Bank surveys: cautious spending, weak housing outlooks

Household confidence and spending are moving differently

The third-quarter Canadian Survey of Consumer Expectations found that respondents felt better about their finances than in the previous quarter. Yet spending intentions weakened from already subdued levels, with high prices and uncertainty still weighing on households. Longer-term inflation expectations rose.

The companion Business Outlook Survey describes a modest improvement in housing-related firms’ sales outlooks, which it attributes to demand stabilizing after a slowdown. It does not describe a housing recovery. Across businesses, hiring intentions remained soft and most firms expected to keep staffing unchanged.

October publication, earlier interviews

The consumer survey ran August 5–27, with follow-up interviews August 24–September 4. Business Outlook Survey interviews ran August 6–September 2. Most responses in each survey preceded the August 21 breakdown in Canada–US trade talks. Later business evidence pointed to weaker sentiment following that development.

The consumer report also notes that the improvement in perceived financial health was measured before September’s rise in bond yields. These are respondents’ opinions, not Bank of Canada policy decisions or a reading of today’s mortgage offers.

Bring the outlook back to your own income

Our interpretation is that confidence and readiness to borrow need separate checks. A household can feel more secure while still choosing to delay a large purchase. Neither response tells us whether a particular home in Edmonton, Vancouver or Toronto is affordable for that household, or where its resale price will move.

For buyers in Alberta, BC and Ontario, the useful conversation is about how the proposed payment fits income that can be documented today. FCAC explains that lenders and brokers review income, assets and debts during pre-approval, and that pre-approval does not guarantee final mortgage approval.

• If employment or working hours have changed, bring that information to the broker and ask which documents need updating before relying on an earlier borrowing estimate.
• If you are self-employed, separate expected new sales from income already documented. Ask which records the lender needs and how it will assess variation in earnings.
• If you are considering a move, write down the dates you need to buy, sell or renew. Discuss a plan that can accommodate those dates without depending on a particular market forecast coming true.

Our self-employed mortgage page and pre-approval guide can help prepare those questions. For a different measure released today, our September inflation briefing covers recorded consumer-price changes; this survey briefing covers expectations and intentions.