A new survey found that more than half of Canadians are nervous about being able to afford their mortgage payments as interest rates rise. But many are still not budgeting for them.
Only 39 per cent of Canadians include mortgages in their monthly budgets, despite them being one of their highest expenses, according to a recent online survey from IG Wealth Management, a financial advising company.
Surveying 1,590 adults between July 28 and Aug. 8, it found that budgeting is popular among Canadians, with 67 per cent of respondents reporting finding budgets helpful to manage their monthly cash flow.
Common expenses budgeted included groceries (90 per cent), gas (72 per cent), and entertainment and savings (54 per cent each).
"In many cases, monthly mortgage payments, along with taxes, account for one of the largest monthly expenses Canadians face," Alana Riley, head of mortgage, insurance and banking at IG Wealth Management, said in a release.
"So, while it is encouraging that so many reported having a monthly budget, it's only providing a partial snapshot of their overall cashflow situation if they don't factor in their mortgage.”
Mortgages make up 35 per cent of monthly expenses for the one-third of Canadians who have them, the survey found.
It's possible that many Canadians may not be factoring in mortgages in their budgets due to it being a “fixed cost,” likely not subject to change each month, Prentiss Dantzler, assistant professor of sociology at the University of Toronto told CTVNews.ca in an email on Saturday.
“So, some households only make budgets after this payment is already made based on their disposable or discretionary income amounts after these bills are paid,” he added.
Dantzler also pointed out that households tend to budget for expenses that they are more in control of.
“Typically, people have more agency to choose where they get their food and how much they drive versus using public transportation. But they don't have the same options when it comes to mortgages and rental payments since these typically change annually,” he said.
Amid high inflation rates, with another spike in interest rates expected in September, costs of living have skyrocketed for almost all Canadians.
IG’s latest survey found that 60 per cent of all Canadians worry about cutting costs to reduce their expenses, while 43 per cent are unsure they’ll be able to cover all their monthly bills.
Only 45 per cent believe they will be mortgage-free when they retire.
The survey echoed the findings of another August study, which found that one in four Canadians admitted to taking on debt to cover their expenses, listing paying bills and covering living expenses among their top reasons
“Budgets are great ways for families to think about short-term costs and long-term savings goals,” Dantzler said.
“However, when there are economic shocks to households, budgets become more advisory than realistic while individuals' concerns grow about … their long-term living circumstances.”
