Nearly one in six Canadians couldn't handle a $500 mortgage increase
According to the bank, 16% of respondents said they would not be able to afford such an increase, while more than a quarter, or roughly 27%, would need to review their budget.
The ultimate goal of most Canadians should be the elimination of debt, but the first step needs to be getting rid of bad debt, said Chris Buttigieg, senior manager of wealth planning strategy at BMO, which has the potential to destabilize a households financial situation.
Another 26% said they would be concerned, but could probably handle it.
Such an increase would be generated in the case of a three percentage point hike in interest rates - from 2.75% to 5.75% - on a $300,000 mortgage with a 25-year amoritization period.
Given that interest rates are likely to increase in the foreseeable future, the bank said there was no better time to put together a detailed debt management plan.
A report by Statistics Canada last month found the ratio of household credit market debt to disposable income climbed in the second quarter of 2015 to 164.6%, up from 163% in the first three months of the year.
That means Canadians owed nearly $1.65 in consumer credit and mortgage and non-mortgage loans for every dollar of disposable income.
The report by BMOs Wealth Institute found that almost half of Canadians, 47%, believed that the high level of debt in Canada has been influenced by soaring real estate values, while 40% believed it has been influenced by low rates.
Files from The Canadian Press
Canadian home sales fall further in July
According to statistics released today by The Canadian Real Estate Association (CREA), national home sales declined further in July 2017. Highlights:
National home sales fell 2.1% from June to July.
Actual (not seasonally adjusted) activity in July stood 11.9% below last Julys level.
The number of newly listed homes edged back by 1.8% from June to July.
The MLS Home Price Index (HPI) was up 12.9% year-over-year (y-o-y) in July 2017.
The national average sale price edged down by 0.3% y-o-y in July.
Julys interest rate hike may have motivated some homebuyers with pre-approved mortgages to make an offer, said CREA President Andrew Peck. Even so, sales activity continued to soften in the Greater Golden Horseshoe region. Meanwhile, sales and prices in Montreal continue to strengthen. All real estate is local, and REALTORS remain your best source for information about sales and listings where you live or might like to.
July marked the smallest monthly decline in Greater Golden Horseshoe home sales since Ontarios Fair Housing Plan was announced in April, said Gregory Klump, CREAs Chief Economist. This suggests sales may be starting to bottom out amid stabilizing housing market sentiment. Time will tell whether thats indeed the case once the transitory boost by buyers with pre-approved mortgages fades.
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Decline in single-family component moderated by gain in multi-family dwellings
Canadian municipalities issued $8.1 billion worth of building permits in June, up 2.5% from May and the second highest value on record. Higher construction intentions for multi-family dwellings and commercial buildings were mainly responsible for the national increase. All building components reported gains in June, except for single-family dwellings.
The value of residential building permits fell 0.9% in June to $5.0 billion, the fourth decrease in five months. The decline was mainly the result of lower construction intentions in four provinces, notably Ontario.
In June, the value of permits for single-family dwellings decreased 12.5% to $2.4 billion. Seven provinces registered declines, with Ontario being the main contributor to the decrease.
Conversely, construction intentions for multi-family dwellings rose 12.5% in June to $2.7 billion, marking a third consecutive monthly increase. Seven provinces registered gains, led by Ontario and British Columbia.
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