Canada

A Third of Canadians Say They’re “House Poor,” And A Fifth Regret Their Purchase

Canada’s highly indebted households didn’t see their finances improve during the pandemic. Many did get a lot more neat stuff they couldn’t afford without low interest rates though. That’s the takeaway from the MNP Consumer Debt Index, conducted quarterly by Ipsos. The poll found a third of Canadians consider themselves “house poor.” Even more are falling behind on bills, and won’t be able to make ends meet without more debt.

A Third of Canadians Are Now “House Poor”

Millions of Canadians are house poor, according to the latest survey data. A third (32%) of Canadians who own a home claim to be “house poor.” This is when a household devotes so much of their income to housing, they can’t afford much else.  

Additionally, the survey found a fifth of homeowners said they regret their purchase. This is due entirely to the financial impact, and not because of the kitchen tile. All in, the firm estimates 5.5 million Canadians are vulnerable to financial shock. That’s a fancy way of saying rising interest rates or loss of job could blow up their budget.

Half of Canadians Can’t Cover Their Expenses Without More Debt

Canadian households are struggling with finances, even beyond homeowners. Almost half (45%) won’t be able to cover their living expenses in 12 months, without taking on more debt. The sentiment is spreading too — 51% said they’re now worried about their debt repayment.

The index also shows the number of people unable to pay their bills is rising to the highest level recorded. It shows 30% of households are unable to meet all of their financial commitments. This was the highest level since the index was created in 2017. Though it won’t show up like it did back then… at least for now. 

Delinquencies, and insolvencies have been unusually low these days. This is due to lenders accommodating borrowers, and hoping they resume bill payment. The only thing worse than losing money is having to report a delinquency. They would much rather someone pay their bills, over stiffing them or seeking to discharge the debt. This means the only people defaulting really have to. Not exactly an accurate view of reality, but clearly it’s easier for economists and politicians to understand. 

Over Half of Canadians Are Worse Off After The Pandemic

Despite the narrative of pent-up savings, and soaring incomes — a lot of people are worse off. Three in ten Canadians feel the pandemic made their debt problems worse. Three in five (2x the previous rate) used the pandemic’s low rates to buy something they couldn’t otherwise afford. But, really… Who doesn’t splurge on something they can’t afford during a pandemic?

There are a lot of data points that paint a picture of stronger household finances during the pandemic. The household savings rate, for example, is often used to show household strength. In reality, further analysis reveals most of those savings are with the wealthiest of households. The one percent saved a buttload of money during the pandemic, not households in general. Though that doesn’t quite have the same ring to it. 

The reality is Canada’s highly indebted households were… well, highly indebted before the pandemic. Shutting down most of retail and asking people to work from home didn’t fix that. In fact, it made it worse. A lot worse for some. It doesn’t take a genius to figure out why most households are now worried about the cost of living.

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26 Comments

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  • lopez 2 months ago

    prosperity built on quicksand

  • Peter Sarantopoulos 2 months ago

    It’s just a matter of time before this all comes crashing down. Interest rates are ridiculously low and even negative when taking into account inflation.

    Inflation is heating up and will first hurt those lower on the ladder.

    The US has no choice but to let their their dollar take a hit.

    Otherwise raising interest rates will trigger a recession that we haven’t seen before and j tank or they begin to raise rates.

    Pick your poison.

  • Ksnn 2 months ago

    To answer this question we need to ask another question. For those of you who didn’t buy yet, do you regret not buying 10 yrs ago? (Let say you are able to). Thats exactly the issue, there are still tons of people who would like to buy (demand) but the price is just too high. The issue is there is demand but the price is too high. With all the funny money printed in the past year the price will only get higher. Don’t wait, if you cant afford Toronto or Vancouver buy in other big cities.

    • david 2 months ago

      I don’t regret not buying 10 years ago, I managed to rent for not much downtown MTL for all these years and could invest money or finance other projects. The situation was already stupid 10 years ago, the feds just made people more indebted since then.

      With the situation as it is now, I don’t want to buy on the country side either; I contemplate moving and working abroad instead.

      • Chuck 2 months ago

        Me neither. I used the capital to invest in a business, and now employ 34 people. Somehow employing dozens of people doesn’t afford the same lifestyle as someone that made $40k/year 10 years ago though.

        Canada can choose if it wants to be a country of productivity, or expensive real estate. They both can’t exist at the same time, and the latter doesn’t last when the jobs go with it. So there’s that.

        • MJ 2 months ago

          Good observation. A couple from the U.S. who got great IT jobs here in Victoria cannot find a rental because they have a dog. They are looking at the $3500 per month range and nothing. My friend who sells pre-sales condos was just told that some investors are interested in multiple units–that have already been dedicated to buyers so she is about to do battle with her supervisor. Victoria is no longer livable for many people, even high paid folks and real estate seems to be the big game in town. The U.S. couple wanted to get away from the guns and not to see friends or themselves bankrupted by medical expenses. Too bad the choice here is to live to service day-to-day living expenses.

          • Dee 2 months ago

            That is the problem, everyone thinks Canada is the answer to all their problems and have to pay a high price because of that. We have a very small area with a decent climate and the whole word wants to live in there

    • alex 2 months ago

      By definition – demand requires that an individual be willing AND able to purchase a good. As you stated, many people are willing, but due to price constraints, are largely unable.

