr. Angus Reid. ARI is a national, not-for-profit, non-partisan public opinion research foundation established to advance education by commissioning, conducting and disseminating to the public accessible and impartial statistical data, research and policy analysis on economics, political science, philanthropy, public administration, domestic and international affairs and other socio-economic issues of importance to Canada and its world.
Note: Because its small population precludes drawing discrete samples over multiple waves, data on Prince Edward Island is not released.
INDEX
Part One: Nearly half are worse off now compared to last year
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What about next year?
Part Two: The Economic Stress Index
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Those struggling see little relief in sight
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Cost of living dominates concerns
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The debt story: one-quarter of Canadians say this is a major concern
Part Three: Renters and homeowners
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Increasing difficulty in paying for housing
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Renters, mortgage owners more likely to be Struggling
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Debt stress and home ownership
Part One: Nearly half are worse off now compared to last year
The Bank of Canada had two opportunities to change its policy interest rate this spring and chose to stand pat. This was seen as a positive sign that the year’s long battle against inflation waged by the central bank was starting to be won. From March 2022 to January 2023, the bank had increased interest rates eight times, raising its policy rate from a historic low of 0.25 per cent to 4.5 per cent.
However, there are emerging signs that inflation has not been tamed. The economy grew faster than predicted in the first quarter of 2023. That, paired with higher than expected inflation in April, has many economists believing further rate hikes may be on the table.
The effect of higher inflation has been considerable on Canadian finances. At the outset of 2022, Canadians became more likely to believe that they were worse off now financially than they were a year ago. Canadians’ belief that their finances are deteriorating has held consistently for the last year. Approaching half (46%) of Canadians say they are in a worse financial position than they were last year. Two-in-five (39%) say they are treading water, while few (14%) believe they have improved their standing:
What about next year?
One-third (32%) of Canadians believe they will be worse off a year from now while one-in-five (19%) say the opposite and believe they are on the financial upswing. During the first year of the COVID-19 pandemic, there were more Canadians who believed they would be better off than worse next year. At the end of 2021, that flipped. Historically, however, it was usually the case that Canadians who were financially pessimistic outweighed those who were optimistic:
Part Two: The Economic Stress Index
To better understand Canadians’ financial circumstances, the Angus Reid Institute created the Economic Stress Index in January 2022. The index analyzes variables relating to household costs, debt and stress, as well as financial self-reflection, optimism and pessimism among Canadians. This results in four groups: the Thriving, the Comfortable, the Uncomfortable and the Struggling. Currently, one-in-five (21%) Canadians fall into the Thriving category, one-quarter (26%) are Comfortable, one-in-five (22%) Uncomfortable and three-in-ten (31%) are assessed to be Struggling.
Since June 2022, there has been a six-point increase in the proportion of Canadians who fall into the Struggling category:
Those living in households most likely to have children under the age of 18 are much more likely to be Struggling than others. Meanwhile, Canadians over the age of 64 are the most likely age group to be Thriving (29%). For age and gender combinations, view detailed tables here.
Inflation and increasing housing costs have affected the entire country, but Saskatchewan and Newfoundland and Labrador are home to the highest levels of economic stress. Unemployment continues to be a challenge in Newfoundland and Labrador, and though Saskatchewan’s provincial economy appears strong, the percentage of residents seeking debt relief has increased in recent years:
Those struggling see little relief in sight
Those who find themselves in dire straits financially are not optimistic about the year to come. Two-thirds (63%) say they expect to be in a worse position financially a year from now. This is nearly double the rate of the Uncomfortable (34%) and triple the rate of those who are Comfortable (18%). Meanwhile, two-in-five (40%) of the Thriving expect to continue to thrive:
Cost of living dominates concerns
There are two issues that Canadians’ fret over more so than others: cost of living (62%) and health care (47%). However, for those feeling the tightest pinch on their finances, inflation is a much higher priority. Three-quarters (72%) of the struggling select it as one of the top issues facing the country, nearly double the rate of any other. At the other end of the index, approaching half (45%) of the Thriving are concerned with the rising cost of living, but the issue falls behind health care (55%) among that group:
The debt story: one-quarter of Canadians say this is a major concern
Canadians’ household debt levels have increased significantly in recent years. In fact, according to an analysis done by the Canadian Mortgage and Housing Corporation, Canadians have the highest household debt levels of all G7 countries. While household debt has been reduced in the United States and United Kingdom over the past decade, it continues to rise in Canada – largely due to skyrocketing home prices. Canada’s household debt level is – as of 2021 – seven per cent higher than the nation’s total gross domestic product.
For this reason, it is perhaps unsurprising that many Canadians profess debt challenges. One-quarter (26%) say this is a major source of stress, while two-in-five (42%) say it is a more minor concern:
Debt affects a proportion of the population across all income levels, but the stress caused by owing is most profound among those with lower income levels:
Part Three: Renters and homeowners
Increasing difficulty in paying for housing
While mortgages are costing the average Canadian home buyer more each year, they’re not alone in facing an increasing cost of living. Renters on average saw an 11 per cent increase across the country in 2022, with competitive urban centres increasing even more.
There has been a five-point increase in those having a difficult time covering their housing costs since last June:
Notably, the percentage of those having difficulty with housing costs has increased among both renters and homeowners over the past year. That said, the percentage increase among homeowners is significantly higher – from 34 per cent in June of last year to 45 per cent this year:
Renters, mortgage owners more likely to be Struggling
Looking at these groups across the Economic Stress Index, the value of having paid off a mortgage is evident. Those who own their home and are not paying a mortgage are vastly more likely than other groups to be Thriving, while more than one-in-three with a mortgage (35%) are Struggling alongside a similar number of renters (38%):
Debt stress and home ownership
Four-in-five who are actively paying a mortgage (81%) face a level of stress regarding their debt, twice as many compared to those who have no mortgage. As well, renters and owners with a mortgage are three-times as likely as homeowners who have paid off their home to report finding their debt levels to be majorly stressful:
Survey Methodology:
The Angus Reid Institute conducted an online survey from May 30 to June 2, 2023 among a representative randomized sample of 2,808 Canadian adults who are members of Angus Reid Forum. For comparison purposes only, a probability sample of this size would carry a margin of error of +/- 2 percentage points, 19 times out of 20. Discrepancies in or between totals are due to rounding. The survey was self-commissioned and paid for by ARI.
For detailed results by age, gender, region, education, and other demographics, click here.
For detailed results by the Economic Stress Index, click here.
For detailed results by living arrangement, click here.
To read the full report, including detailed tables and methodology, click here.
To read the questionnaire in English and French, click here.
Image – Dylan Gillis/Unsplash
MEDIA CONTACT:
Shachi Kurl, President: 604.908.1693 shachi.kurl@angusreid.org @shachikurl
Dave Korzinski, Research Director: 250.899.0821 dave.korzinski@angusreid.org
