Canadians going into debt for future good: Survey

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By Derek Abma, Postmedia News May 25, 2011

An Investors Group survey released Wednesday shows that 75 per cent of respondents describe themselves as being in debt. Most of them, however, also say their debt will do them good in the future.

An Investors Group survey released Wednesday shows that 75 per cent of respondents describe themselves as being in debt. Most of them, however, also say their debt will do them good in the future.
Photograph by: Ed Kaiser, Edmonton Journal

OTTAWA — Most Canadians are in debt, but most of us feel that debt will leave us better off down the road, a new poll suggests.

An Investors Group survey released Wednesday shows that 75 per cent of respondents describe themselves as being in debt. Most of them, however, also said their debt will do them good in the future.

Going into debt to purchase a property was the most common reason for borrowing, cited by 54 per cent of those who said they had debt.

Other common reasons were home renovations (37 per cent), attaining cash for a financial investment (28 per cent) and paying for education or training (18 per cent).

“The reality is that almost everyone has consumer debt,” said Jack Courtney, assistant vice-president of advanced financial planning for Investors Group.

“But accumulating debt with purpose and putting thought into how debt will be repaid is very different than spending beyond one’s means and without foresight.”

The survey had 73 per cent of respondents with debt saying they have “some idea” of how they will pay it off.

That doesn’t mean everyone is completely OK with their debt. The survey had 58 per cent of respondents who owe money saying they feel uncomfortable with it, 33 per cent have lost sleep over it, 30 per cent are embarrassed by their debt and 25 per cent said it has triggered disagreements with their partners.

The data were based on surveys of 1,020 Canadians via an online panel between April 27 and May 8. Investors Groups said a margin of error was not applicable to this method of polling, which used weighting to ensure the sample was demographically representative of the Canadian population.

Postmedia News

Canadians going into debt for future good: Survey.

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Nearly a third don’t have enough money to live on: survey – The Globe and Mail

So you thought you were broke ? You are not alone !

TORONTO— The Canadian Press
 Apr. 20, 2011

Nearly one-third of the people surveyed for a major Canadian bank said they didn’t have enough money to cover living expenses.

The online survey of 1,003 people for TD Canada Trust (TD-T81.11—-%) also found 54 per cent of them said it was a real struggle or impossible to save.Of those surveyed, 38 per cent said they had no savings and 30 per cent said they didn’t have enough for living expenses.

On the flip side, 30 per cent of the respondents said they had enough money saved to cover living expenses for at least four months.

The online survey was conducted before Christmas, from Dec. 2 to 7, by Environics Research for the bank.

Nearly a third don’t have enough money to live on: survey – The Globe and Mail.

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Food, gas prices hammer household budgets

TAVIA GRANT

Globe and Mail Blog

April 12, 2011 6:23

Feeling the pinch from high prices at the pump? You’re not alone.

Nearly half of Canadians say rising prices for gas and food are having a “significant” impact on their household budgets, a national poll released Tuesday shows.

Forty-five per cent of respondents say food and pump prices are hitting their pocket books, according to the Royal Bank of Canada‘s quarterly confidence survey. One in four, or 38 per cent, say these prices haven’t had a big impact yet — but they’ve cut back on other expenses.

Food inflation in Canada is running at 2.1 per cent from a year ago, led by increases in bread, pork, potatoes, confectionery and coffee. Most economists expect food inflation to heat up this year due to higher commodity prices. On Monday, Tim Hortons raised the price of a large coffee by 7 cents; others are expected to follow suit.

Gasoline prices, meantime, have soared almost 25 per cent since late last year, according to a CIBC World Markets report Monday. If sustained, that equates to a 7-per-cent hike in the income-tax bill of households this year.

The RBC findings come as consumer confidence inched higher in March compared with its last survey in January. Six in ten respondents describe the economy as “good,” though a growing number are worried about a job loss or layoff.

Managing debt seems top of mind. When asked about peoples’ personal finance plans for the next year, the most common response, by 39 per cent of Canadians, was to pay off their debt as much as they can. Thirty per cent said they plan to spend less.

The survey was released on the same day the Bank of Canada makes its decision on interest rates. Rates are expected to stay on hold for now, though many economists think they’ll start climbing in July.

