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More Canadians worried about defaulting on their mortgages

by SuperiorInvest

Sign of increased financial stress from rising interest rates

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The number of Canadians worried about not being able to pay a mortgage or a major loan increased in February, according to a long-running survey that tracks people's financial outlook.

Eighteen percent of respondents surveyed in February by Maru Public Opinion said they were likely to default on a mortgage or loan over the next two months, up two percentage points from January. Six percent considered it very likely that they would default on their payments, matching the January results.

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In a sign of increased financial stress, 11 percent of respondents said they were likely to file for bankruptcy in the next two months, up one percentage point, while another three percent indicated they were very likely to file in bankruptcy, the same number as January.

The survey reflects recent data from the Office of the Superintendent of Bankruptcy that showed consumer bankruptcies in January increased 17.9 percent from December and 18 percent from a year earlier. Consumer proposals, which are a renegotiation of terms, increased 19.7 percent month over month and 25 percent since January of last year.

Rising defaults and bankruptcies appear to be the next stage in Canadians' struggle to cope with higher interest rates and the cost of living after the pandemic.

“A lot of people are feeling enormous pressure,” said John Wright, executive vice president of Maru Public Opinion.

The default result was 10 percent when Maru launched its survey in July 2020, and it fell to eight percent in May 2022.

The February survey found that 18- to 34-year-olds now make up 40 percent of the group at risk of default, while those earning less than $50,000 made up 26 percent, up six percentage points from January.

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“There is significant pressure that has increased for the 18 to 34 age group,” Wright said.

Ontario had the highest proportion of people at risk of default among provinces, increasing four percentage points to 22 per cent.

In general, people continue to feel depressed about their finances.

55 percent of respondents worried about their day-to-day finances in February, the same number as the previous month, when the measure hit an all-time high. In 2020, 46 percent of respondents said they were likely to worry about money on a daily basis.

However, there is some optimism. The percentage of Canadians who think the economy is on the right track rose to 36 per cent from 33 per cent at the beginning of the year.

This figure is still well below the 57 percent who were optimistic about the direction of the economy in July 2021, but in recent months the measure has been rising again.

“He has a long way to go to get back to his last highest measurement,” Wright said. “This has been a relatively slow, steady, unbroken upward curve of positivity regarding the direction of the Canadian economy over the past four months.”

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It was enough to push the Maru Household Outlook Index to 87, up one point from January, although it remains firmly in negative territory.

Any value below 100 on the index, which measures Canadians' outlook on the economy and their personal finances, indicates negative sentiment and any value above indicates optimism. It has been stuck in the red since December 2021 and reached its most bearish reading of 83 in March 2023.

“We are swimming in negative and desperate times,” Wright said.

Maru conducted the survey March 1-4 among a random selection of 1,532 Canadian adults.

• Email: gmvsuhanic@postmedia.com

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