study | Financial stress hits Quebec less hard

The majority of Quebecers don’t budget for their mortgage, according to a study by IG Wealth Management released Tuesday. They are also less stressed than the rest of Canada about their ability to pay it off in a rising interest rate environment.

Posted at 7:00 am

Isabelle Dube

Isabelle Dube
The press

Mortgage payments are among the largest monthly expenses for Quebecers. However, when it comes time to force yourself to create a budget, the mortgage isn’t one of them. According to the study, only 43% of Quebecers include it in their budget.

“We are all surprised to see this data,” said Carl Thibeault, CPA and senior vice-president for Quebec at IG Wealth Management. “To explain this fact, one of the hypotheses would be that people take taxes and mortgages as obligatory expenses and plan for what isn’t. »

Respondents indicated that their budget included expenses such as groceries (90%), gas (72%), entertainment (54%) and savings (54%).

The change in interest rates, depending on the type of mortgage taken out, fixed or variable interest rate, is still problematic, as this can affect the amount to be paid monthly.

Carl Thibeault, Chartered Accountant

Another hypothesis is the low interest rates that have persisted for a good ten years. Here are the published rates for 5-year conventional closed-end mortgages as listed by Statistics Canada. These are the rates without the discounts given by the lenders.

mortgage rates

June 2010: 5.18%

July 2021: 3.20% (lowest observed)

June 2022: 5.05%

“That could have influenced people’s behavior,” says Carl Thibeault. A 25 basis point swing, from 50 basis points, is less significant and we tell ourselves we’ll get there one way or the other. If we vary with larger data, it becomes significant. »

ability to pay

The study also shows that 56% of Canadian mortgagors fear they will not be able to make their mortgage payments if interest rates continue to rise. In Quebec, however, that number drops to 35%. “What might explain this difference is that Quebec is a far cry from Toronto and Vancouver prices,” says Carl Thibeault.

If a $300,000 adjustable rate mortgage goes from 4% to 6%, the owner has to pay $350 more per month.

Yet 45% of respondents in Quebec (60% of Canadians) believe rising interest rates and inflationary pressures will require them to reduce spending. Some are concerned about the coming months: 35% of Quebecers (43% of Canadians) don’t know how to “make ends meet” on a monthly basis.

Only 45% believe they will have paid off their mortgage by the time they retire. “If you’re retired and you continue to pay off a larger mortgage than expected, it can affect the remaining balance for groceries and miscellaneous items,” concludes Carl Thibeault.

This study was conducted online from July 28 to August 8, 2022 among 1590 Canadian adults.

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  • Total Adjustable Rate Mortgages ($477,481 million)
    lower than fixed rate loans ($957,500 million).

    Source: Bank of Canada, June 2022

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