I am deeply saddened by the events of the wildfires and their impact on so many this year.  Dealing with the aftermath of a home or property lost to wildfires can be incredibly challenging. If this has happened to you, I express my sincere sympathy and hope these steps can be of some assistance:

1. Contact Your Lender: Notify your mortgage lender as soon as possible about the loss of your property. They will likely have specific procedures and information on how to proceed.
2. Insurance Claim: If you have homeowner’s insurance, initiate the claims process with your insurance company to cover the costs of rebuilding or replacing your property and its contents. Your insurance company will assess the damages and work with you on reviewing compensation.
3. Mortgage Payments: Discuss the situation with your lender. They may provide temporary relief, such as suspending or reducing mortgage payments during the recovery process. This can vary by situation but is worth asking.
4. Document Everything: Keep records of all your communications with the insurance company, lender, and any other parties involved. Document the damage, any expenses you incur, and any agreements you make noting dates and specific staff contacts’ information for each company.
5. Rebuilding or Relocating: Depending on your circumstances, you might decide to rebuild on the same property or relocate elsewhere. This decision will impact how you handle your mortgage, insurance, and interim living arrangements.
6. Tax Implications: Consult a tax professional to understand the potential tax implications of your situation. There could be deductions or other considerations available to you related to the loss of your property.

Remember, every situation is unique, and relevant steps will depend on your specific circumstances, mortgage terms, insurance coverage, and local regulations. It’s important to communicate early with your lender, insurance company, and relevant authorities to navigate this challenging time.  If I can be of any assistance, please don’t hesitate to reach out, I wish everyone affected the very best.

Image Credit: Julie Blake Edison  on Unsplash

If you happen to be carrying extra debt from credit cards or other loans (such as car loans, personal loans, etc.) you may benefit from simplifying and reducing your overall monthly payments, especially given rising costs in the current economic climate.  Rolling extra debt into a mortgage could be a great solution.

Consolidating other forms of debt into your mortgage has multiple benefits. This process allows you to pay off your loans over a longer period with smaller payments per month, and often at a reduced rate of interest when compared to credit card interest for example.  Credit cards often have higher rates of interest than mortgage loans do.

Not only does debt consolidation help with clearing up high-interest debt, it also makes your debt more manageable keeping track of fewer payments.

While debt consolidation through refinancing will increase your mortgage amount, lowering your overall payments and management can be well worth it when it comes to cost savings, time, and stress.  Please note, you need at least 20 percent equity in your home to refinance.

If you are looking for a way to simplify (or get out of) debt, please don’t hesitate to reach out to ask.  I am happy to review your financial portfolio as it relates to reducing costs and improving cash flow, and any other mortgage information you might need.

Adapted from DLC Marketing

Image: Debby Hudson on Unsplash

A quick review with your insurance agent can ensure your strata’s insurance policy aligns with your individual unit’s insurance coverage.  This can safeguard you from a potentially overwhelming and unexpected financial expense you shouldn’t have to worry about.

Condominium or strata insurance covers the entire building including common areas such as hallways and elevators.  It covers damage to individual units as well if for example there’s a leak due to an issue with the building’s plumbing system.  In that case, though strata insurance should cover repairs to the suite, the suite’s owner is obligated to pay the strata’s deductible for the claim.

As such, condo unit owners’ individual insurance policies typically include coverage to pay the strata’s insurance deductible as well as protection for their unit’s contents if such an issue arises.

However, strata insurance deductible costs have risen dramatically over the last several years in Canada, and condo owners unaware of the changes may not be adequately covered.  Historically, deductibles in strata-managed buildings averaged $25,000. In the event of an accident such as a flood or fire, the owner would have needed to pay $25,000 to have their unit repaired.  Strata unit deductibles can now range to $100,000 or more; adequate coverage is crucial.

