Close to a quarter of Canadian homeowners say they'd be forced to sell their homes if interest rates increase any further, according to a new Manulife Financial report.
With three Bank of Canada interest rate hikes already implemented and more expected throughout the remainder of the year, Canadian homeowners are feeling the financial pressure. One in five Canadians said they expect rising interest rates to have a "significant impact on their overall mortgage, debt, and financial situation." In fact, with interest rates having already increased from a historically low 0.25% to 1.5% as of June 1st, 18% of Canadians said they believe they can no longer afford the house they own.
For those who do not yet own a home, the idea of doing so is becoming seemingly further and further out of reach. Two-thirds of respondents said they do not view home ownership as being affordable in their community. And a staggering 71% of Canadians who do not yet own a home worry about saving up for one, with as many as two in five Canadians saying they "worry a lot about this."
"In the past few years, we've seen a huge shift in the housing market, and in parallel we're witnessing interest rates and inflation rising -- all contributing to concerns around Canadian home ownership, affordability and Canadians' mental health," said Vice President of Sales for Manulife Bank Lysa Fitzgerald. "As we move forward, it's imperative Canadians use resources available to them to talk to certified professionals and find ways to try and become more financially flexible and ensure they're taking a detailed look at their personal financial plans before making major financial decisions."
Less than half of Canadians surveyed -- just 46% -- said they felt prepared for rising interest rates. Even fewer -- 42% -- said they were prepared for increased inflation, and just 40% said they were prepared for rising home prices. Sadly, nearly half of Canadians said they would struggle to handle unexpected expenses or are reconsidering summer vacation plans due to affordability concerns.
But what's perhaps even more concerning is that a sizable percentage of Canadians don't have an understanding of how interest rates and inflation work, and no roadmap for how to handle their changing finances.
"The survey revealed nearly one third of Canadians admit they don't understand how inflation or interest rates work, close to three in four do not have a written financial plan and almost half do not have a household budget, and that's particularly telling when reviewing the results of this season's Manulife Bank Debt Survey results," Fitzgerald said.