16 Nov

Bank of Canada Will Not Be Happy With This Inflation Report

General

Posted by: Mike Hattim

Not only did the headline CPI inflation rate stall at 6.9% last month, but the core CPI numbers remain stubbornly high.  Food inflation — a highly visible component — edged down slightly.  Still, prices for food purchased from stores (+11%) continued to increase faster year over year than the all-items CPI for the eleventh consecutive month.  Bonds fell on the news, with Canada’s two-year yield rising to 3.877% at 8:43 a.m. Ottawa time, about 3.5 basis points (BPS) higher than its level before the data release.  The yield on the 5-year Government of Canada bonds spiked temporarily on the release of these disappointing inflation data.  This was in direct contrast to the US, which posted a better-than-expected inflation reading for October last week.

Less than two weeks after a stronger-than-expected jobs report, the inflation numbers continue to show the economy in overheated territory. Bank of Canada Governor Tiff Macklem has said that rates will need to continue to rise further while acknowledging the end of this tightening cycle is near.

Traders are pricing at least a 25 basis-point increase at the next policy decision on Dec. 7, with a 50-50 chance of a half percentage point hike. The central bank has increased borrowing costs by 3.5 percentage points since March, bringing the benchmark overnight lending rate to 3.75%.

A significant factor in the Bank’s decision process is the continued rise in wage inflation to a 5.6% annual pace in October. If inflation expectations remain robust, wage-price spiralling becomes a real threat.

Bottom Line

Price pressures might have peaked, but today’s data release will not be welcome news for the Bank of Canada. There is no evidence that core inflation is moderating despite the housing and consumer spending slowdown. The average of the Bank’s favourite measure of core inflation remains stuck at 5.3%. The central bank slowed reduced its rate hike at the October 26th meeting to 50 bps, and while some traders are betting the hike in December will be 25 bps, there is at least an even chance that the Governing Council will opt for an overnight policy target of 4.25%.

Inflation is still way above the Bank’s 2%-target level. Ultimately, it will take a higher peak interest rate to break the back of inflation. I expect the policy target to peak at about 4.5% in early 2023 and to remain at that level for an extended period despite triggering a mild recession in early 2023.

 

By Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres

31 Oct

Enjoying a Debt-Free Holiday

General

Posted by: Mike Hattim

The holidays are coming up! As much as these celebrations bring us joy and harmony, they can also bring us stress. This is particularly true when it comes to your finances!

However, don’t lose hope that this will be another draining year on your pocketbook. In fact, with a little planning, there are a few ways you can make sure your holidays are stress and credit-free.

  • Determine Your Holiday Goals: Are you looking to plan an extravagant black-tie party or have a more low-key celebration? Maybe you just want to hang out with lots of family and friends and enjoy some good food? Or maybe you usually get away and are finding yourself homebound this year. No matter how you normally spend your holidays, sharing your thoughts with family will help determine your goals and come to a decision that works for everyone!
  • Create a Budget: Once you have decided your expectations and goals for the holiday, it is time to create your budget. A little planning can go a long way to creating a credit-free holiday, and will help you spread out the costs. The first step is to create a list of everything you need, from individual gifts to decorations to baking ingredients and meal items to clothing!
  • Start Now: Early planning can make all the difference when it comes to the holidays. Instead of lumping your entire budget into a couple paychecks, try keeping an eye out for gift ideas and cute decor all year long. While it may be too late this year, it could be a good strategy to try for 2023! Starting early will help reduce stress and give you more opportunities to scoop up incredible deals throughout the year, which means you can spread your budget even farther!
  • Manage Your Expectations: Did you find the holidays refreshing last year, or were they somewhat draining and you’re still trying to figure out how to pay off your credit card bills? If you are someone that wants your holidays to be energizing and provide that feeling of togetherness, there is more to it than just spending money. Once you decide your expectations, it becomes easier to work towards things that create that result.
  • Accept Help: While I know many of us try to do everything during the holidays so our families can just enjoy themselves, it is important to remember that the holidays are a time when we are supposed to support each other, and celebrate together! If you are hosting a dinner this year, don’t be afraid to ask your family to bring appetizers or drinks. If you are buying gifts for friends, set a limit or challenge everyone to make something by hand! Homemade gifts can often feel more special and it creates a fun exchange for you and your friends. There are many incredible ways to reduce stress and help get others involved so that the holiday is perfect for everyone.

