Quick adjustments are needed to the household

Des ajustements rapides s'imposent pour les ménages

Photo: Michael Monnier Archives The Duty
With uncertainty, the demand for credit is expected to slow.

Delinquency rate on loans in the rise and erosion of net worth, households are going to come out of the crisis linked to the COVID-19 with a financial health weakened.

In a small study published Thursday, the economist Ksenia Bushmeneva, TD Bank, says that the health crisis is going to cause rapid changes, and this, with a baseline scenario that did not provide for a return of the unemployment rate to its level of pre-pandemic before the second half of 2021.

The savings rate, for its part, is called to increase. Certainly, it had done a bond related to the period of confinement, but the economist predicts that it will remain high despite the expected recovery from the second half-year, households are concentrating their attention on their high level of debt notwithstanding the fact that interest rates are on the floor. With uncertainty, the demand for credit is expected to slow in the second quarter to contract in the third under the effect of the decline in real estate sales and purchases of durable goods. Regarding the cost of debt service, including the high level reasons for the increase of the insolvency in 2019, it will slightly decrease, also helped in this by the programmes deferral of payments.

Rest the financial health, shaken by the fall in stock market prices. Weakened also by this data from the canadian bankers Association, according to which 720 000 Canadians have asked for a postponement of mortgage payment between march and April. They will be 900 000 in June, writes the economist of the TD, affecting 18 % of the mortgage loans granted.

The economist reminds us, however, that the household has grown by 84 % since 2009, with half coming from real estate. In addition, in 2018, only 16 % of mortgage loans granted by the banks had the equivalent of a downpayment of 20 % or less. And the economist to conclude that the owners, and those with a margin of manoeuvre, which will better take the shot even if the rate of insolvency, currently in pilot, is expected to grow at recession levels at the end of the year.

 

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