Posthaste: Canadians brace for mortgage renewal cliff that could hike payments by 70%
The holiday spending season is upon us, and poll after poll reveals that this year Canadians are keeping a tighter grip on their wallets.
More than half of Canadians say they will spend less on the holiday this year and 61 per cent have cut back on discretionary spending overall in recent months, says a recent survey by the Angus Reid Institute.
Inflation, though it has eased significantly, continues to be a drag, but for many Canadians another financial worry is looming on the horizon.
“Instead of the Grinch, it could be mortgage renewals that steal Christmas this year,” said Royce Mendes, head of macro strategy at Desjardins.
Signs are mounting that Canadians are hunkering down for a tough time ahead.
Over the past year, term deposits at Canadian banks have risen more than 40 per cent to a total of $175 billion, said Mendes in his note. According to recent data, Canadians saved 5.1 per cent of their disposable income in the third quarter, higher than the average of 2.4 per cent between 2015 and 2019.
At the same time the volume of household credit is declining. Adjusted for inflation, consumer credit fell by 1 per cent in the year to September, National Bank economists estimate. The last time that happened was in the 1990s recession when the prime rate was 14 per cent.
“Canadians are spending less to save more,” said Mendes. When you take out auto sales, which are catching up after a long supply disruption, retail sales are only 1.2 per cent higher than a year ago, a much slower pace than the average 3.5 per cent growth seen before the pandemic.
Spending looks even worse when Canada’s population surge is taken into consideration. Household per-capita spending in the second quarter was down 1.4 per cent from the year
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