Is your home at risk? Peter Watson explains what Ontario homeowners need to know about rising mortgage defaults.
Middle-class borrowers defaulting on their mortgage sends a warning signal for the Canadian economy.
There are economic danger signals coming from Canadians who have a mortgage.
Historically, borrowers with low credit scores were the most likely to default on their mortgage payments during challenging economic times. That is a segment of the population that is less affluent and understandably could be unable to make mortgage payments during economically unstable times.
The surprise now is that more financially stable middle-class people are a group that is also defaulting on mortgage payments. That to me is an alarm. This information is from Equifax Canada.
The Canadian economy runs on trust. Trust that most people can pay their bills, including mortgage payments and covering household costs.
When financial stability leaves the masses, there can be a chain reaction. If people cannot cover the cost of their mortgage, they are likely not able to cover other living expenses and will, by necessity, reduce their spending.
Local businesses will suffer because of reduced spending. That is the start of a financial chain reaction. That puts pressure on our federal government to provide financial support.
Our federal government correctly spent billions managing our economy during COVID, but it was a mistake to continue overspending since then.
As the saying goes from a financial perspective: “the cupboard is bare.” We still have tariffs, but we are spending to refocus our economy and now the financially reliable middle class is starting to suffer.
There could be challenging times ahead, so this is a good time to review your financial situation and plan accordingly.
Peter Watson, of Watson Investments MBA, CFP®, R.F.P., CIM®, FCSI offers a weekly financial planning column, Dollars & Sense. He can be contacted through www.watsoninvestments.com.
