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Navigating Financial Strain in 2024: How We Can Help

by | Jun 20, 2024

Navigating Financial Strain in 2024: How GLM Mortgage Group Can Help

The financial strain on Canadian households escalated in the first quarter of 2024, with missed payments on mortgages and other credit returning to pre-COVID levels, according to a report by Equifax Canada. In the first quarter of this year, over 1.26 million Canadians missed a credit payment, a 12.2% increase from the same period last year. Additionally, more than 34,000 Canadians missed a mortgage payment, marking a nearly 23% rise from the first quarter of 2023.

Rebecca Oakes, vice-president of advanced analytics at Equifax Canada, attributed the increase to ongoing “challenging economic conditions.” She noted that Canadians have adopted strategies such as extending their mortgage terms to lower payments. “It’s not just homeowners feeling the strain. Whether you own or rent, the high cost of living remains a heavy burden for many,” Oakes said.

Despite a recent 25-basis-point interest rate cut by the Bank of Canada, Oakes suggested this reduction is unlikely to offer significant relief. “It’s only really scratching the surface in terms of what it’s going to do to payments,” she explained. “It needs to go down at least a full percent, maybe, before there’s probably some meaningful impact to individuals.”

Regional Disparities in Financial Stress

The report indicated that financial stress varies significantly across Canada. Ontario, British Columbia, and Quebec saw “above-average jumps” in missed credit payments, with increases ranging from 13% to 15%. In Ontario, the total of mortgage balances that were 90 days or more overdue, termed “severe delinquency,” exceeded $1 billion for the first time.

“When you look overall, the numbers aren’t terrible, but then when you start to look at certain geographies, you start to see a lot more stress coming through,” Oakes said, highlighting the high costs of owning or renting a home in major cities as a primary factor.

The Equifax report aligns with other recent studies showing that persistent financial stress and high costs have negatively impacted the housing market and large-scale consumer spending. According to Yahoo News, new mortgages fell to an all-time low in the first quarter of 2024, as consumers delayed major purchases amid speculation about further rate cuts. Nationally, mortgage refinancing levels dropped by 2.6% year-over-year, and first-time homebuyer volumes decreased by 10%.

A Shift in Mortgage Trends

Interestingly, Alberta saw a 10.6% year-over-year increase in new mortgage originations, which Equifax attributes to interprovincial migration driven by housing affordability issues. “As high home prices and reduced affordability continue in some geographies, more consumers are making the decision to relocate to more financially accessible regions,” Oakes said. Over the past year, more people have moved from Ontario and British Columbia to other provinces than vice versa. Notably, 71% of all interprovincial migration to Alberta came from these two provinces.

The Role of GLM Mortgage Group

Navigating the complexities of the current mortgage landscape can be daunting, but this is where GLM Mortgage Group steps in to assist. With expertise in finding tailored mortgage solutions, GLM Mortgage Group can help Canadians manage their financial obligations more effectively, especially during these challenging times.

By offering personalized advice and a wide range of mortgage products, GLM Mortgage Group ensures that clients can make informed decisions. Whether it’s extending mortgage terms, refinancing, or finding lower interest rates, their team of professionals is dedicated to easing the financial burden on homeowners.

Insights from the Bank of Canada

Interest rates may slowly start to be easing around the world, but they won’t be returning to pandemic levels and borrowers will need to adjust accordingly. That’s according to Bank of Canada governor Tiff Macklem, who made the remarks during a Montreal speech last week.

“Interest rates may be easing in many economies, but global interest rates are unlikely to return to pre-pandemic levels,” he said. “The new normal won’t be the old normal. And if we’re not going back, we’ll all need to adjust.” He also acknowledged that there were policy errors made by the Bank of Canada during the pandemic.

“[Compared to the 1970s] our track record on inflation control combined with our forceful monetary response brought inflation back down at much lower economic cost. But public trust and central bank credibility have been dented by the post-pandemic inflation,” he noted. “To keep the trust we have and to restore what trust we’ve lost, we need to continue delivering for our citizens. And we need to communicate clearly and broadly.”

Canadians’ Household Net Worth Rises

Despite the current economic challenges and financial strain, Canadian households were wealthier in the first quarter, seeing their net worth rising by a total of $548.2 billion, or +3.3%, to $16.9 trillion. That was due in large part to a 10.2% rise in equity markets and a 5.8% rise in the S&P/TSX Composite Index specifically, according to recent data from Statistics Canada. Canadians also saw their wealth boosted by a collective $213-billion rise in residential real estate, marking the first quarterly decline after two consecutive declines. StatCan noted that household wealth isn’t distributed equally, with over 90% of net worth being held by homeowners.

The household savings rate was also up 6.9% in the quarter, the highest rate since the first quarter of 2022. “Over the last four quarters, households added $113.7 billion in deposits compared with $161.3 billion in the four quarters prior to that,” StatCan said. “Households have responded to interest rate increases by adjusting their preferences towards fixed-term deposits that earn higher interest.”

Looking Ahead

While the economic landscape and financial strain remains challenging, the expertise and personalized service of GLM Mortgage Group offer a beacon of hope for Canadian homeowners. By leveraging their knowledge and resources, GLM Mortgage Group can help navigate these turbulent times, ensuring that the financial burden of high living costs and interest rates is managed effectively.

As we move forward, it’s crucial for individuals to stay informed and seek professional advice to make the best financial decisions. Whether you’re a homeowner struggling with mortgage payments or someone looking to enter the housing market, having the right support can make all the difference. GLM Mortgage Group stands ready to provide that support, helping Canadians find stability and financial peace of mind in 2024 and beyond.

 

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