The holiday is YOURS, so make sure you spend it whichever way brings you the most joy – and the least amount of stress on your pocketbook.

31 Oct

Winterizing Your Home

General

Posted by: Mike Hattim

With the changing of the seasons, it can be a good time to take stock of your home and ensure you are ready for the colder weather.

To help you feel more comfortable, save on bills and prevent future repair costs, there are some simple things you can do to prepare for the coming season.

Tending to minor problems yourself, or booking a professional now, will save you time and aggravation later when poor weather makes it harder to tackle home maintenance jobs.

  • Service Your Heat Source: Before Winter starts, be sure to have a professional check and clean your heat sources. You should have your chimney cleaned out if using wood heat or make sure to update your oil heater’s filters and service gas furnaces regularly.
  • Check Your Pipes: Checking pipe joints for leaks that could cause rot and damage will save you trouble in the future. Repair any cracks you find, especially those around electrical outlets and alarm system lines. You can also consider foam pipe insulation, which is fairly easy to install and could help prevent energy loss and potential water damage from frozen pipes.
  • Mind the Gaps: Search exterior window frames, doors and siding for cracks and gaps where water could get in. Doors and windows commonly have gaps that let cold in and heat out. Some will be easy to fill or fix yourself but could save you money and damage down the line!
  • Insulation is Key! On a snowy day go outside and look at your roof; you should see snow on the roof. If you can see your roof that means the attic is not insulated well and heat is escaping and melting the snow. If this is the case, you will want to have it repaired and packed to ensure you are not losing excess heat during the winter months.
  • 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!
31 Oct

Don’t Be House Poor

General

Posted by: Mike Hattim

Having the biggest and best home on the block sounds great – but not if it is at the expense of your life and monthly finances!

Be smart about your budget and avoid buying a home at the very top of your pre-approval value, which might lead to cash flow issues and being “house poor” down the line.

Home Expenses

When it comes to your home, it is more than just your purchase price and mortgage cost. While you might be able to afford to buy a $800,000 home, can you also afford the maintenance, property taxes, utilities and more?

When it comes to your home expenses and overall monthly budget, the goal is that the costs to maintain your home do not exceed 35% of your total monthly income.

Monthly Budget

To help you keep track of your finances, consider breaking up your monthly budget into the following categories:

  • Housing – mortgage payments, property taxes, utilities, etc.
  • Transit – car payments or transit passes, gas, maintenance, etc.
  • Debt – payments to credit cards, lines of credit, etc.
  • Savings – your long-term savings for retirement, etc.
  • Life – food, vacations, fun, medical, childcare, etc.

From there, you would want to look at how much you spend on each category. The below is a good rule of thumb:

  • Housing – 35% of your monthly income
  • Transit – 15% of your monthly income.
  • Debt – 15% of your monthly income
  • Savings – 10% of your monthly income
  • Life – 25% of your monthly income

By spending too much on housing, you are forced to sacrifice in other areas of spending such as your life or savings, but it is better to be life RICH than house POOR.

If you’re not sure what you should budget for your new home, or have questions about making your home costs more affordable (such as changing your mortgage payments), please don’t hesitate to reach out to me today!

3 Oct

Go Green! In Your Kitchen?

General

Posted by: Mike Hattim

When it comes to making your home more eco-friendly, the best place to start is the kitchen!

With all of the hustle and bustle that goes on in this space (as well as the multitude of appliances), this is the ideal area to transform first for maximum effect.