If you are a condo owner and you’d like to ensure your unit’s insurance policy includes enough coverage to cover the deductible of the strata’s insurance, review them both with your insurance agent.  The strata can provide you with a copy of its policy.  Individual policies’ terms may vary.  Please reach out if you need a referral to an experienced home insurance professional for an opinion on yours.

Adapted from DLC Marketing

Image: Bisakha Datta on Unsplash

One of the quickest ways to take control of your finances is to create a monthly budget.  Creating a snapshot of your income and spending can help you reach your financial goals sooner.

Step 1: Calculate Your Income

The first step to creating any budget is determining exactly how much money you have available per month after taxes.

Step 2: Track Your Spending

To start, list out your fixed expenses – these are things like car payments, loans, rent or mortgage costs that do not change monthly.  Don’t forget to prorate your annual expenses like car insurance if you only pay for it once per year.  Next, review your variable expenses, groceries, gas, entertainment for example, and determine how much you spend on average.  Then review each category and see where you might be able to cut back.

Step 3: Set Realistic Goals

Realistic goals are vital for long-lasting financial health.  If you’re not sure where to start, consider the 50/30/20 rule, which applies the following:

• 50% of your spending is for needs such as rent or mortgage payments, car payments, utilities and groceries
• 30% of your income is for wants such as shopping, vacations, streaming services, etc.
• 20% of your income goes to savings or debts such as emergency funds, retirement, child’s education and/or credit card payments

Step 4: Make a Plan

There are a few different ways you can set your monthly budget. For some, setting realistic spending limits for each category works well.  For others, looking at the importance of the items on their expenses list and re-prioritizing can free up funds.  Perhaps you can save money by getting a better interest rate on your mortgage or changing your payment schedule for your loan.  Be sure to connect with me before making any changes in that regard.

Step 5: Stay on Track

Tracking your budget monthly is important to catch any changes in your spending habits.  Conducting an annual review and considering any changes in expenses or wages requiring adjustments to your overall plan will help you adapt over time.

A realistic budget specific to your circumstances is key.  Please let me know if I can provide any further input, happy budgeting!

Adapted from DLC Marketing

Photo Credit: Timo Stern on Unsplash

June inflation data released today by Statistics Canada showed that the Consumer Price Index (CPI) rose 2.8% year-over-year (y/y), slightly below expectations. This was the lowest CPI reading since February 2022.

The decline in inflation was mainly due to lower energy prices, which fell by 21.6% y/y. Without this decline, headline CPI inflation would have been 4.0%. The year-over-year decrease resulted from elevated prices in June 2022 amid higher global demand for crude oil as China, the largest importer of crude oil, eased some COVID-19 public health restrictions. In June 2023, consumers paid 1.9% more at the pump compared with May.

Food and shelter costs remained the two most significant contributors to inflation, rising by 9.1% y/y and 4.8% y/y, respectively. Food prices at stores have risen nearly 20% in the past two years, the most significant rise in over 40 years. Shelter inflation rose slightly from 4.7% y/y in May.

The largest contributors within the food component were meat (+6.9%), bakery products (+12.9%), dairy products (+7.4%) and other food preparations (+10.2%). Fresh fruit prices grew at a faster pace year over year in June (+10.4%) than in May (+5.7%), driven, in part, by a 30.0% month-over-month increase in the price of grapes.

Food purchased from restaurants continued to contribute to the headline CPI increase, albeit at a slower year-over-year pace in June (+6.6%) than in May (+6.8%).

Services inflation cooled to 4.2% y/y from 4.8% y/y in May. This was due to smaller increases in travel tours and cellular services.

The Bank of Canada’s target range for inflation is 1% to 3%. While June’s inflation reading was within the target range, it is still higher than the Bank would like. The Bank raised the overnight policy rate twice in the past two months to reduce the stickier elements of inflation.

There were signs of easing price pressures for consumer goods also. Durable goods inflation continued to cool to 0.8% y/y in June. Passenger vehicle prices rose slower in June (+2.4%) than in May (+3.2%). The year-over-year slowdown resulted from a base-year effect, with a 1.5% month-over-month increase in June 2022 replaced with a more minor 0.6% month-over-month increase in June 2023. This coincided with improved supply chains and inventories compared with a year ago. Household furniture and equipment was up only 0.1% y/y in June, down from a peak of 10.5% last June.

