Our leaders have been swiping the national credit card like it's Black Friday, and mortgagors are paying the price for their extravagant spending.
Someone finally quantified that price last week when a Scotiabank report concluded:
"We estimate that government consumption and pandemic transfers to households account for about 200 basis points of the 475 basis points increase in the Bank of Canada’s policy rate."
Let's say Scotia's estimate is even half right. That's a whopping $17,000 extra that families are shelling out on a 5-year term (based on average mortgage amounts, according to TransUnion).
As much as some of that spending was justified to save families and jobs, much of it was our federal and provincial leaders acting like teenagers with a new VISA. The spending taps remain wide open, with federal program spending estimated at ~16% of GDP, well above the ~13% long-term average. How much the Liberals rein in spending will partly influence how far rates fall in the next rate-cut cycle.
But what many don't realize is, the riskiest spending is out of our control.