Mortgage holders say they can make higher payments as Canadians cut spending: survey

A Bank of Canada survey finds Canadians are increasingly cutting back on spending while mortgage holders remain confident they can keep up with higher payments when their loans renew.

The central bank released its fourth-quarter consumer expectations and business outlook surveys Monday, revealing how Canadians are faring amid higher borrowing costs and rising prices.

Roughly two-thirds of consumers said they were reducing spending or planning to do so because of their expectations for interest rates and inflation.

“While many Canadians are experiencing rising levels of financial stress, this stress is higher among those who typically live paycheque to paycheque,” the Bank of Canada said.

The central bank said financially vulnerable households typically hold less than two weeks worth of expenses in liquid assets, frequently run out of money before the end of the month and are not able to immediate pay for an unexpected expense of $500.

The survey found one in four consumers reported having at least one of these characteristics.

About 80 per cent of mortgage holders said they are somewhat or very confident they’ll be able to make higher payments.

As for businesses, the central bank finds weaker demand and renewed competitive pressures have slowed down the pace of price increases.

Inflation might be easing but don’t expect prices to fall

Canadians have been paying more for everything as prices surged during the pandemic. But as inflation eases, prices will remain high and some economists say that’s a good thing.

And while labour shortage concerns have faded, businesses expect wage growth to remain above average until 2025, propping up their expectations for inflation.