The current economic landscape can be challenging for young Canadians to navigate as they face great uncertainty with heightened interest rates and inflation. It can be frustrating as they are just starting to build their career, considering buying a home or starting a family. If you are a parent, you may be thinking about how you can help your child during this period. The CHIP Reverse Mortgage by HomeEquity Bank is a sound financial solution that can help you support your loved ones by providing a tax-free gift.

The Gift of Early Inheritance 

As a parent, you may want to provide an early inheritance to see your adult children use the funds to improve their lives in a time of need. By giving an early inheritance, you can avoid probate fees (estate administration tax) and save money by bringing you to a lower tax bracket*. With an early inheritance, your children can pay for their wedding, start a business, pay off student loans, make a down payment on their home, and much more. Speak to your tax specialist for more details.

How the CHIP Reverse Mortgage Works

You may have heard of using a home equity line of credit (HELOC), or liquidating investments to gift an early inheritance. There are disadvantages associated with loss of investment earnings or taxes when selling investments. The CHIP Reverse Mortgage by HomeEquity Bank allows you to unlock up to 55% of the equity in your home without any of these challenges. With the CHIP Reverse Mortgage, your investments remain intact, and no monthly mortgage payments are required. Therefore, your income is not affected, and best of all, the money you get from the CHIP Reverse Mortgage is tax-free!

If you want to provide a tax-free gift to your children, contact me for details on how the CHIP Reverse Mortgage by HomeEquity Bank might be a help you.

*HomeEquity Bank requires all clients to receive independent legal advice to review the mortgage contract and ensure they fully understand the terms and conditions.

Adapted from HomeEquity Bank’s February 16, 2023 Publication

Image Credit:  Jon Tyson, Unsplash

Today’s inflation report showed a continued improvement, mainly due to falling year-over-year (y/y) gasoline prices. The October Consumer Price Index (CPI) rose 3.1% y/y, down from the 3.8% rise in September. There were no surprises here, so markets moved little on the news. Excluding gasoline, the CPI rose 3.6% in October, compared to 3.7% the month before.

The most significant contributors to inflation remain mortgage interest costs, food purchased at stores, and rent.

Canadians continued to feel the impact of rising rent prices, which grew faster (y/y) in October (+8.2%) than in September (+7.3%). The national increase reflected acceleration across most provinces. The most significant increases in rent prices were seen in Nova Scotia (+14.6%), Alberta (+9.9%), British Columbia (+9.1%) and Quebec (+9.1%).

Property taxes and other special charges, priced annually in October, rose 4.9% yearly, compared with a 3.6% increase in October 2022. The national increase in October 2023 was the largest since October 1992, with homeowners paying more in all but one province, as municipalities required larger budgets to cover rising costs. Property taxes in Manitoba (-0.3%) declined for the third consecutive year, mainly due to reduced provincial education tax.

While goods prices decelerated by -1.6% as prices at the pump fell, prices for services rose 4.6% last month, primarily driven by higher prices for travel tours, rent and property taxes.

While grocery prices remained elevated, they also continued their trend of slower year-over-year growth, with a 5.4% increase in October following a 5.8% gain in September. While deceleration continued to be broad-based, fresh vegetables (+5.0%) contributed the most to the slowdown.

Excluding food and energy, inflation fell to 2.7% in October, down a tick from the September reading. Two other inflation measures closely tracked by the Bank of Canada–the so-called trim and median core rates–also eased, averaging 3.6% from an upwardly revised 3.8% a month earlier.

Bottom Line

According to Bloomberg calculations, another critical measure, a three-month moving average of underlying price pressures, fell to an annualized pace of 2.96% from 3.67% a month earlier. It’s an important metric because Bank of Canada Governor Tiff Macklem has said policymakers are tracking it closely to understand inflation trends.

Today’s news shows that tighter monetary policy is working to bring down the inflation rate. In its Monetary Policy Report last month, the Bank of Canada expected the CPI to average 3.5% through mid-2024. Cutting its economic forecast, the Bank forecasted it would hit its 2% inflation target in the second half of 2025.

Given today’s data and the likely significant slowdown in Q3 GDP growth, released on November 30, and the Labour Force Survey for November the following day, policy rates have peaked. Governor Tiff Macklem will give a speech on the cost of high inflation in New Brunswick tomorrow, and the subsequent decision date for the Governing Council is December 6th. The Bank’s inflation-chopping rhetoric may be relatively hawkish, but the expectation of rate cuts could spur the spring housing market.