The survey of 3,520 Canadians was conducted in mid-March. Here is more of its findings:

• Forty-two per cent think the economy will improve over this year – down a notch from the last survey.

• Concern over a job loss or layoff rose to 22 per cent of respondents from 20 per cent, with people in Ontario the most concerned.

• One in five said financially they are just keeping their heads above water.

• Concern about rising gasoline and food prices is highest in Ontario, along with Atlantic Canada and Quebec.

• Optimism about the economy this year is most upbeat in Alberta, followed by British Columbia and Manitoba/Saskatchewan.

• The bank thinks a cooler housing market, rising interest rates and consumer efforts to pay down debts will slow the growth of debt levels.

Food, gas prices hammer household budgets – The Globe and Mail.

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Men who lose their jobs at greater risk of dying prematurely

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ScienceDaily (Apr. 4, 2011)

Research by McGill Sociology Professor Eran Shor, working in collaboration with researchers from Stony Brook University, has revealed that unemployment increases the risk of premature mortality by 63 per cent. Shor reached these conclusions by surveying existing research covering 20 million people in 15 (mainly western) countries, over the last 40 years.

One surprising finding was that, in spite of expectations that a better health-care system might contribute to lower mortality rates, the correlation between unemployment and a higher risk of death was the same in all the countries covered by the study.

The truly groundbreaking aspect of the research is that it suggests that there is a causal relationship between unemployment and a higher risk of death.

“Until now, one of the big questions in the literature has been about whether pre-existing health conditions, such as diabetes or heart problems, or behaviours such as smoking, drinking or drug use, lead to both unemployment and a greater risk of death,” Shor said. “What’s interesting about our work is that we found that preexisting health conditions had no effect, suggesting that the unemployment-mortality relationship is quite likely a causal one. This probably has to do with unemployment causing stress and negatively affecting one’s socioeconomic status, which in turn leads to poorer health and higher mortality rates.”

The research also showed that unemployment increases men’s mortality risk more than it does women’s mortality risk (78 per cent vs. 37 per cent respectively).The research also showed that there is a much higher correlation between unemployment and mortality for men than for women (78 per cent vs. 37 per cent). The risk of death is particularly high for those who are under the age of 50.

“We suspect that even today, not having a job is more stressful for men than for women.” Shor said. “When a man loses his job, it still often means that the family will become poorer and suffer in various ways, which in turn can have a huge impact on a man’s health by leading to both increased smoking, drinking or eating and by reducing the availability of healthy nutrition and health care services.”

The research suggests that public-health initiatives could target unemployed people for more aggressive cardiovascular screening and interventions aimed at reducing risk-taking behaviours.

Men who lose their jobs at greater risk of dying prematurely.

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Canadian mortgage debt tops $1-trillion for first time

The Canadian residential mortgage market crossed the $1-trillion threshold for the first time this year as higher prices forced many to borrow heavily to finance their new homes and low interest rates encouraged many more to refinance.

The Canadian Association of Mortgage Professionals said in its annual report to be released Monday that there were $1,008,000,000,000 in mortgages outstanding at the end of August, a gain of 7.6 per cent in one year. Over the past 15 years, the volume of outstanding mortgages has increased by 194 per cent.

While mortgage approvals slipped through the recession, a boom in lending has followed as the housing market recovered and buyers rushed into the market. After a frenzy of buying drove average prices to an all-time high of $346,881 in May, things have cooled slightly with prices now at year-ago levels near $331,000. Canadians have not been shy about using their mortgages to free up extra money – 18 per cent of mortgage holders took equity out of their homes, almost half of them citing a need for “debt consolidation or repayment.” The average amount borrowed against home equity was $46,000.

Given that there are 5.65 million mortgage holders in Canada, CAAMP estimates the borrowing at $41-billion, about the same as last year.

“It is estimated that 30 per cent of the takeout was for debt reconsolidation and repayment,” the report states. “Therefore, while the amount of outstanding mortgage debt would have increased by this amount, totals for other types of debt would be correspondingly reduced. About $15-billion was taken out for renovations, $6-billion for education and other spending, $7.5-billion for investments and $4-billion for other purposes.”

