BoC rate cut gives indebted Canadians reason to hope: poll

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More debt-burdened Canadians think better days could be just around the corner after an interest rate cut and promising data boosted their outlook for the economy, a long-running survey of consumers suggests.

Maru Public Opinion’s Household Outlook Index (MHOI) found that a rising number of people believe the Canadian economy will improve over the next two months, jumping seven percentage points to 44 per cent from June to July. Thirty eight per cent said they think the economy is heading in the right direction, an increase of five percentage points from June.

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While a majority remain concerned about the economy, recent developments — including a second consecutive Bank of Canada rate cut — have changed the channel for many people, Maru said in a press release.

Other data that likely lifted people’s outlook in July included slowing inflation and stronger-than-expected gross domestic product (GDP). The former decelerated to 2.7 per cent year over year in June, from 2.9 per cent in May 2023. GDP for May rose 0.2 per cent from April, beating analysts’ estimates.

“Aside from the dollar and cents impact (the rate cut) has, it’s a tangible signal to consumers that things are on the right track for better days ahead,” John Wright, executive vice-president at Maru Public Opinion, said in the press release.

The Bank of Canada announced its second straight 25 basis point rate cut on July 24, just days before Maru conducted its monthly survey, from July 26 to 29.

“There’s no denying that this was welcome news for those who are managing mortgage renewals and variable mortgage rates,” Wright said.

Many economists have warned of a “mortgage cliff,” with just over half of homeowners who took out a mortgage before the Bank of Canada started raising rates in March 2022 expected to renew at significantly higher rates.

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The Bank of Canada estimated in an analysis from November 2023 that people holding variable rate mortgages with fixed payments could see them rise 54 per cent during the renewal period from before March 2022 to the end of 2027.

Other Maru findings reflect the mortgage trap some find themselves in.

For example, 17 per cent of Canadians admitted they will likely default on payments of major loans or mortgages — up two per cent from June.

While more people are optimistic about the general economic outlook, they are still consumed by personal finance worries, with 23 per cent feeling financially worse off in July than in June — an increase of two percentage points and “a pocketbook signal that the cost of living, not big picture changes, matter more to most,” Wright said.

Further, a third said they would rely on government programs to cover their costs (up one percentage point), 20 per cent said they would move to a smaller home to save money (up two percentage points) and more people — 52 per cent — said they were worried about their personal finances (up one percentage point).

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Regardless of ongoing daily stressors, Maru’s Household Outlook Index rose to 88 in July from 86 in June. The base number for the index is 100. A result above 100 indicates optimism, and below 100, pessimism. Maru compiles its household index each month by asking a panel of people a series of questions about the economy and their financial prospects over the next 60 days.

Maru surveyed a random selection of 1,531 Canadian adults. For comparison purposes, a probability sample of this size has an estimated margin of error (which measures sampling variability) of +/- 2.5 per cent, 19 times out of 20.

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