Canadian Survey of Consumer Expectations—First Quarter of 2021

Household finance, credit and house prices

Consumers expect their spending growth to pick up despite flat income growth (Chart 5). This increase in spending growth expectations to a survey high could reflect pent-up demand for some goods and services as well as improved confidence about the end of the pandemic (Box 1). The gap between expectations for spending and expectations for income has expanded to its widest point since the survey began. This suggests that households could become more confident in their spending after the pandemic has subsided and may be willing to spend some of their accumulated savings. In fact, respondents anticipate spending more than one-third of their extra savings accumulated during the pandemic over the coming two years. People also expect to use about 15 percent of their extra savings to pay down debt.

Consumers’ expectations for interest rates at all horizons changed little and are lower than they were before the pandemic. This decline in expectations is in line with the Bank’s policy rate cuts and forward guidance; it also supports planned household spending (Chart 6).

The pandemic has not significantly altered consumers’ ability to make debt payments. Consumers’ views on access to credit are less positive than before the pandemic, indicating tighter credit conditions. Still, most people reported being able to make debt payments on time, and only a small faction (9 percent) have requested debt payment deferral for mortgages or consumer credit. The vast majority of these requests—made because of a pandemic-related decline in household income or for precautionary reasons—were partly or fully approved.

Consistent with the strength in housing markets, consumers’ expectations for house price gains moved up (Chart 7). This increase since the outbreak has been widespread across the country, but expectations are more moderate in Alberta and Saskatchewan. Low mortgage rates, increased savings and pandemic-induced shifts in behaviour continue to boost demand for housing. Buyers prefer larger homes and locations outside of city centres. Roughly 10 percent of respondents (14 percent of renters and 9 percent of homeowners) plan to buy or are considering buying a house or a condominium.

News – Bank of Canada