At a glance in the Winnipeg Free Press on July 8 is an article titled, “Manitoban’s vulnerable to mortgage-rate increase, poll finds”. Now I know newspapers have to sell copies and they use blood and guts to do it, but really! They quoted 82% of consumers in the most affordable major market in Canada would have a “problem” if rates increased by 1.5%. What a bunch of hooey from a flawed survey sponsored by the same newspaper. Did they define what the “PROBLEM” would be? NO Did they find out what their existing rate is? NO
At first glance I thought why would people feel this way because I don’t see that type of concern when I am talking to clients. Off I go to Probe Research who conducted the survey, to find out more. The first thing I see is most Manitobans would face financial distress with a 1.5% rise in rates. Here is the definition of distress: to afflict with great pain, anxiety, or sorrow; trouble; worry; bother. If households feel they have a minor problem (49%) with rates increasing, that does not seem like it equals distress!
Although semantics might seem rather picky, the reality is most consumers do not have an interest rate that will be 1.5% higher than their existing rates for another 3.5 years. For the last 1 1/2 years we have seen rates fall and most consumers are aware of this. They purchase knowing very well that their interest rate is on sale and there won’t be any sale prices when their mortgage renews. Almost all consumers in Manitoba I have dealt with know this and are very prudent in their decisions. I have not seen many at maximum debt service ratios and those that do, usually have a much higher earning potential in the near future. For those that have elected to take a Variable Rate Mortgage, they have factored in the rate they are willing to accept without causing any distress in their financial situation.
If you want to see a much more detailed and thorough report of the impact of interest rates on Canadians and Manitoban’s, just check out the report produced by CAAMP Economist Will Dunning , pages 35 – 37 and you will get a different story of tolerance in risk for mortgage holders.
Give Manitobans more credit than this survey would contend. The headline should read, “Most Manitobans Prudent in their Mortgage Decisions”, but that doesn’t sell papers!