      This is why demand is negative sloping for normal goods i.e as prices drop, demand goes higher.

      Your “advice” makes you sound like a realtor who is trying to goad people into purchasing a home, it’s written all over your rhetoric and the fact that you apparently have a chimp level understanding of basic economic principles.

    • Average Man 2 months ago

      Look man. 10 years ago I was low key drinking myself to death and struggled to even pay rent on time. Buying would have been a disaster for me. In an alternative universe? Sure I wish I bought 10 years ago if I were a different person. But if you’re telling me that I should buy in a city I have no interest living in because the next 10 years are gonna be like the last 10 years, that’s a lot of assumptions.

    • Paul 2 months ago

      As many have been pointing out it’s a house of cards and I don’t appreciate your FOMO rhetoric about pumping other cities. My guess is you are on the flipping ladder and troll various social media platforms seeing if you can “fry it up.” Correct me if I am wrong. Debt is sky high. Prices will drop when values drop. WFH changes will create inventory in areas that never had any business being included in the bubble. So you tell me where is your never ending ladder to the sky?

      Maybe I’ve missed something.

  • Smug Canadians 2 months ago

    Uh oh! The realtors are circling the carcass!

  • Trader Jim 2 months ago

    Most people won’t discuss their finances publicly, so it’s hard to get a gauge on this. 10 years ago when I bought in Toronto, every person moving into my neighborhood also had a six-figure luxury vehicle with them. Now they’re driving up a beat up Kia, and you’re wondering how they could afford a $6k/month mortgage with a modest professional salary.

    • Jim 2 months ago

      because their first or second home went up 200% in the past decade, that’s how

    • Lisa McGill 2 months ago

      Bank of Mom and Dad will cosign on a mortgage but forget cosigning the Range Rover lease! Grandparents will also pay for private school, summer camp…..

  • Vincent Fornelli 2 months ago

    So what? They can’t buy a couple of toys. They’ll be happy with the fact they buckled down and own in a few years when their salary adjusts and they’re sitting on fat home equity.

    • Mortgage Guy 2 months ago

      A little more complicated than that. When people have the “my house is my retirement” mindset, they tend to neglect other areas of their retirement. This is why so many Boomers don’t have much else, and depend on their home for retirement.

      You’re much better off buying a house you can afford that might be a little smaller, than extending yourself and buying “too much” house. Life’s a balance of the things we want, the things we need, and the things that fulfill us. Never go all in on just one of those.

      • Mica 2 months ago

        Exactly. My retirement funds are just like any other expense. I consider it the same way as my food and shelter (because that’s what it is).

        Great if my house is worth a ton later, but depending on that is like buying a lottery ticket.

    • Whiskey Foxtrot 2 months ago

      Hey, bruh. You have to wear gloves, or does the knuckle dragging not bother you anymore?

    • Average Man 2 months ago

      Except it’s not just “toys.” It’s the inability to save or withstand financial shocks.

  • Charlie Lee 2 months ago

    Never spend more than you can afford to lo… I guess no one is losing anything. Oh look, inflation hit a new record this morning.

  • Jim 2 months ago

    Increased inflation = lower REAL interest rates. If we assume inflation is 3.5% in Canada (that is CPI, in reality it is closer to 10% when you count home and rental prices over the past 10 years), and you can borrow at 2% …. that means the REAL interest rate is between -1.5% and -8%. This is stimulus. This means any sane person will take on mortgage debt as opposed to saving money (or take on some other form of debt that gets a return, and since the government/central bank has intervened to push down interest rates and bond yield, that leaves 2 options – stock market or real estate)

    The government wants inflation, because they want to stimulate the economy, and also because their debt obligations become easier to service.

    This is all by design. And because it is by design, it WILL NOT CHANGE.

    So leverage up and borrow as much money as possible, buy the first house you can win, or dump that money into the stock market. This is the system the Canadian government has set up. Saving money is a fools game.

    • alex 2 months ago

      This is some of the most ignorant and toxic advice I have seen on this platform.

      People like you end up asking themselves where it all went wrong once they end up wiped out after one bad recession.

      You’re making quite a bit of false assumptions as well, namely that income is rising with inflation (Which it is not), that inflation will be higher than interest rates for the next 25+ years (Which it likely won’t) and that there is no risk of any black swan events/shift in government policies/economic downturns that can cause the equity value of homes to evaporate as they have in the past many times before.

      Many average people seem to think of stock investors as the risk takers, but ironically it seems like they’re the only ones practicing risk management these days.

    • Paul 2 months ago

      No one mentioned saving money on here.

      Please you pile on as much debt as possible and when the dragon king strikes come back here and tell us how you will lose everything. 2008 largely missed home owners in Canada. This time it won’t pass us. It will be a direct hit.

    • D 2 months ago

      A real interest rate of 1% will wipe out the proles that took your advice. It’s better to hold cash then risk the incoming interest rate hike.

  • Smug Canadians 2 months ago

    The knuckles are only dragging under the weight of all that “fat home equity”! hahaha

    • questions guy 2 months ago

      home equity doesn’t buy food or pay the heating bill… borrowing against does

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