Drilling Down Into CICA’s Debt Poll

debt (3)This week’s ominous debt stat comes from the Canadian Institute of Chartered Accountants (CICA).

CICA says that 48% of those it had surveyed feel a “significant rate hike” would make it “challenging” to keep up on their mortgage or debt payments.

The report got widespread coverage. (The media craves anything debt related these days.) But there were a few mortgage-specific details that were not widely reported.

Of those who claim they’d be stressed by “significant rate hikes,” 29% say a 0-2% rate increase “would make it challenging to keep up on mortgage/debt payments.”

On an absolute basis, however, this amounts to fewer than 1 in 7 (13.7%) respondents overall, says CICA.

And not all of those people are mortgage holders. Only 42.7% of households have mortgages, according to the Canadian Association of Accredited Mortgage Professionals (CAAMP).

Of those who indicated concern about rate hikes, 350 basis points is the average increase that would create financial “challenges” for people. That sort of rate surge is possible, but many would deem it unlikely over the next five years. A 3.5% hike would push rates notably above long-term averages, be a serious economic drag on Canada’s leveraged economy and require a significant unforeseen inflation threat.

This also raises the question of how respondents determined their rate increase tolerance. Most people have no idea—off the top of their head—how a 1% rate increase affects their mortgage payment. (Here’s a payment comparison calculator if you’re curious.)

In sum, from a mortgagor risk standpoint, the number of people vulnerable to higher rates is more limited than related headlines suggest. Albeit, that should in no way downplay the rate threat that the small minority face.

Canadian-foreclosureAnd lastly, despite the above, it’s important to remember that being “challenged” by higher rates and not making your mortgage payments are two entirely different things. People get surprisingly resourceful when foreclosure stares them in the face. That’s partly why only 34 out of 10,000 mortgagors are in arrears in this country.

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Other debt-related findings from the survey:

  • 61% of Canadians say they worry about money
  • 43% of Canadians carry credit card balances, versus 34% in 2010.
  • 17% have borrowed to cover day-to-day living costs
    • 42% of those have loans outstanding that were used to cover day-to-day living costs
  • 43% of those 55 or older say they have not saved enough for retirement
  • 21% of those age 65 or older say they are forced to work to make ends meet
  • 34% of those age 65 or older currently have debt and/or a mortgage
  • 39% expect to work past age 65 to make ends meet
  • 39% expect to have a mortgage and/or other debt past age 65
  • 44% of homeowners (and those intending to purchase within 5 years) say they want more advice on choosing the right type of mortgage. 56% are not interested in such advice.

The survey also found that women are more worried about mortgage rate hikes then men. Not coincidentally, women also choose fixed rates more often than men.

Here is the CICA’s full survey.


Rob McLister, CMT

  1. ” Only 42% of households have mortgages, according to the Canadian Association of Accredited Mortgage Professionals (CAAMP).”
    Rob,
    Does CAAMP mean 42% of ALL households have mortgages (renters and owners), or that only 42% of homeowners have mortgages? If the answer was the latter, that would surprise me.
    Thanks for the clarification.

  2. Would echo your point about most people not knowing how a 1% (or 2%, etc.) increase would affect their monthly payments. I was playing around with a calculator and was surprised at how much wiggle room I had in my own situation (which of course, is not necessarily representative).
    In the same vein, I wonder how people interpreted the savings question (i.e. “Thinking about your monthly household income, what percentage would you say you save each month?”). Gross? Net? Would you include mortgage principal? Automatic pension (CPP/RPP/RRSP) deductions?

  3. Everyone should take the time and understand what a 2% rate increase can do to their budget. If you can’t survive a 2% bump in rates, sell now while prices are still high.

  4. Interesting facts, or fiction as most consumers don’t really understand mortgages well. I assume this survey included people with mortgages that are at 5.75% and similar that will be coming up for renewal in the next couple years. I can understand that they would not be thrilled baying 7.75% but realistically their rate is going to drop. Also if you just took a mortgage out in the low threes for five years you don’t have to worry abut it for the next five years. If we have inflation and rates go up because of it surely you will get a raise or two along the way. Find most of these surveys pretty useless as they are just done on the phone and are off the top of the head opinions from few people that don’t hang up on the surveyors.

  5. If a survey like this says 61% of Canadians are worried about money, the actual percentage may be 58% or 64%. That doesn’t make the survey useless. All surveys have margins of error. Harris/Decima is a top research firm. If you think it doesn’t know how to adjust for polling bias, you are misinformed.

  6. Harris/Decima was one of many polling companies that incorrectly predicted a Wildrose Alliance majority in the recent Alberta 2012 Provincial Election. Referring to that survey as “useless” would actually be a complement!
    No organization relies solely on stats or polls. In the real world, we primarily base decisions on hard facts. Something that I have noticed is often omitted from your own analysis, StatGuy.

  7. You seem to enjoy lacing your responses with fallacious arguments.
    Let’s evaluate your wobbly assertions one by one, starting with the amateurish attempt to use an exception to disprove the rule. In this case, you have cherry picked a glaring outlier. In the case of the 2012 Alberta provincial election, 40% of voters made their decision on which party they would support on the final weekend or election day. This was a very unique case.
    This proves nothing other than the fact that surveys always have variance and no opinion collection method is flawless. It’s surprising that someone who implies intelligence with an “Ivory Tower” handle would twist that into a categorical invalidation of polling. Your anecdotal case does not disprove the value of polls.
    Furthermore, no one is claiming that organizations rely solely on polls. That is a diversionary argument to the real question, which is, “What is the utility of public opinion surveys?”
    Lastly, your ad hominem attack on my analysis, with no examples to support your criticism, is a further sign that your position is flimsy.
    If you want hard facts, here is one for you. Polling in general has been uncannily accurate in political forecasting. Below is some data, for you to chew on.
    http://www.angus-reid.com/wp-content/uploads/2012/05/ARPO_Record.pdf
    http://fivethirtyeight.blogs.nytimes.com/2010/09/30/the-uncanny-accuracy-of-polling-averages-part-2-what-the-numbers-say/ (US data)
    There is some evidence that polling is becoming less accurate for reasons related to methodology, commercial pressures and social trends, but it is an extreme stretch to claim surveys are useless.

  8. Given some of the shortcomings identified with this survey (such as not giving people concrete examples of the dollar value a X% change would have on their own situation and not providing mutually exclusive definitions), I would suggest that this type of polling is more geared towards divining public sentiment than it is predicting future consumer response in a rising rate environment.

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