Here’s a number that might pique your interest: Canadians are devoting 15-1/2 per cent of their incomes to servicing debt.
Now, that may not seem like an onerous figure, given all the attention we’re paying to higher costs for shelter playing a role in driving inflation. But it is a couple points higher than what we were seeing two years ago and exceeds the high-water mark that faced Americans just before the Great Recession 15 years ago.
TD Bank’s economics team has drilled down on this topic, using internal data comparing mortgages and consumer spending patterns. Not surprisingly, they found a correlation between rising mortgage costs and cuts in day-to-day expenditures.
For those who saw mortgage renewals a couple years ago, the trimming required to balance the books was modest.
But those who are renewing today are having to cut much deeper. And, the bank notes, people with renewals coming up next year have not even started to trim their spending so we should expect consumer expenditures to continue falling — something that will put even more pressure on a slowing economy.
