Homebuyer worried about rising price

While the Bank of Canada’s latest growth forecast remains positive for the year ahead, Canadians are not taking any chances. In fact, more than a third of Canadians are preparing for a potential recession by increasing their savings, according to new data from TransUnion. Those in younger cohorts—Generation Z and Millennials—are more likely to be prepared for a recession, at 50% and 39%, respectively. Other actions consumers take include paying down their debt faster (17%) and saving less for retirement (15%). Another 13% say they increase their use of available credit. TransUnion’s latest Consumer Pulse survey found that 36% of Canadians believe we are currently in a recession, while only 27% believe the Bank of Canada’s current projections suggest the country will not enter a recession before the end of the year. “Although there is a mixed level of confidence in Canadians’ financial outlook, macroeconomic stresses remain a top priority for many,” said Matt Fabian, director of financial services research and advisory at TransUnion Canada. “Concerns about inflation, rising interest rates, housing affordability and the perceived threat of a possible recession are affecting how Canadians manage their family finances,” he added. Fiscal pressure is increasing, however, whether or not the country enters a technical recession, soaring interest rates and other costs of living are making it easier for consumers to digest. Rising interest rates mean that mortgage interest costs are now up more than 70% in the past year, according to data from Statistics Canada. A minority of respondents (42%) said they are optimistic about the financial outlook over the next 12 months, with nearly a third of Canadians expecting it to be difficult to pay their bills and loans in full. Of those, 22% said they plan to borrow from a family member or friend to help cover these costs. Inflation remains a major concern The survey identified inflation as the biggest financial concern (47%) facing Canadians, followed by rising house prices (14%) and the possibility of a recession (11%). More than half (55%) of those surveyed said that their incomes do not keep pace with rising prices. This is despite a quarter of them receiving a pay increase while 34% expect a pay increase. The TransUnion survey noted, “While steady or rising income levels may help mitigate the effects of inflation and rising debt levels, concerns about the cost of living and rising interest rates continue to influence the spending behaviors of many consumers.” More than half (54%) said they cut discretionary spending, more than a quarter (26%) canceled subscriptions or memberships, and 21% canceled or reduced digital services. The findings come on the heels of another BoC rate hike, which will increase debt-service costs for those with a variable-rate mortgage, personal line of credit, or home equity line of credit (HELOC). The bank also revealed that it expects inflation to remain high at around 3% for the next year before finally reaching its target of 2% by mid-2025.

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