Pandemic has some less vulnerable to debt: report
Determined to double annual income by 2023
Canadians are expected to spend more and borrow more in 2021, but they may be less vulnerable to debt than they were before the pandemic, says a new analysis by RBC Economics.
So how does that work? Our mountain of household debt has long been identified as a worry by everybody from the Bank of Canada to international watchdogs such as the OECD.
Last year Canadians piled on $118 billion more in mortgage debt, almost double the increase of the year before. But while that debt is now higher than before the pandemic, the share of household disposable income going to debt payments has dropped, say RBC economists Nathan Janzen and Claire Fan.
The reason for that is lower interest rates, government income supports and payments deferrals for about 3 million borrowers over the summer and fall.
Though deferral programs have mostly ended, the Bank of Canada has signalled it will keep rates low and government support will likely continue until the labour market begins to recover. “We expect debt payments to remain manageable under these circumstances,” said the economists.
If the recovery picks up steam and rates rise faster than expected, it could have a bigger impact on households than in the past because debt levels are higher.
But the mix of debt has changed during the pandemic, with more of it in mortgages, which are less sensitive to rate hikes.
The report finds that fiveyear fixed-rate mortgages made up almost half of mortgages by late last year, up 7 percentage points from early 2019.
“That means it would take time, years in many cases, for higher interest rates to flow through to actual household borrowing costs.”
Moreover, soaring home prices have meant asset values have risen faster than debt levels. Household real estate assets rose $400 billion in the third quarter of 2020, from the year before — more than four times the rise in mortgage debt over the same period, the report said.
Canadians are also using the money they are saving during lockdowns to pay down more expensive debt, such as credit cards. Outside of mortgages, household debt decreased in 2020, with credit-card debt declining 14 per cent ($12.8 billion) by year end, compared to pre-pandemic levels.
However, “concern remains that there are households caught in the middle,” the economists say.
Higher-income earners have been less impacted by job losses during the pandemic and are saving more. Lower-income workers, hit hardest by job losses, have received significant support from government income programs.
“Recent Bank of Canada research pointed to an increase in household debt payments relative to incomes largely from middle-income households who lost work and received only partial offset from government support payments,” they said.
Twitter Inc. wants to double its annual revenue to US$7.5 billion by 2023, and expects to increase its user base by an average of almost 20 per cent each of the next three years, according to a regulatory filing.
The social media company has targeted 315 million daily active users by the end of 2023, an increase from 192 million in the fourth quarter of 2020.
Shares jumped as much as 12 per cent to a record intraday high of US$80.75 as the market opened on Thursday.
The business goals were announced Thursday in conjunction with the San Francisco-based company’s first Analyst Day since 2014.
Twitter makes about 86 per cent of its annual revenue from targeted advertising, a crowded space in which its market share is a sliver compared with competitors like Facebook Inc. and Alphabet Inc.’s Google.
But Twitter executives have argued that the company has a lot of room to increase its sales by building products for smaller clients.
The company also has been buoyed by a rise in digital advertising the past year as more consumers shopped online during the pandemic.
And Twitter is considering other ways to generate revenue, such as a subscription business.
The shares have jumped almost 33 per cent in 2021, despite the company’s decision in early January to ban then-u.s. President Donald Trump from the service.
There was concern that Trump’s ban would hurt business, or stunt user growth, but Twitter said growth in January was around 20 per cent, which is consistent with previous quarters.
Another goal outlined Thursday is meant to improve Twitter’s pace when it comes to improving the service.
The company wants to “double development velocity” of product shipments that directly influence revenue or user growth.
In practice, that means “doubling the number of features shipped per employee,” the company said in its filing, though it didn’t specify the current rate.