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

The Bank of Canada today held its target for the overnight rate at 5%, as was widely expected. The central bank continues to normalize its balance sheet through quantitative tightening, reducing its Government of Canada bonds holdings.

The Monetary Policy Report (MPR) detailed a slowdown in global economic growth “as past increases in policy rates and the recent surge in global bond yields weigh on demand.” Continued increases in longer-date bond yields reflect the stronger-than-expected growth in the US, where the Q3 economic growth rate, released tomorrow, is expected to be a whopping 5%. Ten-year yields in the US have risen to nearly 5%, boosting fixed mortgage rates in Canada.

Oil prices are higher than was assumed in the July MPR, and the war in Israel and Gaza is a new source of geopolitical uncertainty.

The Governing Council said that past increases in interest rates are slowing economic activity in Canada and relieving price pressures. “Consumption has been subdued, with softer demand for housing, durable goods and many services. Weaker demand and higher borrowing costs are weighing on business investment. The surge in Canada’s population is easing labour market pressures in some sectors while adding to housing demand and consumption. In the labour market, recent job gains have been below labour force growth, and job vacancies have continued to ease. However, the labour market remains on the tight side, and wage pressures persist. Overall, a range of indicators suggest that supply and demand in the economy are now approaching balance.”

Economic growth in Canada averaged 1% over the past year, and the Bank forecasts it will continue to be weak for the next year before increasing in late 2024 and through 2025. The Bank is not forecasting a recession over this period. “The near-term weakness in growth reflects both the broadening impact of past increases in interest rates and slower foreign demand. The subsequent pickup is driven by household spending as well as stronger exports and business investment in response to improving foreign demand. Spending by governments contributes materially to growth over the forecast horizon. Overall, the Bank expects the Canadian economy to grow by 1.2% this year, 0.9% in 2024 and 2.5% in 2025.”

The central bank highlighted the volatility of CPI inflation in recent months–at 2.8% in June, 4.0% in August and 3.8% in September. “Higher interest rates are moderating inflation in many goods that people buy on credit, and this is spreading to services. Food inflation is easing from very high rates. However, in addition to elevated mortgage interest costs, inflation in rent and other housing costs remains high. Near-term inflation expectations and corporate pricing behaviour are normalizing only gradually, and wages are still growing around 4% to 5%. The Bank’s preferred measures of core inflation show little downward momentum.”

In today’s MPR, CPI is expected to average about 3.5% through the middle of next year before gradually falling to the 2% target level in 2025. “Inflation returns to target about the same time as in the July projection, but the near-term path is higher because of energy prices and ongoing persistence in core inflation.”

The hawkish tone of the final paragraph of today’s press release is noteworthy. The Bank does not want to boost interest-sensitive spending, such as housing and durable goods purchases, by assuring markets that its next move will be a rate cut. Instead, the Bank said, “Governing Council is concerned that progress towards price stability is slow and inflationary risks have increased, and is prepared to raise the policy rate further if needed. The Governing Council wants to see downward momentum in core inflation. It continues to be focused on the balance between demand and supply in the economy, inflation expectations, wage growth and corporate pricing behaviour. The Bank remains resolute in its commitment to restoring price stability for Canadians.”

Bottom Line

Nothing was surprising in today’s report. The slowdown in economic activity since late last year has dramatically reduced excess demand. The output gap–the difference between the actual growth in GDP and its potential growth at full employment–is essentially closed, suggesting that demand pressures have been easing. They had previously expected the output gap to close in early 2024.

Of concern to the Bank is that inflation remains above their 2% target in the face of increased global risks of higher inflation. Upside risks to inflation include elevated inflation expectations of households and businesses, growing extreme weather events, and heightened geopolitical uncertainties including the Israel-Hamas war.

Price gains in energy and shelter — upward pressures on inflation — are “anticipated to be partially offset by the easing of excess demand, weaker pressure from input costs and further disinflation in globally traded goods,” the Bank said.

“Ongoing excess supply in the economy moderates price inflation, helps ease inflation expectations and encourages businesses to gradually return to more normal pricing behaviour.”

Canada’s households are more indebted, on average, than their US counterparts and their shorter-duration mortgages roll over faster. That makes the Canadian economy more sensitive to higher rates and is one reason the Bank of Canada first declared a pause in January, well before the US Federal Reserve. The central bank’s next decision is due Dec. 6, after two releases of jobs data, October inflation numbers and third-quarter gross domestic product figures. I expect the Bank to pause rate hikes for the next six to nine months. When they finally begin to ease monetary policy, they will do so gradually, taking the overnight rate down to roughly 4% by the end of next year.

