Even big BoC rate cut may not ease Canadians' financial struggles, survey shows

Canadians are feeling so financially stressed that even a significant interest cut by the Bank of Canada may not offer much relief, according to an ongoing survey by Maru Public Opinion. The survey indicates that inflation and high prices are continuing to weigh heavily on consumers.

The fallout from pandemic-era inflation and sticky higher prices remain “significant pain points for consumers,” John Wright, executive vice president of Maru Public Opinion, said in a release highlighting households’ outlook for finances and the economy in 2020.

“Even a further 50-basis-point cut in interest rates may not prompt action from many Canadians, who might decide to wait for more favourable conditions, as the burden of down payments and mortgages continues to feel out of reach,” he said.

Canada's housing market has become more difficult for prospective homebuyers. Currently, home prices are 30% higher than in April 2020, while monthly mortgage payments for a five-year fixed mortgage increased by 40% since January 2020, according to data from the Canadian Real Estate Association (CREA).

Previous Maru surveys suggested that more people were ready to enter the housing market. However, the latest findings indicate a shift, as Wright noted that many homeowners are looking to downsize because of increasing mortgage rates.

With additional rate cuts expected, many potential homebuyers are delaying their purchases until after the Bank of Canada's meetings in late October and December. They may also be waiting for new rules on longer amortization periods and a higher price cap on insured mortgages, set to take effect in December.

However, the affordability crisis is not restricted to housing costs. “This inflationary pressure extends beyond housing, affecting sectors such as cars, groceries and manufactured goods, indicating a structural economic issue unlikely to be resolved by simply lowering interest rates,” Wright said.

Maru's survey revealed further financial stress: fewer Canadians are planning to save for retirement (50%, down from 56%), and fewer believe their local economy will improve (42%, down from 45%). Only 10% of respondents intend to buy a home, compared to 13% in the previous survey.

Regional polls in Vancouver, Calgary, Edmonton, and Toronto highlighted growing concerns over the cost of living. Seven in 10 people indicated feeling their “cities are unaffordable,” while 84% agreed it was “too costly to live and work in these urban areas.”

Overall, Canadians’ economic outlook remains grim, with 63% believing the economy is heading in the wrong direction, pushing the Maru Household Outlook Index down to 89, below the neutral point of 100.

Source CMP
By Grant Funtila