Faced with inflation and rising interest rates, families are rethinking their calculations

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Faced with inflation and rising rates, families are reviewing their calculations

Because of the increase in rate and galloping inflation, more and more households are struggling to make ends meet.

Within weeks, Jeanine Messanvi's mortgage payments went from $980 to $1209 every two weeks.

Discouragement can be read on the face of Jeanine Messanvi when she addresses the question of the family budget. This dynamic mother of five is not one to neglect her finances.

With her husband, they bought a house in Saint-Jean-sur-Richelieu last July. Both have modest salaries, and if they moved away from Montreal, their place of work is to have access to the property and to obtain a residence spacious enough for the whole family.

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After 10 years in a housing cooperative, they had put money aside. Enough, they thought, to have room to manoeuvre.

We had savings, so we opted for a variable rate, with one salary which pays the mortgage and the other which makes us live, details the mother of the family. That's how we made our calculations.

Except that within weeks, mortgage payments skyrocketed. Payments went from $980 to $1209 every two weeks, and inflation kicked in too. I said to my husband: we have to sit down and go over our calculations.

Since then, the couple have been chasing bargains to reduce the grocery bill. He also made the decision to sell his second car.

The family also cut non-essential expenses, such as Halloween decorations, weekly outings to restaurants or Christmas holidays in a hotel in Quebec, a tradition at home. However, despite efforts, month-ends remain difficult.

“I was very anxious, I met my doctor, I talked to him about it. I start talking about finances with my children, to explain to them. I told them, ''If we're decorating on Halloween, we're not going to do it for Christmas.'' We are starting to cut for us, the parents, but also for the children.

—Jeanine Messanvi

Hélène Hétu, budget consultant at the South Shore Family Economics Cooperative Association

Jeanine Messanvi is far from the only one to worry about her finances. Since September, it has risen quite spectacularly, notes Hélène Hétu, budget consultant at the Cooperative Association of Family Economy (ACEF) of the South Shore.

Since then, his workshops have been regularly sold out, whether it's for budget 101 meetings, the activity to eat well on a budget or information sessions on solutions to debt.

Above all, she sees an increased demand for small loans of $700 or less and assistance for unpaid rent, two programs offered by ACEF Rive-Sud.

According to Equifax's latest report, Canadians' total consumer debt increased by 8.2% in the second quarter compared to the same period last year.

We see a significant increase in difficult debt situations, notes Ms. Hétu.

At the moment, inflation is doing the most damage, but it predicts that rising interest rates are a bomb. delay.

It predicts that many households will have to renew their mortgages in the coming months at rates much higher than the initial rate.

For their part, the banks are in the expectation, even if they do not anticipate a catastrophic situation in the short term. Desjardins Group, however, took the lead with customers with the most fragile finances.

Contact was established with each of them to find strategies to limit the impact. Some are offered packages to repay on an ad hoc basis and not every two weeks or every month. Others decide to postpone the maturity of the loan to reduce monthly payments.

Few of them are vulnerable to rising interest rates, specifies the senior spokesperson, Chantal Corbeil.

According to Canada Mortgage and Housing Corporation, the rate for conventional mortgages with a five-year term has gone from 3. 22% to 6.64% between September 2021 and September 2022.

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