Dr. Sherry Cooper

In September, the Bank of Canada opted to maintain its policy rate at 5%.  The recent rate hikes over the spring and summer had already begun influencing the housing market.  Let’s take a closer look at the current scenario, what’s on the horizon, and how to navigate property purchases.

Current Market Conditions: The recent rate hikes during the spring and summer caused a slowdown in the housing market.  Some potential buyers chose to wait on property purchases, hoping for more favorable conditions.  Though home prices decreased by 6% in some markets during the summer, increased interest rates affected the amount borrowers could qualify for in some cases.  In the meantime, property owners have been busy navigating renewals and refinances, exploring switching lenders as they weigh out how to optimize their financial situations.

The Bank of Canada’s Upcoming Announcement: The overnight rate directly impacts various financial products, including lines of credit and variable rate mortgages.  With the Bank of Canada maintaining its 5% policy rate, many are hopeful this might be the peak in the overnight and prime rate.  We’ll have a clearer picture after the upcoming announcement on October 25th.  Borrowers are of course eager for a possible decrease in rates and a bit more potential breathing room.

Looking Ahead: As we look ahead to the coming year, analysts are forecasting a stronger housing market as the Bank of Canada begins to signal interest rate reductions.  Some economists anticipate these to begin by mid-2024.  This is expected to lead to an increase in new listings, addressing the shortage of inventory.  With lower interest rates, more buyers will likely enter the market, boosting demand.  Until then, buyers may have greater opportunities to negotiate property values and other contract terms.

Making the Right Move: Sometimes life dictates the timing of your real estate decisions.  Families grow and evolve, and others relocate for work; these are two examples of why property purchase decisions are made without regard for market conditions.  Most purchasers will buy when the opportunity presents itself.  Historically speaking, time has taken care of dips in the market as values have generally continued to increase over time.  Because property values tend to increase, the best time to buy can sometimes be when you qualify.  If you wait, property values, interest rates, and lender policies can change, and you may not be able to purchase for quite as much as you did when you first began your search.  Some buyers wait until they’re in a better financial position.  With an upcoming raise that might be the best play.  But the best time to get in the market might just be when your pre-qualification terms match your plans vs. waiting for rates or values to move.

Your Next Steps: Whenever the time is right for you, consider a no-obligation pre-qualification terms review and a rate hold for 90-120 days while you explore the market. Rate holds protect your ability to qualify, ensuring your cash flow and interest savings if rates rise while you shop. Understanding your pre-qualification terms will help you create a realistic budget for your property purchase. Additionally, it puts you in a stronger negotiating position. Sellers often prioritize offers from those whose financing has been reviewed in advance.

Conclusion: Regardless of where you are in your real estate journey, don’t hesitate to reach out if you have mortgage questions at any point.  I’m always happy to help.

Adapted from DLC Marketing

Image Credit: Autumn Mott Rodeheaver on Unsplash

Has this ever happened to you?  You’re buying property or refinancing, you have paid for a lender appraisal but you can’t have a copy of it.  Not being able to read a report you paid for is odd on the face of it, especially if you paid for the service in relation to property you may soon own, or property you do own already.  It’s natural you might be curious about every detail.

Unfortunately, lender appraisals are for mortgage purposes only.  This kind of valuation is sometimes done differently than an appraisal a consumer would order to support the valuation for an upcoming property sale or for another use.

Mainly due to liability reasons, only the lender may have a copy as its sole purpose is to confirm the value for lending.  Should anyone rely on the report for another reason and suffer a financial loss because of inaccuracies or omissions, the appraisal company and anyone who shares it may also be liable.

For an additional fee, an appraisal company may be happy to repurpose the report for your own use, which is sometimes open to you to request.

In any case, should you need mortgage information for a purchase, refinance, or other purpose, I am here to help.

Image Credit: Kristina Flour, Unsplash

Start your teen off right and help them prepare for as smooth a financial road ahead as possible.

Needs vs. Wants

Tweens and teens need to learn to differentiate between needs and wants and to prioritize how they spend their money.  Value and cost are two more important concepts they need to understand.  A top-of-the-line cell phone or a carbon fiber mountain bike may really impress, but a cheaper versions may perform similarly and provide more value.  Bombarded by marketing messages, teens need to learn how to stay objective. Even billionaires like Warren Buffett drive basic vehicles and live in modest homes.   If your teen or tween wants the latest and greatest must-have item, challenge them to explain the value beyond items being new, trendy, or fashionable.  When they want to buy something, encourage your teen to research, read reviews, and compare prices to make informed decisions.

