the rennie brief: Changes In Household Finances, March 2021

the rennie brief: Changes In Household Finances, March 2021

HOUSEHOLD FINANCES

WHAT YOU NEED TO KNOW ABOUT CHANGES IN HOUSEHOLD FINANCES IN THE COVID ERA • Canada’s lower-income and younger households have experienced the largest declines in wages & salaries but have also received the largest increase in government transfers • The value of fiscal supports has generally exceeded the deficits in employment earnings created by the pandemic for lower-income and younger households • Savings and net worth have increased for many Canadian households during the pandemic, with lower-income groups seeing the most significant growth • Historically-low lending rates have facilitated the move into home ownership for many Canadians

the rennie brief

MARCH 2021

Household economic well-being has shifted significantly due to Covid-19, with fiscal supports and low interest rates conspiring to improve Canadians’ balance sheets.

reaching an average of $786,000 per Canadian household. Interestingly, household net worth for those in the lowest quintile of disposable income (that is, those in the bottom 20% of disposable income) grew more than it did for other households—up 6.3% as of Q3 2020 relative to the end of 2019. Households in the highest income quintile saw a 4.8% gain. LOW LENDING RATES HAVE FACILITATED HOME PURCHASES, ESPECIALLY FOR LOWER-INCOME AND YOUNGER HOUSEHOLDS Although the pandemic reduced job security for many younger households, both lower-income earners and younger households acquired mortgage debt at a faster pace than other households. Households have been prompted towards home ownership by, among a range of factors, historically-low mortgage rates. For the lowest-income households, average mortgage debt increased by 5.4% from the end of 2019, while households headed by someone under the age of 35 saw mortgage debt increase by 5.8%. That being said, although these households increased their mortgage liabilities, they also became less leveraged over this period as property values grew at a faster pace than new debt: from the end of 2019 to Q3 2020, the ratio of mortgage debt to real estate assets decreased from 32.9% to 32.2% for the lowest- income earners, and from 51.7% to 50.7% for the youngest age group. LOOKING AHEAD These >Page 1

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