A new poll conducted on behalf of accountants MNP offers more sobering insight on the financial fragility of Canadian households. See: 27% of Canadians already ‘in over their head’ with mortgage payments: MNP. Here are some highlights:
- 30% say any drop in the value of their home will cause them financial difficulties.
- Even with no price drop or increase in interest rates, 27% say they are already ‘in over their head’ in terms of funding their current mortgage payments and expenses.
- Over 70% rate their ability to cope with a 1% interest rate increase as less than optimal and 77% say they would have difficulty managing an increase of just $130 in their monthly payments.
- Those who have borrowed on home equity lines of credit are particularly vulnerable:
“Many are borrowing against their homes and using them to finance lifestyles they simply can’t afford. What’s worse is that many are not making regular payments against the principal, and the threat of an increase in interest rates might make it even harder to make ends meet,” Bazian said in the release. “We’ve been living with this ‘minimum payment mentality’ for far too long. Collectively we need to start looking critically at our debt loads and factoring in interest rate changes to see if the debt amassed is even affordable…For many, it already isn’t.”
A June report from the Financial Consumer Agency of Canada confirmed that Canadians owed $211 billion on 3 million home equity lines of credit (HELOCs) at the end of 2016, with 40% not making regular payments on the loans and 25% making only minimum or interest only payments. See: Line of credit use soars