A larger proportion of mortgage holders, however, increased their payments in the last year. Thirty-five per cent paid more than they had to, with 12 per cent making lump sum payments, 16 per cent increasing their monthly payments and 7 per cent doing both.

The report included a survey of 2,005 Canadians, half of them homeowners.

The association asked at what point homeowners would be in trouble if interest rates were to rise. The question was “the amount at which, if your monthly mortgage payment increased this much, you would be concerned with your ability to make your payments.”

The average amount of room is $1,056 per month on top of their current costs, the report states.

“There is a sizable minority, about 350,000 out of 5.65 million, or about 6 per cent, who would be challenged by rate rises of less than 1 per cent, and a further 225,000 (5 per cent) have thresholds in the range of 1.00 per cent to 1.49 per cent. However, most of these have fixed-rate mortgages: by the time their mortgages are due for renewal, time will have increased their financial capacity and reduced the amount of mortgage debt being financed. There are about 100,000 borrowers who are susceptible to short-term moves of interest rates, which is a quite small share (less than 2 per cent) of the 5.65 million mortgage holders in Canada.”

Canadian mortgage debt tops $1-trillion for first time – The Globe and Mail.

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Canadian Housing prices to drop 25%, forecaster predicts

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By Tony Wong | Thu Feb 03 2011

House prices in Canada will fall over the next several years by as much as 25 per cent, creating a massive impact on the economy and possibly pushing the country into recession, says a forecast.

“The recent housing boom has resulted in the largest rises in house prices ever seen in Canada, which have been similar in magnitude to those during the recent boom in the U.S.,” said Capital Economics analyst David Madani in a report released Thursday. “Unfortunately, the subsequent falls in prices could also be just as severe as those elsewhere.”

Madani is predicting house prices will fall by a cumulative 25 per cent over the next several years, or “in the same ballpark as the recorded declines in the U.S. and other countries.”

The effects on consumer spending and housing investment could be significant and perhaps strong enough to “push the economy into another recession,” says Madani.

Financial agencies such as the Canadian Mortgage Housing Corporation, which provides mortgage loan insurance, could also be exposed to significant losses, he argues.

“We conclude that housing prices have formed a bubble and are at risk of falling substantially over the next few years.”

The market has been particularly devilish to forecast for economists because of the continuing global financial uncertainty.

Last year, the Canadian Real Estate Association modified its forecasts at least four times. After initially predicting housing prices would increase in 2011, it now says prices will fall by 1.3 per cent — far below the eye-catching 25 per cent forecast by Capital Economics.

Some economists do not see a parallel between the U.S. market and Canada.

“The price run-up in Canada has been based on strong economic fundamentals and demand from owner-occupants, whereas in the U.S., housing production was in excess of the demand that was justified by economic conditions,” said Toronto housing economist Will Dunning. “There was a large element of speculation in the U.S. that has not been present in Canada.

“If house prices are to fall, there needs to be a mechanism — an excess of supply relative to demand,” he said. “At this point, there is not an excess supply (in Canada) and it is difficult to see one materializing.”

The Capital Economics forecast is not the first to predict a bubble in the Canadian market. Gluskin Sheff & Associates chief economist David Rosenberg has also predicted a 25 per cent drop in Canadian housing prices, as has The Economist magazine.

However, the current consensus forecast by economists seems to be that Canada has achieved a “soft” landing and that prices will flatline but not go down substantially over the next several years.

As in the U.S., financial innovation and very low interest rates have allowed Canadian consumers to take on more debt, and house prices are high relative to income, says Madani.

However, consumers have remained complacent because low rates are keeping mortgage payments low.

“So what’s the problem?” Madani said. “Similar arguments were made in other countries with very low mortgage rates, including the U.S. However, this did not prevent house prices from falling in many of those countries.”

One reason is that growth in future disposable income per worker won’t close the gap between house prices and income, he says.

“Prices have risen substantially relative to income and we don’t think that’s sustainable,” said Madani.

The historical home price-to-income ratio is 3.5, but now it’s hovering around the 5.5 mark, meaning average house prices are more than five times the income of workers, he said.

And while strong net immigration and demand from baby boomers are expected to fill some of the demand for housing, we are simply building too many homes, says Madani.

Housing prices to drop 25%, forecaster predicts – Moneyville.ca.

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