Around 30% of millennial respondents in the latest survey by Nanos Research reported that higher rates are having a negative impact on their personal spending, with another 23% saying the effect is somewhat negative.
More than half of Canadians under 35 years old said that they are spending less because of recent interest rate increases. Of those between 35 and 54 years old, 41% reported higher rates are having a negative effect. Those over the age of 55 reported the least negative effects, with about one third saying higher rates harmed personal spending.
Nanos conducted the polling on behalf of Bloomberg between April 28 and May 4.
The survey results suggested that higher borrowing costs are already beginning to curb demand in the economy. It also underscored how the impacts will reverberate well beyond real estate as households offset rising interest payments by cutting back on other things.
A slowdown in consumer spending is the primary reason why most economists – including those at the Bank of Canada – are anticipating the economy is poised to drop off in coming years.
“Research suggests that age is a significant determinant of the possible impact of rate hikes on the personal spending of Canadians,” Nanos Research chairman Nik Nanos told Bloomberg. “The spending of younger Canadians, under 35 years of age, will likely be squeezed the most.”
The situation is particularly acute for younger Canadians borrowing to buy into a housing market that has seen prices double in cities such as Vancouver and Toronto over the past decade.
Because households have amassed record levels of debt during the recent period of extremely low borrowing costs, the Bank of Canada has predicted that the economy is as much as 50% more sensitive than before to rate hikes. Canada’s central bank has raised borrowing costs three times since July, and investors are anticipating two more increases later this year.