Introduce Basic Investing Concepts

Introduce your teens to basic investing and the concept of how to make money with money.  Explain how investments can grow over time and the power of compound interest.  Should you buy a stock (or an ETF, GIC, mutual fund or some other financial product) for a 14-year-old? Absolutely!

Kids are familiar with many publicly traded companies like Disney, Roblox, Mattel and McDonalds.  Holding a few shares (in an informal trust account or simply in your name) may not return enough to put them through university, but it will teach them a few of the basics around investing, risk, and return for managing finances in the future.  Developing an investing mindset pays huge dividends over the course of a lifetime and helps underpin long-term financial security.  As soon as your kids turn 18, have them open a tax-free savings account (TFSA), even if they can only muster $50 or $100 monthly to contribute.

Credit and Debt

First-year post-secondary students are often able to get a credit card.  Responsible use of this first credit card can help establish a credit score and is very convenient.  They’re also a necessity for many online transactions.   However, cautioning about high interest and poorly planned expenses will be imperative from the start.

Federally issued Canada Student Loans are interest-free but provincial loans may still carry interest. Either way, explaining repayment of student loans at the outset is imperative as well.

Financial education is ongoing.  Encouraging openness about money and creating an environment where your teen feels comfortable discussing money matters with you is key.  Instilling sound money habits early as they develop their financial skills will help them eventually grow into financially responsible adults.

Adapted from DLC Marketing

Image Credit: pixelperfektion on Unsplash

Financial independence is a critical skill for future success.  As parents, we have the opportunity to nurture our children’s healthy relationship with money.  Here are a few points to consider with respect to helping them in this area:

• Review Your Attitude Towards Money: What is your own attitude towards money?  Are you a penny pincher?  Frivolous spender?  Do you buy on impulse, or take a long time to make a purchase?  How much debt do you have?  Your financial habits will shape your children.  To ensure you are setting them up for their best financial future, parents need to consider what messages they are sending with their money habits.
• Give Your Children an Allowance: Providing a small allowance to your children (especially one in exchange for chores) is an age-old way of teaching your kids about money.
• Encourage them to babysit or mow lawns for extra money: Nothing can beat the feeling of independence your child will feel by making a little extra money and saving up for something important to them.
• Teach Your Child to Save: If you are giving your child $5 per week in allowance for chores, encourage them to put even just $1 per week into a piggy bank.  In six months, ask them to count how much money they have saved.  Talk to them about why saving is important and what they might do with that amount.
• Encourage Kids to Think Before They Buy: While it’s hard to get a 10-year-old excited about an RRSP, there are other ways to help them start thinking about planning ahead.  One is to encourage them to think about their purchases before they commit.  If they see an ad for a toy and they have to have it, teach them about how advertisements are designed to make you want something.  Ask them to wait a week.  Do they still want it?
• Involve Your Children in the Family Finances: Explain why and how much you pay for certain things and discuss affordable choices.  Opening and paying bills or planning vacations helps them be a part of the conversation and will work to instill a sense of financial responsibility as they grow up.
• Show your children that by starting early, compound interest can make saving substantially easy:

Required savings per month to save $1,000,000 by age 65 assuming a 10% return:

If you start at 20, you need to save $116 per month

If you start at 30, you need to save $307 per month

If you start at 40, you need to save $847 per month

If you start at 50, you need to save $2.623 per month

A lower rate of return and a higher savings amount will get there too.  The point is to show your children how leveraging compound interest early and staying consistent will get them there more easily than by starting later.

You are the best example to your children about money.  Don’t be afraid to share the ups and downs with them.  Be patient with your kids, and don’t give up.  The best thing you can do as a parent is to repeat your message, show them how you make financial decisions, and hope they make the right ones for themselves eventually too.

Adapted from DLC Marketing

Image Credit: Felix Koutchinski Unsplash

Savings Data Source: https://www.fool.com/the-ascent/buying-stocks/articles/how-much-do-you-need-to-save-per-month-to-retire-with-1-million/

Part Three: Navigating Your Way Forward Using Property Equity Through Retirement

In the first two installments of this series, we’ve looked at equity and strategies around using a Home Equity Line of Credit (HELOC), also referred to here as a Line of Credit.  Let’s now look at HELOC considerations toward the end of one’s career and into retirement.

Not all HELOCs are created equal.  Selecting a lender whose products work well through retirement can be necessary at this stage.  Having the flexibility not to make a payment if there’s room between the balance and the limit of the Line of Credit can be helpful later in life.  Again, it’s recommended to at least make the interest payment, but there are times when being able to manage cash flow in this way can make financial sense.