  • Invest in Long-Lasting Cookware: Switch your Teflon and low-grade cookware out for stainless steel or cast-iron pots and pans for increased longevity.
  • Consider Your Appliances: With everything from coffee makers to toaster ovens to microwaves and dishwashers, the kitchen is a busy place when it comes to appliances. Swapping these out for energy-efficient models will reduce costs and energy usage, while providing the same results.
  • Opt for an Energy-Efficient Stove: With a variety of different stoves available on the market, there are plenty of choices when wanting to move to something more energy-efficient! Think gas stoves, induction cooktops, ceramic-glass cooktops or even energy-efficient electric coils.
  • Consider Practicing Energy-Efficient Cooking: Want to further maximize your efficiency and energy-usage in the kitchen? Stop preheating! With most ovens today, they heat up almost instantly making pre-heating your oven for 20 minutes a waste of time and energy. Some more tips to improve your energy-efficiency when cooking is to consider pressure cooking, BBQing, eating “raw” food such as salads, chilled soups and more.
  • Use Green Cleaners: Finally, if you’re going to put all the effort into improving your appliances and habits in the kitchen for greener results, you might also want to consider switching your kitchen cleaners to green products. There are dozens of options out there for non-toxic, biodegradable and plant-based cleaners that you can choose from. Your kitchen (and yourself!) will thank you.
3 Oct

Job Loss and Your Mortgage Application

General

Posted by: Mike Hattim

When it comes to your mortgage application, there are a few things that you should avoid doing while you’re waiting for approval – such as making large purchases (i.e. a new car), applying for new credit, pulling additional credit reports, etc.

Another issue that can come up is the loss of your job…

What you can afford to qualify for in relation to your mortgage depends on your income. As a result, the sudden loss of employment can be quite detrimental to your efforts. So, what do you do?

Should You Continue With Your Mortgage Application?

If you’ve already qualified for a mortgage, but your employment circumstances have changed, your first step is to disclose this to myself, your mortgage professional. As the lender will verify your income prior to closing, your mortgage professional will need to update your file to advise them, otherwise it may be  considered fraud as your application income and closing income would not match.

In some cases, the loss of your job may not affect your mortgage. Some examples include:

  • You secure a new job right away in the same field as previously. Keep in mind, you will still need to requalify. However, if your new job requires a probationary period then you may not be approved.
  • If you have a co-signer on the mortgage who earns enough income to qualify for the value on their own. However, be sure your co-signer is aware of your employment situation.
  • If you have additional sources of income such as income from retirement, investments, rentals or even child support they may be considered, depending on the lender.

Can You Use Unemployment Income to Apply for a Mortgage?

Typically this is not a suitable source of income to qualify for a mortgage with A-lenders, but it may still be an option for alternative or B-lenders. In rare cases, individuals with seasonal or cyclical jobs who rely on unemployment income for a portion of the year may be considered. However, you would be asked to provide a two-year cycle of employment followed by Employment Insurance benefits. Contact me and I can help you look into your options!

What Happens During Furlough?

If you did not lose your job entirely but have instead been furloughed or temporarily laid off, your lender may take a wait-and-see approach to your mortgage application. You would be required to provide a letter from your employer with a return-to-work date on it in this situation. However, if you don’t return to work before the closing date, your lender may be required to cancel the application for now with resubmitting as an option in the future.

Regardless of the reason for the change in your employment situation, one of the most important things you can do is contact me directly to discuss your situation. I would be happy to look at all the options for you and help with finding a solution that best suits you.

3 Oct

Don’t Get Spooked! First-Time Homebuyer Tips

General

Posted by: Mike Hattim

Whether you’re currently in the process of looking for your first home, or have just started to think about it, I have some first-time homebuyer tips to help make your journey as easy as possible!

Some of these you may already know about, and some you might not, but they are sure to make your first homebuying experience that much easier!

Get Pre-Approved

Having your mortgage pre-approved is an important step in the process and benefits you in three ways:

  • Pre-approval helps verify your budget and allows your real estate agent to find the best home in your price range. Quick Tip: Don’t forget about the closing costs! These range from 1 to 4% of the purchase price and should be factored into your budget.
  • Pre-approval guarantees the rate offered and locks it in for up to 120 days. This protects you from any increases in interest rates while you are shopping (phew!). Make sure to ask exactly how long your pre-approval is good for!
  • Pre-approval lets the seller know that securing financing should not be an issue, which is beneficial in competitive markets!

