The average savings rate in Q3 was more than double the pace seen between 2015 and 2019
Canadian consumers are bracing themselves for a potential crisis as renewal season looms, according to Royce Mendes, head of macro strategy at Desjardins.
“Canadians are spending less to save more,” Mendes said in a client note.
The economist said that removing auto sales from the equation makes retail sales only 1.2% higher on an annual basis, which was significantly slower than the 3.5% pre-pandemic average growth rate.
At the same time, term deposits at Canadian banks have increased by more than 40% to reach a total of $175 billion over the past year, Mendes said.
Canadians also saved an estimated 5.1% of their disposable incomes during Q3, more than double the average savings rate of 2.4% seen between 2015 and 2019.
“The daunting prospect of higher monthly mortgage payments, longer amortizations, large lump-sum payments or some combination of them is clearly weighing on the minds of many Canadians,” Mendes said. “It’s not hard to believe that Canadians with looming mortgage renewals are getting their financial houses in order before the coming storm.”
Chase Belair from Nesto advises mortgage professionals to optimize their renewal process by focusing on clear client communication and a proactive approach.
— Canadian Mortgage Professional Magazine (@CMPmagazine) November 6, 2023
Read more: https://t.co/eRyIHnj7dI#MortgageIndustry #MortgageBroker #InterestRates #MortgageRenewal
Higher costs fuelling household anxiety, poll suggests
A recent poll conducted by Ipsos on behalf of MNP LTD found that a significant number of Canadians blame current economic conditions for increased stress (42%) and anxiety (39%) in their households.
Those who considered their personal debt as “terrible” were more likely to feel increased stress (77%) and anxiety (72%), and tend to stay home more often (72%) and spend less time socializing (55%) or with family (33%).
“High inflation and interest rates are not just impacting Canadians’ finances, they are having a significant effect on their mental health as well,” said Grant Bazian, president of MNP LTD.
Fully half of Canadians (51%) now consider staying home more often as a valid strategy to manage their expenses, while 35% said that they are spending less time socializing (35%) or with friends (30%) to reduce their spending.
