June 13, 2022
Real Estate News
RYPM
Close to a
quarter of Canadian homeowners say they’d be forced to sell their homes if
interest rates increase any further, according to a new Manulife Financial report.
With three
Bank of Canada interest rate hikes already implemented and more
expected throughout the remainder of the year, Canadian homeowners are feeling
the financial pressure. One in five Canadians said they expect rising interest
rates to have a “significant impact on their overall mortgage, debt, and
financial situation.” In fact, with interest rates having already increased
from a historically low 0.25% to 1.5% as of June 1st, 18% of Canadians said
they believe they can no longer afford the house they own.
For those
who do not yet own a home, the idea of doing so is becoming seemingly further
and further out of reach. Two-thirds of respondents said they do not view home
ownership as being affordable in their community. And a staggering 71% of
Canadians who do not yet own a home worry about saving up for one, with as many
as two in five Canadians saying they “worry a lot about this.”
“In the past
few years, we’ve seen a huge shift in the housing market, and in parallel, we’re
witnessing interest rates and inflation rising — all contributing to concerns
around Canadian home ownership, affordability, and Canadians’ mental health,”
said Vice President of Sales for Manulife Bank Lysa Fitzgerald. “As we
move forward, it’s imperative Canadians use resources available to them to talk
to certified professionals and find ways to try and become more financially
flexible and ensure they’re taking a detailed look at their personal financial
plans before making major financial decisions.”
Less than
half of Canadians surveyed — just 46% — said they felt prepared for rising
interest rates. Even fewer — 42% — said they were prepared for increased
inflation, and just 40% said they were prepared for rising home prices. Sadly,
nearly half of Canadians said they would struggle to handle unexpected expenses
or are reconsidering summer vacation plans due to affordability concerns.
But what’s
perhaps even more concerning is that a sizable percentage of Canadians don’t
have an understanding of how interest rates and inflation work, and no roadmap
for how to handle their changing finances.
“The survey
revealed nearly one-third of Canadians admit they don’t understand how inflation
or interest rates work, close to three in four do not have a written financial
plan and almost half do not have a household budget, and that’s particularly
telling when reviewing the results of this season’s Manulife Bank Debt Survey
results,” Fitzgerald said.