Nearly Half of Canadians Don’t Consider Their Mortgage Debt: Manulife Survey

For most households their mortgage will be the largest debt of their lifetime. With home prices skyrocketing, households are taking on more debt to buy their dream home. The low interest rate environment seems to have given a false sense of security to many, especially young adults.

A lot of Millennials don’t consider their mortgage debt, according to a recent survey by Manulife. In fact, today’s adults are a lot more comfortable with debt than their parents were.

Younger Homeowners More Comfortable with Debt than Their Parents

Four in 10 homeowners (39 per cent) said they’re more comfortable with household debt than their parents. Those in their 50’s are the most at ease with carrying debt – they are five times as likely to be more comfortable carrying personal debt.

For generations personal finance has been a taboo topic seldom discussed around dinner tables. The survey found homeowners are actually more willing to discuss debt with family, with three in 10 (28 per cent) saying they talk about it more than their parents. Those in their 50’s once again were five times as likely to feel they’re better at communicating about debt than their parents.

“Canadians are becoming increasingly comfortable with taking on debt and discussing that debt with those close to them,” says Jason Daly, VP Product, Marketing & Business Development, Manulife Bank of Canada. “This could be a result of our current low interest rate environment, which makes debt management seem less intimidating than it was in the ‘80s and 90’s, when rates were much higher.”

Many Canadians Don’t Consider Their Mortgage Debt

Those furthest from retirement are less likely to consider their mortgage debt. The survey found nearly half (45 per cent) of homeowners would say they’re debt-free, even if they still had a mortgage to pay. A majority of homeowners in their 20’s (68 per cent) don’t consider their mortgage household debt.

The closer homeowners are to retirement, the more their mortgage weighs on their minds – 60 per cent of homeowners in their 30’s would consider themselves debt-free even with a mortgage, while less than half (48 per cent) in their 40’s, and three in 10 (29 per cent) in their 50’s.

“This may reflect a difference in focus,” says Daly. “Younger homeowners are more likely to carry higher-interest consumer debt, which they’d be smart to focus on paying down. However those in their 40s and 50s may have already tackled their consumer debt and are becoming more focused on paying off their mortgage before retirement.”

Reaching Debt-Freedom

It’s often said reaching debt-freedom is akin to taking the weight of the world off your shoulders. When you’re debt-free you have choices – if you’d like to change careers or tackle a major home renovation, there’s no better time than when you’re debt-free.

What advice can homeowners who recently became debt-free share with those looking to shed their debt burden? While we’re often told it pays to shop around for the lowest rate, only 35 per cent said obtaining the lowest rate was important in becoming debt-free.

What is the number one piece of advice? The survey found 92 per cent said paying credit card balances in full is their best advice. This is sound advice – while you can find a five-year fixed rate mortgage at less than three per cent, the interest rates on most credit cards remain sky-high at 18 per cent or higher. If you’re carrying a balance on your credit card, any money you have left at the end of the month should go towards reducing your high-interest debt. In fact, 62 per cent said making extra payments above and beyond your minimum payment is an effect way to eliminate debt. Meanwhile, half (51 per cent) said creating a budget and managing spending is helpful.

The Bottom Line

Although today’s younger generation may own homes like their parents, their perceptions and attitudes towards debt differs, even by age group. Regardless of your age, if you’re carrying high-interest credit card debt, it’s hard to argue with paying it down. As long as you’re able to meet the minimum payments for other debt obligations, in most cases it makes sense to allocate any money left over at the end of the month towards your highest interest debt. Once you’ve tackled that, then you can concentrate on your mortgage with the eventual goal of reaching debt freedom.