The June inflation data provides some relief to consumers, but it is clear that food and shelter costs remain a major concern. The Bank of Canada will closely monitor inflation in the coming months to see if it is on track to return to its 2% target. There is another CPI report before the Bank meets again on September 6th.

The Bank of Canada’s underlying inflation measures cooled further in May. CPI-trim eased to 3.7%y/y in June from 3.8% y/y in May, and CPI-median registered 3.9% versus 4.0% y/y in May. The chart below shows the closely watched measure of underlying price pressures, the three-month moving average annualized of the core measures of CPI. They continue to be just under 4%.

Canadian inflation continued to make encouraging progress in June. However, the cooling in headline inflation benefits from sizeable base effects due to the favourable comparison to high energy prices last June. The Bank of Canada (BoC) is watching its preferred core measures, which continue to show glacial progress.

Bottom Line
It takes time for the full effect of interest rate hikes to feed into the CPI. Mortgage interest costs will continue to rise as higher interest rates flow gradually through to household mortgage payments with a lag as contracts are renewed.

BoC Governor Macklem emphasized last week that the Bank has become worried about the persistence of underlying inflation pressures in the economy. The June inflation data likely provides some reassurance that things are moving in the right direction, but not fast enough for the Bank of Canada to let its guard down.

The BoC is facing a difficult balancing act. It needs to raise interest rates enough to bring inflation under control, but it also needs to be careful not to raise rates so high that it causes a recession. The next few months will be critical for the BoC as it assesses the risks of inflation and recession.

Courtesy of Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres

Image: Frank Peters on Canva

The Bank of Canada increased the overnight policy rate by 25 basis points this morning to 5.0%, its highest level since March 2001. Never before has a policy action been so widely expected. Still, the Bank’s detailed outlook in the July Monetary Policy Report (MPR) suggests stronger growth and a longer trajectory to reach the 2% inflation target. The Bank of Canada believes the economy is still in excess demand and that growth will continue stronger than expected, supported by tight labour markets, the high level of accumulated household savings, and rapid population growth. “Newcomers to Canada are entering the labour force, easing the labour shortage. But at the same time, they add to consumer spending and demand for housing.”

The Bank forecasts GDP growth to average 1.0% through the middle of next year–a soft landing in the economy. “This means the economy moves into modest excess supply in early 2024, and this should relieve price pressures. CPI inflation is forecast to remain about 3% for the next year, before declining gradually to the 2% target in the middle of 2025.” This is about six months later than the Bank expected in April. This means that high-interest rates remain higher for longer.

While Canadian inflation has fallen quickly, much of the downward momentum has come from lower energy prices and base-year effects as large price increases last year fall out of the year-over-year inflation calculation. We are still seeing large price increases in a wide range of goods and services. Our measures of core inflation—which we use to gauge underlying inflationary pressures—have come down, but not as much as we expected.

There continue to be large price increases in a wide range of goods and services. Measures of core inflation have come down, but by less than expected (see chart below). One measure of core inflation–which removes food, energy and shelter prices, remains elevated and will likely continue to be sticky.

To remove base effects, the Bank looks at three-month rates of core inflation, which have remained at 3.5% to 4.0% since September 2022, almost a percentage point above the Bank’s expectations at the beginning of this year.

In addition, labour markets remain tight. Although the jobless rate has risen to 5.4%, that is still low by historical standards. The unemployment rate was at 5.7% when the pandemic began, which was considered close to full employment at the time. Job gains have been robust, with about 290,000 net new jobs created in the first six months of 2023. Many new entrants to the labour market have been hired quickly, and wage growth has been about 4% to 5%.

