October 10, 2023
Interest rates remain high with upside risk and only 18% of variable rate mortgage holders can weather the storm.
TORONTO, Oct. 10, 2023 /CNW/ – Financial Resilience Institute, the leading authority on financial resilience and well-being in Canada, announces results from its eighth Seymour Financial Resilience Index ® release, with additional insights available in its new report.
Financial Resilience Institute measures household financial resilience, defined as a household’s ability to get through financial hardship, stressors and shocks as a result of unplanned life events, through its peer-reviewed Financial Resilience Index. The Index measures households’ financial resilience across nine behavioural, sentiment and resilience indicators at the national, provincial, segment and individual household level three times a year, with a pre-pandemic Index baseline of February 2020. The Index is complemented with extensive financial stress and other data from the Institute’s independent Financial Well-Being studies conducted with over 5000 adult Canadians since 2017.
According to the latest findings from the Seymour Financial Resilience Index ® Canada’s mean financial resilience score in June 2023 stands at 52.44, with Canadians at the national level ‘Approaching Resilience.’  This score is consistent with the findings from February 2023, marking a marginal increase of two points from June 2022. However, it represents a decrease of three points compared to the pre-pandemic period in June 2020 when Canadians demonstrated higher financial resilience due to significant changes in consumer and financial behaviors amid lockdowns and substantial government COVID-19 relief efforts.
The latest findings from the Seymour Financial Resilience Index ® shed light on concerning trends in the financial well-being of Canadians:
- Widespread financial vulnerability: The Index reveals that a significant 76% of the Canadian population, equivalent to 19.5 million adults aged 18 to 70 years old, are classified as ‘Not Financially Resilient.’ This vulnerability extends across all household income demographics. Remarkably, 22% of Canadians with a household income exceeding $150,000 are ‘Extremely Vulnerable’ or ‘Financially Vulnerable’ based on the June 2023 Index.
- Decrease in ‘Financial Resilient’ households: Over the past two years, there has been a noticeable decline in ‘Financially Resilient’ households, falling from 31% of the population in June 2021 to just 24% (less than 1 in 4) as of June 2023. Additionally, 18% of the population is now ‘Extremely Vulnerable’ to all financial stressors and shocks, which is a slight decrease from 21% observed a year ago.
- Continued high levels of financial stress: 52% of households are experiencing high levels of financial stress concerning their current and future financial obligations, up from 43% in June 2022. 60% of Canadians report that the high cost of living is negatively impacting their quality of life and 49% report that money worries make them physically unwell.
- Financial Hardship: 42% of Canadians are currently facing significant financial hardship. 23% of families are unable to meet their essential expenses, and 16% of households have been unable to get or afford the food they need, with this the case for 44% of ‘Extremely Vulnerable’ households. Housing affordability is a problem for 55% of Canadians as of June 2023. This issue is particularly acute for 82% of ‘Extremely Vulnerable’ and 69% of ‘Financially Vulnerable’ Canadians.
- Changing Financial Behaviors: As of June 2023, 69% of households report having significantly reduced their non-essential expenses, a notable increase from 56% a year earlier. However, due to the high cost of living, 62.5% of Canadians now report spending either more or the same as their household income, marking a substantial rise from 53% in June 2021.
- Savings and Debt: Despite these shifts in behavior, the Index highlights that 84% of households report the cost of living has outpaced any growth in their household income over the past 12 months as of February 2023. With Canada having the highest household debt levels of any G7 country as of May 2023, one third of Canadians have increased their borrowing to pay for essential expenses and 42% have had to draw down on savings to meet their debt obligations. Notably, only 50% of Canadians currently maintain a liquid savings buffer of three months or more as of June 2023, a notable decrease from a high of 64% in 2017. Nearly a quarter of the population (24%) has a buffer of less than three weeks. It’s crucial to point out that 37% of Canadians have either a negative or zero household savings rate as of June 2023.
- Increased financial vulnerability for variable-rate mortgage holders: While 67% of Canadians overall report that rising interest rates are a problem for them personally, this is the case for 88% of variable interest rate mortgage holders as of June 2023. Notably, the Index highlights that mortgage holders scored as ‘Financially Resilient,’ fell from 33% in June 2021 to 22% in February 2023 to only 18% in June 2023.
In a positive development, a significant proportion of Canadians (47%) now rate their primary Financial Institution highly for helping to improve their financial wellness over the past year, compared to the previous year in June 2022. Additionally, the latest Index reveals improvements in the ‘confidence in the ability to meet short-term savings goals’ indicator and the ‘change in household financial situation’ indicator compared to February 2023.
“The latest Index from the Financial Resilience Institute highlights the financial vulnerability and stress faced by many Canadians,” comments Eloise Duncan, CEO and Founder of the Financial Resilience Institute. “It is crucial to recognize the financial challenges encountered by significant portions of our population and to bring to the forefront the need for Canada to chart a course toward financial resilience.”
About the Financial Resilience Institute
Financial Resilience Institute is a non-profit organization dedicated to improving the financial resilience and well-being of Canadians and global citizens. It is the leading independent authority on financial resilience and financial well-being in Canada.