Inflation and interest rate hikes weigh on Canadians

One in 10 Canadians expects to take on more debt to pay their mortgage

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Just one more sleep until the Bank of Canada Rate Decision, and in the meantime here is the sequel knowledge on how Canadians are coping with the rising cost of borrowing.

A poll released today by Dye & Durham and online forum Angus Reid found that the three percentage points the Bank has already raised has had “a significant chilling effect on Canadian spending”, especially immovable.

One in three Canadians say that the rapid and steady rise in interest rates this year has caused them to delay a real estate transaction or a major purchase. One in 10 say they have put off buying a home, while the same proportion expects to delay buying a home next year.

Since the Bank of Canada began raising rates in March, property values ​​in Canada have gone down for seven straight months and are now down 8.8% from their peak in February.

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Smaller markets in Ontario and British Columbia that led the frothy climb during the pandemic are bearing the brunt of the correction, said RBC economist Robert Hogue. For example, prices in Cambridge, Ontario. fell by 20%, Hamilton by 16% and Chilliwack, BC by 13%.

At the same time, the sharp increase in mortgage rates has dramatically reduced the affordability of many Canadians.

One in five homeowners surveyed say they expect rising rates will mean it will take them much longer to pay off their mortgage than they thought. Nearly one in 10 expects to take on more debt to pay their current mortgage.

With borrowing costs likely to rise further, Canadians surveyed were equally gloomy about selling, with nearly one in five expecting their home to never reach the value it had before the 2022 rate increases, according to the survey.

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Martha Vallance, chief operating officer of Dye & Durham, said the ripple effect this drop in sentiment will have on businesses dependent on consumer spending and property transactions in 2023 is significant.

“The effects that the double whammy of rising interest rates and recessionary concerns are having on housing spending and plans cannot be underestimated. The average Canadian is preoccupied with what lies ahead and preparing for a recession by tightening spending and delaying major purchases,” Vallance said in the press release.

And we are concerned, according to the poll. More than half, 53%, of Canadians believe the country is on the verge of a recession, while 30% believe we are already in one.

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Canadians are equally pessimistic about the Bank of Canada’s rate stance, with a third saying they expect the Bank to hike another 100 basis points before the end of the year, taking the rate to 4 .25%.

Disturbingly – especially for central bankers who want to stifle inflation expectations – nearly half, 48%, say they don’t think interest rate hikes so far have slowed inflation , and more than half, 53%, think inflation will continue to rise over the next six months.

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IN THE NEW New Conservative Party leader and incoming Prime Minister Rishi Sunak waves as he leaves Conservative Party headquarters in London after being announced as the winner of the leadership race on Monday. Sunak was named Conservative leader and next Prime Minister of the UK after being the only candidate to garner more than 100 votes from Conservative MPs in the competition for the top job. He was appointed Prime Minister by King Charles today, replacing Liz Truss, who lasted just 44 days before she resigned. Read more about the latest UK leader below in today’s leading indicator. Photo by Dan Kitwood/Getty Images

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  • Natural Resources Minister Jonathan Wilkinson to speak at the Canadian Club Toronto
  • Louise Chabot, Bloc Québécois critic for human resources, skills development and social development, will hold a press briefing on employment insurance for seasonal workers
  • Special Committee on Canada-People’s Republic of China Relations Meets in Ottawa
  • Natural Resources Minister Jonathan Wilkinson; Todd Smith, Ontario Minister of Energy; Ken Hartwick, President of Ontario Power Generation; and Ehren Cory, CEO of the Canada Infrastructure Bank, will make an announcement on nuclear power
  • The Standing Committee on International Trade meets with Nadia Theodore, Ambassador and Permanent Representative of Canada to the World Trade Organization
  • Energy, Mines and Resources Minister John Streicker and Community Services Minister Richard Mostyn make an announcement about the new Better Buildings program that supports energy-efficient renovations to Yukon homes and buildings
  • Today’s data: S&P CoreLogic Case-Shiller Home Price Index, US Conference Board Consumer Confidence Index
  • Earnings: Canadian National Railway, Lundin Mining, First Quantum Minerals, First National Financial, General Motors, General Electric, Halliburton, Coca-Cola, Alphabet, Visa, Twitter Microsoft

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Rishi Sunak, 42, became one of Britain’s youngest leaders of modern times when he was sworn in as Prime Minister today after winning the Conservative Party leadership race. In fact, the youngest in 200 years.

The multi-millionaire former hedge fund boss is also one of Westminster’s wealthiest politicians. A former Goldman Sachs analyst, Sunak has become the latest in a long line of former Goldman employees to become policymakers in the Group of Seven economies, Bloomberg reports. From December 2005 until last Sunday, there has always been a Goldman Sachs alumnus serving as G-7 prime minister, finance minister or central bank chief. Mark Carney, former governor of the Bank of Canada and the Bank of England, was one of them.

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The race was only halted when Mario Draghi stepped down as Italy’s prime minister on Sunday. Today’s chart is from Bloomberg.

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Are you on an adjustable rate mortgage and starting to sweat as the Bank of Canada raises rates? Those feeling the pressure on their budget might consider opting for a fixed rate mortgage. But before taking the plunge, it’s good to know all your options.

Our content partner MoneyWise can help.

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Today’s Posthaste was written by Pamela Heaven (@pamheaven), with additional reporting from The Canadian Press, Thomson Reuters and Bloomberg.

Do you have an idea for an article, a pitch, an embargoed report or a suggestion for this newsletter? Email us at [email protected], or hit reply to send us a note.

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