Canadians’ accumulated savings may not be as large as expected
According to a new report from Oxford economists Tony Stillo and Michael Davenport, the oft-touted stockpile of savings expected to boost Canada’s mortgage and housing recovery may not be as large as the numbers suggest.
While Canadians have accumulated an estimated $ 184 billion in savings throughout 2020, a significant fraction of those funds has already been used for debt service and investments, the Financial Post said in its analysis of the ‘Oxford study.
Stillo and Davenport felt that much of it was spent on housing. During the pandemic year, total mortgage debt increased by approximately $ 132 billion.
Meanwhile, non-mortgage debt fell $ 22 billion between the fourth quarter of 2019 and the first quarter of 2021, with about 12% of Canadians’ savings going to this segment.
With further cuts due to servicing stocks, the stock of cash drops to just over $ 100 billion, Oxford calculated.
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More troubling is the fact that well over half of these savings are found in the highest income households, while the lowest income segment held only 11%.
âTypically, higher income households have a much lower marginal propensity to consume. With more than half of the excess savings held by high-income households, it seems reasonable that most of the savings go unspent, âsaid Stillo and Davenport.
Recent findings from Statistics Canada have supported these rumblings of caution: According to the agency, the average net savings per household was only $ 13,546 during the pandemic year.
âThat’s quite a bit of money, given that households saved on average less than $ 2,000 the previous yearâ¦ [but] it doesn’t quite sound like households saving $ 167 billion â, Better accommodation said in his analysis of Statistics Canada figures. âIt will definitely give spending a boost. However, not everyone got a down payment-sized bargain as many assume. “