A new survey from Manulife Bank of Canada reveals many Canadians are ill-equipped to deal with any increase in their mortgage payments.
According to the survey, more than a third of respondents said they would have difficulty making regular payments within three months if the breadwinner of the household lost their job. Additionally, more than 16 per cent said they would struggle with any increase in their current mortgage payment, even if their household employment situation remained unchanged.
In a press release, Manulife Bank of Canada Chief Executive Officer Rick Lunny said many Canadians are playing close to the edge when it comes to their ability to withstand financial shocks, but that options do exist to mitigate their risk profiles.
“A financial buffer is an important part of a financial plan,” Lunny said in the release.
“A high-interest savings account is a good option. Or, if you’ve got a home equity line of credit, you could use your savings to reduce your debt and save interest — and still have access to that money if an emergency arises.”
The millennial cohort could be among the most exposed, according to the poll, with 83 per cent of respondents aged 20 to 34 carrying mortgage debt. Additionally, 36 per cent of the millennial respondents said mortgage rates are currently too high, despite lending costs being at multi-decade lows. The disconnect may be a case of millennials misunderstanding the source of their monthly fixed costs, according to Manulife Canada Chief Investment Strategist Philip Petursson.
“The survey results may be more reflective of monthly mortgage costs — which are a function of debt and interest rates,” he said in the release. “Perhaps the emphasis is misplaced on interest rates, given the fact that interest rates are at decade lows, as opposed to the real driver of higher mortgage costs, which is housing prices.”