Household finance, credit and house prices
Consumers expect their spending growth to recover, while prospects for household income growth remain unchanged (Chart 5). This expected recovery in spending could reflect the impact of the announcements about the development of effective vaccines. The gap between spending expectations and income expectations has widened, suggesting that households could spend part of their accumulated savings going forward. Still, the gap remains smaller than it was just before the pandemic began, suggesting that, on balance, consumers are still more cautious than before the pandemic.
Consumers’ interest rate expectations for two years ahead have moderated, and expectations at all horizons are lower than their pre-pandemic levels. These lower expectations are in line with the Bank’s policy rate cuts and forward guidance (Chart 6). However, consumers’ views about access to credit deteriorated from the previous quarter to their lowest level so far, indicating tighter credit conditions since the onset of the pandemic.
Most people reported being able to make debt payments on time. A small share of respondents (8 percent) requested debt payment deferral (for mortgages or consumer credit), and the vast majority of these were partly or fully approved.
Consistent with the rebound in the housing market, consumers’ expectations for house price growth ticked up from the previous quarter, reaching an all-time high (Chart 7). While the increase was widespread across provinces, expectations remain modest in Alberta. The pandemic is pushing buyers to prefer larger homes and locations outside of city centres.