With growing expectations that the Bank of Canada is going to move ahead with interest rate increases in the second half of next year, concerns are building about affordability, debt and the standard of living in Canada.
The household debt-to-income ratio has been a serious economic concern in this country for several years. The latest “Affordability Index” produced by debt services firm BDO Debt Solutions suggests the pandemic may be contributing to that problem.
The survey indicates 43% of the people who took part – and who have debt – increased that debt due to the pandemic, up 4% from last year. It also shows that 26% of respondents incurred at least one new type of debt. For more than a quarter of them, it was credit card debt.
Of all the respondents with a new type of debt, 70% say it has caused their standard of living to decrease. Just 10% of that group feel confident they will be able to get back to their pre-pandemic standard of living.
House prices have jumped sharply during the pandemic. Despite hectic sales, the survey suggests 45% of Canadians are facing affordability barriers to home ownership, a 7% increase year-over-year.
Three-quarters of the respondents aged 35 to 54, who do not own a home, say they are unlikely to buy in the next three years. Nearly half of the respondents – of all age groups – who say they are unlikely to own a home in the next three years indicate they are unable to save enough for a down payment.