Current economic conditions are having a substantial impact on Canadians’ home renovation plans in the year ahead, as revealed in a recent study commissioned by FinanceIt Canada Inc. (“Financeit”), a market-leading point-of-sale financing provider within the home improvement industry. The Financeit Consumer Lending Survey of Canadian homeowners found that almost four in 10 Canadians (39 per cent) cite affordability challenges as the reason for postponing their renovation plans for anywhere from one year to indefinitely, with this sentiment rising to almost half (48 per cent) for younger respondents aged 18-34.
“It’s no secret that Canadians are continuing to be mindful of spending as rising interest rates and financial uncertainty are felt across the country,” says Michael Garrity, CEO of Financeit. “While some may have the option of shifting their renovation dates around, for those who are needing to make necessary upgrades, this can make for a challenging situation. It’s not surprising that younger Canadians, who likely have less disposable income than their older counterparts, are being impacted at a greater rate.”
The Leger survey, conducted by Leger Marketing Inc. (“Leger”), signals increased appetite and openness for alternative payment options amongst Canadians, with 43 per cent claiming to be interested in learning more about the options available. This figure rises to 57 per cent amongst those aged 18-34.
As part of the survey, Financeit merchants were asked to provide an analysis of their recent business activity since the start of national economic challenges. As many as 90 per cent of the merchants interviewed have reported an expectation of business volume fluctuations, as consumers become hesitant to spend.
“Right now, our customers want to hold onto their cash for a rainy day. At the same time, for many, these home improvement projects are a necessity. We’ve seen that increasing mortgage payments have resulted in households renovating their basements either to create a multi-generational home or to generate rental income. Our customers are receptive to fixed-rate payment options that require no upfront payment and allow their monthly bills to remain consistent,” said Medi Zadegan, President and CEO of White Orchid Build & Design Inc.
Looking ahead to 2023, alongside increasing financial hesitations and concern, the home improvement sector is anticipated to be influenced by housing market activity. Higher interest rates that have accompanied inflation have meant that engaging in the housing market might not be viable for some Canadians; this may make renovating the home, rather than selling it, a potentially more attractive option for some.
“We’ve witnessed a connection between affordability challenges within Canada’s real estate market and interest in financing options within the home improvement space in years prior, but that’s now being compounded by recent financial strain,” says Garrity. “Given these factors, we anticipate continued interest from Canadians to better understand the range of payment options available to them as we continue progressing throughout 2023.”
- Only 23 per cent of Canadians are aware of financing that is offered directly through a home improvement contractor.
- About a quarter of Canadians would prefer an easy application process when securing financing, even if it means a slightly higher interest rate.
- 23 per cent of Canadians are not overly concerned about interest rates related to financing their home renovation projects, so long as their monthly payments are affordable.