The faster-than-expected pickup in housing resales, combined with a lack of supply, has pushed house prices higher than anticipated by the Bank of Canada in January (see chart below). According to the MPR, “the previously unforeseen strength in house prices is likely to persist and boost inflation by as much as 0.3 percentage points by the end of 2023, compared with the January outlook.”

Bottom Line

As always, the next steps by the Bank of Canada will be data-dependent. Interest rates will remain higher for longer if the Bank is correct that inflation will not reach its 2% target until 2025. We also cannot rule out more rate hikes in the future. This morning, the US inflation data for June were released, showing a marked decline from 4% in May to 3% in June. Markets rallied worldwide, taking Canadian bond yields down despite the BoC tightening. The hardship caused by the continued rise in mortgage rates is already evident. OSFI recently announced the possibility of higher capital requirements for federally insured financial institutions on mortgages with loan-to-value ratios above 65% that have unusually high amortizations. This proposal is now out for consultation. It seems OSFI and the federal consumer watchdog are working at cross purposes.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
drsherrycooper@dominionlending.ca

As we age, maintaining independence and staying in the home we love can be a challenge, especially when faced with reduced mobility and the need for costly home modifications and personal care services. However, with the CHIP Reverse Mortgage by HomeEquity Bank, aging in place becomes more feasible and attainable. Here are three ways in which this unique financial solution can support you:

1. Enhance your home for accessibility and enjoyment.

The CHIP Reverse Mortgage enables you to make essential home improvements that improve accessibility, safety, and overall livability. For example, you can adjust electrical switches and outlets to a more comfortable height, eliminating the need for reaching overhead. You can also plan for features like relocating the laundry room from the basement to the main floor to facilitate single-level living.

2. Afford the convenience of at-home care.

With funds from the CHIP Reverse Mortgage, you can access financial resources to help with various at-home care needs. From hiring a cleaning crew to maintain your house regularly to securing 24/7 in-home caregivers, the funds provide the means to ensure you receive the necessary assistance and support.

3. Support for transitioning into assisted living or long-term care.

If your spouse or a loved one needs to move into assisted living or long-term care, the CHIP Reverse Mortgage can alleviate the financial strain of the transition. The funds can be used to pay for accommodation and meals, known as co-payment fees, ensuring that your loved one receives the care they need.

Ease financial burdens with the CHIP Reverse Mortgage

The CHIP Reverse Mortgage by HomeEquity Bank allows Canadians aged 55 + to unlock up to 55% of their home’s equity as tax-free cash. This enables you to revitalize your living space, afford at-home care services, or support your spouse’s transition to assisted living or long-term care. What’s more, there are no required monthly mortgage payments until you decide to move or sell your home.

Contact me today to discover how the CHIP Reverse Mortgage can empower your journey of aging in place, or that of someone you love.

Written by HomeEquity Bank for DLC Marketing

Image Credit: Ekaterina Shakharova on Unsplash

A pre-qualification is the first step in uncovering what you can afford when embarking on the search for your next property.  It should outline a realistic budget, including the costs to complete the purchase, including legal fees and applicable taxes, as well as estimated ongoing mortgage payments.

To arrive at an accurate budget and to move quickly once you find your perfect property, you’ll need to submit comprehensive documentation describing your current income amongst other details in advance.

A pre-qualification gives you an understanding of the maximum amount you can comfortably spend on your new home.  Armed with this knowledge, you can confidently search for properties within your price range.

At times it may make sense to lock in a favorable interest rate for a specified period (typically 90-120 days) allowing you to explore the market without worrying about potential interest rate fluctuations.

Once you receive your pre-qualification terms, it’s important to maintain the same financial picture until your mortgage is finalized.  Significant changes, such as switching jobs, making large purchases, or opening new credit cards can impact your final mortgage approval.

If you’re ready to see what you might qualify for, please don’t hesitate to ask, I am always happy to see how I can help.

Adapted from DLC Marketing

Photo Credit: Sshootz on Unsplash

Property Taxes are typically due in July in BC, and the Home Owner Grant gives owners a break if eligible.