Couples borrowing together require special considerations too.  Selecting a lender offering the continued use of a mortgage and line of credit after one partner passes away protects the surviving partner.

Though reverse mortgages are available to retirees and can be a good option for some to access equity for expenses, investments, or to supplement income, and though Lines of Credit have greater approval requirements, a HELOC may still be preferable as:

• There is no minimum use required on a Line of Credit, you only pay interest on what you need
• The rate of interest on a Line of Credit can often be lower than that of a Reverse Mortgage
• The entire amount of the Line of Credit can be repaid without penalty at any time
• Some Lines of Credit are as accessible as chequing accounts, accessing Reverse Mortgage Funds can be more difficult
• Reverse Mortgages come with set-up fees in addition to closing costs and have minimum required withdrawals
• Reverse Mortgages don’t always provide access to as much equity as a Line of Credit can
• Reverse Mortgages are limited to principal residences

As mentioned previously, using the equity in your home can potentially preserve access to Old Age Security.  Liquidating investments can increase your taxable income if the investment gain is taxable.  Increasing your income can impact your ability to collect Old Age Security if your income is bumped above the eligible income amount.  Accessing equity in your home has no impact on your taxable income and preserves your investments from having to be liquidated for use, allowing them to continue appreciating instead.

Always keep in mind, As with any refinance or property purchase, typical closing costs apply when securing a Line of Credit on a property.  In some cases, a fee is charged for the chequing account associated with a Line of Credit, but there are often options to have monthly fees waived.

I hope this series has inspired some ideas and I would be happy to review your requirements to assist you in planning for the future with this tool.  Feel free to reach out at any time for more information.

Image Credit: Tierra Mallorca on Unsplash

Part Two:  Heightened Financial Potential Through Your Property’s Equity: Benefits and Strategies

In the first post of this series, we looked at the concept of equity and the Home Equity Line of Credit (HELOC), also referred to as a Line of Credit here. This second post of this three-part series looks into the reasons why a HELOC is more than just a financial tool and how it fits as a strategic piece of your financial future.

Even those who have other assets benefit from using property equity instead as Lines of Credit can:

• Preserve your investments so they can keep appreciating
• Shield you from paying taxes and potentially bumping up into a higher tax bracket, which can be triggered when liquidating certain investments
• Potentially preserve access to Old Age Security (OAS) in some cases

Setting up a Line of Credit can secure future access to funds and a safety net for things like:

• Staying in your home rather than accessing its value by selling and downsizing or renting
• Accessing the equity in a rental property rather than selling it
• Managing cash flow in retirement
• Funding renovations
• Funding the deposit or down payment on a future property, or future properties, without the need to sell the current property first
• Helping family with down payments
• Making other investments
• Meeting other expenses
• Assisting with cash flow needs prior to selling the property
• Reducing (but not eliminating) the risk of title fraud on your property if you don’t have a mortgage on it
• Raw land purchases and funding construction costs, which can be simplified and more cost effective when funds are obtained through a line of credit on other residential property

Again, it should be noted Lines of Credit are demand loans.  Unlike mortgages with rates secured for a period of time, lines of credit rates can be changed, and lenders can request repayment at any time.  However, those circumstances are rare.

Anyone who looking into a HELOC should apply before they reduce their working income.  Some borrowers can qualify after retirement, but they may not qualify for as much as they might before they stop working.  Setting up a line of credit to plan for future use can be done at any point in one’s career.

You can in some cases apply for a HELOC after retirement, but advance planning before you reduce your income from work allows you to set yourself up to access the most equity possible.

Stay tuned for the last post in this series and in the meantime, for more information, please feel free to reach out any time.

With last Friday’s publication of the anemic second-quarter GDP data, it was obvious that the Bank of Canada would refrain from raising rates at today’s meeting. Economic activity declined by 0.2% in Q2; the first quarter growth estimate decreased from 3.1% to 2.6%.

Today’s press release announced, “The Canadian economy has entered a period of weaker growth, which is needed to relieve price pressures.” The Q2 slowdown in output reflected a “marked weakening in consumption growth and a decline in housing activity, as well as the impact of wildfires in many regions of the country. Household credit growth slowed as the impact of higher rates restrained spending among a wider range of borrowers. Final domestic demand grew by 1% in the second quarter, supported by government spending and a boost to business investment. The tightness in the labour market has continued to ease gradually. However, wage growth has remained around 4% to 5%.”

