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MNP Ltd.’s latest consumer-debt survey also found that 61 per cent of those polled “feel now is a good time to buy things they otherwise might not be able to afford,” the insolvency firm said.
“I’ve never seen the intent to buy as high as it is right now,” True North’s Eisner said. “There are a lot of Canadians who are looking to upgrade their house or just looking to buy a home for the first time.”
The debt that comes with such home purchases has been a source of concern for policymakers, but historically low interest rates brought on by COVID-19 have been keeping borrowing costs low for consumers. The household debt-service ratio, which is total debt payments as a share of disposable income, was 13.22 per cent in the third quarter, below pre-pandemic levels.
I’ve never seen the intent to buy as high as it is right now
Dan Eisner, chief executive, True North Mortgage Inc.
But if borrowing costs start ticking up, household budgets could start really getting squeezed. MNP found that 47 per cent of those surveyed were worried about landing in financial trouble if interest rates rise.
However, Renner said the Conference Board does not see interest rates rising again until 2023. In the meantime, Canada’s housing market is expected to stay strong, even in the midst of a second wave of COVID-19, which could continue to drive up prices and inflate the amount of mortgage debt being built up.
“We see little that will stop activity or prices from reaching new highs in 2021,” Royal Bank of Canada economist Robert Hogue wrote in a Jan. 15 report on the housing market. “Historically low interest rates, changing housing needs, high household savings and improving consumer confidence will keep demand supercharged. A dearth of supply will maintain the heat on prices.”
Financial Post
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