The eligible property value limit increased to $1.975 million in 2022.  Homeowners in Metro Vancouver, the Fraser Valley, and the Captial Regional Districts owning property valued at less than that amount may be eligible for a discount of up to $570 for the basic grant.  Homeowners aged 65 or older, individuals with disabilities, or those living with a relative who has a disability are eligible for a grant of up to $845.

In northern or rural areas (outside Metro Vancouver and the Fraser Valley and Capital Regional districts) homeowners can claim up to $770, and seniors or people with disabilities can claim up to $1,045 for their grant.

A grant reduction applies at $5 for every $1,000 over the threshold but low-income seniors, veterans, and people with disabilities can apply for a low-income grant supplement to replace the lost grant amount.

To apply for the grant, visit: https://www2.gov.bc.ca/gov/content/taxes/property-taxes/annual-property-tax/home-owner-grant/apply or call Phone: Call 1 800 663-7867.  Service BC is available to assist with more complex applications.

The best time to apply is before your taxes are due, optimally in May, once you have both your BC Assessment and municipal tax notice in hand, but you can apply at any point in the tax year.  You may be able to apply retroactively for up to one year if you missed a year as well.

Feel free to contact me with any questions you may have regarding your property and financing, I am always pleased to help.

Adapted from BC’s Home Owner Grant website https://www2.gov.bc.ca/gov/content/taxes/property-taxes/annual-property-tax/home-owner-grant/apply

and

BC’s Article entitled “Home Owner Grant helps people with property taxes” found here: https://news.gov.bc.ca/releases/2022FIN0001-000004

With the increase in the Overnight Rate of .25%, the Prime Rate has also risen by this amount in Canada.  If you have a Variable Rate mortgage, please feel free to contact me for strategies to discuss the rate outlook, manage a lengthening amortization, or manage your payment.  Static payment variable mortgage holders may be contacted by their lenders to discuss bringing their amortization back in line with the amortization they had at the beginning of their current term.  There are steps borrowers may be able to take to prevent having to make a large lump sum payment or to make a large increase to their regular payment.

From Dr. Sherry Cooper:

If there were any doubt that the Bank of Canada wanted inflation to fall to 2%, it would be obliterated today. In a relatively surprising move, the Bank hiked the overnight policy rate by 25 bps to 4.75%, and an equivalent hike will follow in the prime rate. Fixed mortgage rates had already leaped higher even before today’s move as market-determined bond yields have risen in the wake of the US debt-ceiling debacle. Now variable mortgage rates will increase as well. The central bank is determined to eliminate the excess demand in the economy.

“Monetary policy was not sufficiently restrictive to bring supply and demand into balance and return inflation sustainably to the 2% target,” the bank said, citing an “accumulation of evidence” that includes stronger-than-expected first-quarter output growth, an uptick in inflation and a rebound in housing-market activity.

I had thought that the Bank would want to see the May employment data and the next read on inflation before they resumed tightening, but with the substantial May numbers in the housing market, the Governing Council jumped the gun.

The Reserve Bank of Australia did the same thing earlier this week. But their economy was already softening. On the other hand, the Canadian economy grew by a whopping 3.1% in the first quarter and is likely to surprise on the upside in Q2, boosted by a strong rebound in housing. If the correction in housing is over, then the Bank has failed to cool the most interest-sensitive sector in the economy. Governing Council fears that inflation could get stuck at levels meaningfully above the 2% target.

The next Bank of Canada decision date is a mere five weeks away. While we will see two labour force surveys and one inflation report, the odds favour another rate hike before yearend. The BoC concluded in their press release that, “Overall, excess demand in the economy looks to be more persistent than anticipated.”

No doubt, if the data remain strong over the next several weeks, another 25 bps rate hike is likely in July. Deputy Governor Beaudry will flesh out today’s decision in his Economic Progress Report tomorrow.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
drsherrycooper@dominionlending.ca