Lest we get too comfy with a more dovish stance in monetary policy, the central bank warned that the Governing Council remains resolute in its commitment to restoring price stability.

Inflationary pressures remain broad-based. CPI inflation rose to 3.3% in July after falling to 2.8% in June. Much of the rise in July was caused by the statistical base effect. Nevertheless, current harbingers of inflation remain troubling. The increase in gasoline prices in August will boost inflation soon before easing again. “Year-over-year and three-month measures of core inflation are now running at about 3.5%, indicating little recent downward momentum in underlying inflation. The longer high inflation persists, the greater the risk that elevated inflation becomes entrenched, making it more difficult to restore price stability.” The Bank also continues to normalize its balance sheet by letting maturing bonds run off. This quantitative tightening keeps upward pressure on longer-term interest rates. Tiff Macklem and company concede that excess demand is diminishing and the labour markets are easing. The unemployment rate rose to 5.5% in July, up from a cycle low of 4.9%, and job vacancies continue to decline. Net exports have slowed, and the Chinese economy has weakened sharply. Consumers are tightening their belts as the saving rate rose and household spending slowed markedly in Q1. Monetary policy actions have a lagged effect on the economy. As mortgage renewals rise, peaking in 2026, the economic impact of higher interest rates will grow. Homeowners renewing mortgages this year are seeing roughly a doubling in interest rates. The Governing Council will focus on the movement in excess demand, inflation expectations, wage growth and corporate price decisions. Bottom Line The Bank of Canada, though independent, is coming under increasing political pressure. In an unusual move, the premiers of both BC and Ontario have publically called for a cessation of rate hikes. Even so, the BoC is keeping its hawkish bias to avoid a bond rally that could trigger another boost in the housing market, similar to what we saw last April. The government bond yield is hovering just under 4%, having breached that level recently with the release of robust US economic data. There are two more meetings before the end of this year, and many are expecting another rate hike in one of those meetings. The odds of this are less than even, given the downward momentum in the economy. The central bank’s next decision is due October 25, after two releases of jobs, inflation and retail data, gross domestic product numbers for July and an August estimate.

Part One: Unlocking Your Property’s Hidden Value: The Power of Equity

Most real estate might appear to be comprised of four walls and a roof, but beneath the surface lies a hidden gem: your property’s equity. In this series, we’re simplifying the concept of property equity to introduce you to a potentially powerful tool—the Home Equity Line of Credit (HELOC).

A Home Equity Line of Credit (HELOC), also referred to here as a Line of Credit, grants you access to your property’s equity without selling it. Whether it’s your primary residence, a vacation home, or a rental property, a HELOC is one piece of the financial puzzle to increasing your net worth.  Please see our subsequent posts for more on its uses, but first, here’s how it works.

HELOCs differ from standard mortgages.  With a Line of Credit, you borrow only what’s needed, and interest accrues solely on the borrowed sum. Early repayment bears no penalties.  The rate is based on the Prime Rate plus a certain premium.  It should be noted the premium can change at any time and lenders can require HELOCs to be repaid at any time, but those changes and requirements are rare.  Some lines of credit don’t require a minimum interest payment as long as there’s room between the amount you’ve used and the limit.  There are some instances in which this might be useful though it’s best to maintain at least the interest due if possible.

On a property worth $800,000 with a mortgage balance of $300,000, the gap of  $500,000 signifies your equity—a valuable asset.  Should you qualify, lenders can offer stand-alone lines of credit with limits of up to 65% of the value of the property.   Lenders offering mortgages in combination with HELOCs will lend up to 80% of the value of your property as a combined balance.

In our example, 80% of the property’s $800,000 value is $640,000.  As such, your mortgage of $300,000 would leave $340,000 of your equity available as the limit on a line of credit for a total of 65% of the value of your property.  Some lenders will raise the line of credit limit in proportion to the amount you pay down on the mortgage side, to a maximum of 65% of the value of the property.  Once the mortgage in our example is paid to zero, the borrower would then have a line of credit limit of $520,000 available to them, equating to 65% of the value of the property.

A HELOC is more than a tool—used wisely, it can be stepping stone toward a more secure future. You can use it to fund renovations, make deposits on future properties to prevent having to rent between purchases, manage post-retirement finances, or address other expenses—all while retaining property ownership. Anyone who owns property should consider whether a HELOC might be an essential part of their financial portfolio.

Stay tuned for upcoming posts in this series, where further benefits and strategies to leverage this financial tool will be illuminated.  For more information, please feel free to reach out any time.

Image Credit: Tierra Mallorca on Unsplash