Nearly 40% of Canadian homeowners struggle to pay monthly bills, survey finds

Surging house prices have left nearly four in 10 Canadian homeowners with lots of equity, but unable to cover their monthly expenses at least once this past year, according to a new survey released Tuesday.

The survey from Manulife Bank of Canada found that while 37 per cent of those asked say they were “caught short” when it came to covering their basic living costs, another 60 per cent are worried they will not have enough saved for retirement.

“There’s a significant segment in Canada today that as a result of house prices are either struggling on day to day expenses or have not even begun to think about retirement or how they are going to thrive in their retirement years,” said Manulife Bank chief executive officer Rick Lunny.

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The survey found the average Canadian homeowner with a mortgage has an outstanding balance of $181,000, up from $175,000 reported last fall. Vancouver tops all provinces when it comes to average mortgage debt outstanding at $259,000; followed by Calgary and Edmonton at $217,000; Toronto at $194,000; and Montreal at $156,000.

Of those who said they had been caught short on cash to pay their monthly expenses, Manulife says Canadians often turn to more expensive forms of debt.

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Manulife says homeowners who find themselves with limited savings may have to make difficult choices when it comes to retirement, including: retiring later, accepting a lower standard of living in retirement or moving to a less expensive home and use their home equity to fund retirement.

“A disproportionate amount of people are looking to their house as their retirement plan, which might have worked for a few lucky people in Toronto or Vancouver 20 or 30 years ago but that is not sound financial planning,” said Lunny.

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The first step Canadians need to take to control their finances is to figure out where they are spending their money, Lunny said.

“Everybody hates doing budgets. I get that, but a $4 latte every day of the week or a gym membership these things add up,” he said. “People don’t realize the impact it has on their current ability to meet their needs or perhaps more importantly their retirement needs.”

The Manulife Bank of Canada poll surveyed 2,373 Canadian homeowners in all provinces between ages 20 to 59 with household income of $50,000 or more. The survey was conducted online by Environics Research between Feb. 3 and Feb. 20 2016.