Most Canadians exclude mortgages from their monthly budget, finds study

Pressures of inflation and rising interest rates lead 60% of respondents to believe they need to cut back on expenses

Most Canadians exclude mortgages from their monthly budget, finds study

A significant portion of Canadians can more potentially manage their cashflow more effectively by including mortgage payments in their monthly budgeting.

That’s according to a new study by IG Wealth Management, which was carried out in collaboration with Pollara Strategic Insights.

Among all Canadians surveyed, more than two-thirds (67%) said they use a budget to control their monthly cash flow. Common budget items include costs of groceries (90%) and gas (72%), as well as entertainment and savings (54%).

Only two-fifths (39%) of respondents said they account for their mortgage when creating their monthly budget, even though mortgage payments are among the biggest monthly expenses (35%) for those who have one.

“In many cases, monthly mortgage payments, along with taxes, account for one of the largest monthly expenses Canadians face,” said Alana Riley, Head of Mortgage, Insurance and Banking, IG Wealth Management.

“So, while it is encouraging that so many reported having a monthly budget, it’s only providing a partial snapshot of their overall cashflow situation if they don’t factor in their mortgage. In order to truly optimize the effectiveness of a monthly budget, it should include all major expenses and be a part of a comprehensive financial plan that captures all dimensions of an individual’s financial world,” Riley added.

Riley pointed out that in an era of rising interest rates and inflation, including one's mortgage in budgeting has become even more crucial.

The research revealed that for nearly three fifths (56%) of mortgage holders, their ability to pay their mortgage should interest rates continue to climb is a concern, and only 45% believe they’ll retire mortgage-free.

Three-fifths (60%) of all Canadians believe they will need to cut back on their spending due to rising costs and interest rates, and 43% are unsure of how they will be able to make ends meet monthly.

“The combination of rising interest rates and inflation is causing stress for many Canadians and in some cases tense dinner table conversations across the country,” Riley stated. 

“Canadian families are wrestling with questions such as should they go with a fixed or variable rate mortgage, how can they more effectively manage their money and what can they do to set themselves up for the future, whether it be their retirement, the purchase of a home or paying for their children’s education.  The value of advice and financial planning has never been more important.”

“If you have questions about your finances or the current economic environment, seek out the help of a financial advisor who can work with you to build a holistic plan and help you face the future with confidence,” Riley said.