The economists at BMO have pointed out that “three provinces now have an inflation rate below 2%, while only three are above 3%, so much of the country is already seeing serious signs of stabilization. (Unfortunately, the two largest provinces have the fastest inflation rates—Quebec at 4.2% and Ontario at 3.3%).” There is no need for the Bank to raise rates again, and they could begin to cut interest rates in the second quarter of next year.  

Your mortgage renewal is an opportunity to optimize long term interest savings and address current cash flow.  Some of the items to explore as you evaluate your options include:

Fixed vs. Variable Rates:

• Assessing your risk tolerance: Fixed rates can provide stability, while variable rates fluctuate. However, fixed rates can come with their own inherent risk: penalties. Depending on the lender and the direction rates are trending, the penalty on fixed rate mortgages can vary widely.
• Reviewing the current economic climate: Rates are forecasted to come down, making variable rates more attractive again to those with a comfort with relying on those forecasts in making rate decisions.
• Variable rate payment options: Not all variable rate mortgages work the same way. Some have fixed payments, and some have payments fluctuating with the prime rate.  Both have implications as rates move and each should be considered against interest rate forecasts and personal perspectives when making a selection.
• Consider Term Length: Forecasts may influence how long of a term you select at renewal as well.

Adjusting Payments:

• Exploring flexible payment options: The ability to adjust your payment frequency or making lump sum payments should align with your financial goals, future opportunities and potential rate climate as it evolves.
• Considering budget changes: If your financial situation has evolved or will be in the future, adjusting your payments accordingly can be a strategic move. From adjusting payment frequency to changes in amortization, you may have multiple options to choose from to address your budget and future plans.

Consolidating Other Debt:

• Evaluating high-interest debt: Use the renewal as an opportunity to consolidate high-interest debts into your mortgage. This can simplify payments and potentially save on interest.

Selecting a New Lender or Staying With Your Current One:

• Weighing your options: Never settle for your lender’s first offer without exploring your options with me first ensuring you’ve received personalized advice tailored to your unique situation as interest rate forecasts shift.

Your mortgage renewal is not just an exercise in paperwork; it’s a chance to align your mortgage now with your financial goals. Considering these factors, interest rate forecasts, and your future plans can pay off both in the short and long term.  Reach out today with any questions you may have, I’m always happy to help.

Image: Joshua Hibbert on Unsplash

Though Fall has already started, there are a few things you can do still to ensure your home is well-prepared for the season:

• Examine Your Gutters: This time of year it is important to clean and inspect your gutters (replacing as needed) to ensure they are working properly as the rain and snow season hits. If they are clogged or damaged, it could result in flooding or exterior damage – so be sure not to wait.
• Check for Drafts: In the Fall and Winter, many homeowners are spending extra money heating their homes due to drafts, but it doesn’t have to be that way.  A quick check on exterior doors and windows to confirm if they are properly sealed is a good start. To do this, simply close a door or window on a strip of paper. If the paper slides easily, update your weatherstripping.
• Inspect Your Furnace: In Canada, we are no strangers to chilly evenings.  To ensure you are comfortable throughout the colder months, be sure to have your furnace inspected by an HVAC professional. They can check leaks, test efficiency, and change the filter. They can also conduct a carbon monoxide check to ensure air safety.
• Manage Your Thermostat: As tempting as it is to turn your heat all the way up in the winter, proper thermostat management will help you save costs in the long run. Using a thermostat with a timer can save you even more. Turn them on earlier so the room heats up in time for use and have it turned off 30 minutes before bed or before leaving the home.

• Fix Any Concrete/Asphalt Cracks: This one is easy to ignore but can turn into a bigger issue. When water gets into existing cracks during colder months, it freezes and expands, causing cracks to become even larger.

• Turn Off Outdoor Plumbing: Since your garden will not need attention until the Spring, shut off and drain all outdoor faucets and sprinkler systems. Depending on where you live, you might also want to cover them to prevent freezing during the Winter months.

• Change Your Batteries: For safety, check all smoke detectors and carbon monoxide devices at least a couple of times throughout the year. While doing other Fall home prep, this is an easy one to add to the list.

• Create a Storm Kit: A storm kit is a handy source of essential items in the event of losing power. Consider what you and your family might need, such as a flashlight with new batteries, candles, matches, a portable radio, water, and snacks. Keep your kit somewhere easy to access.

Whatever your plans this season, a quick check of your home will ensure you are well-prepared for cooler temperatures ahead.

Adapted from DLC Marketing

Image Credit: Hans Isaacson, Unsplash