Keep in mind, this is not the same as final mortgage financing approval, but it can be a very helpful step in the process towards getting your final approval by helping you work within your budget.

Using the My Mortgage Toolbox app can help you get pre-qualified as part of your pre-approval – right from your mobile phone! In addition, this incredible tool can help you calculate your closing costs and even your potential monthly mortgage payments.

Maintain Your Credit

If you are currently looking at homes or thinking about looking at homes, it is vital to maintain your credit throughout the entire mortgage process. Be sure to continue to pay your bills on time, refrain from applying for new credit, closing off credit accounts or committing to any other large purchases (i.e. new car), and also avoid pulling additional credit reports once you have been pre-approved. Another helpful tip is to keep any credit card balances below 70% of the limit to help skyrocket your score!

Utilize Your RRSPs

Did you know? The Home Buyer’s Plan allows you to utilize up to $35,000 from your RRSP and put it towards a down payment on a new home, which you can repay over a 15-year period. You must be a first-time home buyer to qualify.

Take Advantage of Government Programs

There are various government programs in place that provide some financial relief in the form of rebates and tax refunds, including:

  • First-Time Home Buyer (FTHB) Tax Credit: First-time home owners would get a credit of $1,500 if you qualify.
  • First Time Home Buyer Incentive: The government will cover 5% of the purchase price on a resale home or up to 10% on a newly constructed home, if you qualify.
  • GST/HST New Housing Rebate: You may qualify for a rebate for some of the GST or HST paid on the purchase price or cost of building your new house.

There are also additional programs and support available depending on your province that are worth looking into, including land transfer and property transfer rebates, first-time homebuyer tax credits, homeownership support programs and more.

Contact Me for Expert Advice!

Before you get started on your homebuying journey, make sure to reach out to me for expert advice on choosing the right mortgage options, determining your budget, getting your pre-approval, and more!

9 Sep

Fall Home Prep!

General

Posted by: Mike Hattim

With Fall just around the corner, here are some of my favourite (and helpful!) home prep tips to help you be ready for the upcoming season.

Following these tips will ensure everything continues running well into the colder months!

  • Inspect 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 a flooded interior and damaged exterior so don’t 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! Do a check on all exterior doors and windows to confirm if they are properly sealed. To do this, simply close a door or window on a strip of paper. If the paper slides easily, you need to update your weatherstripping.
  • Have Your Furnace Inspected: 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.
  • Fix Any Concrete/Asphalt Cracks: This one is easy to ignore thinking it will be fine, but it could easily turn into a bigger issue. When water gets into existing cracks during the colder months it will freeze and expand, causing the crack to become even larger.
  • Turn Off Outdoor Plumbing: Since your garden will not need attention until the Spring, it is a good idea to 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: It is a good idea annually to check that all smoke detectors and carbon monoxide devices are working. While you’re doing your Fall and Winter home preparations, this is a good time to test your existing gadgets.
9 Sep

Back-to-School Credit Clean-Up!

General

Posted by: Mike Hattim

It’s time to go back to school… for your finances! The fall is the perfect time for a credit clean-up so that you are ready for the holiday spending season – and anything else the year can throw at you!

When it comes to cleaning up credit, there is no better time than now to recognize the importance of your credit score and check if you are on track with your habits.

To get started with your credit clean-up, there are a few things you can do:

  1. Pull Your Credit Report: For most of us, our credit score is something we only think about when we need it. However, if you are unsure of where you stand, this is a great time to find out! The Fair Credit Reporting Act lets you get one free credit report every year through Equifax or TransUnion. Pulling your own credit report results in a “soft” inquiry on your report and will not affect your credit score.
  2. If You Find Errors, Dispute Them: When doing your annual credit score review, it is a good idea to go through line-by-line and confirm no errors. If you find any errors, report and dispute them immediately as they could be affecting your score.
  3. Consolidate Your Loans: One of the best tips for managing your credit and working towards future financial success, is to consolidate your debt. Consolidating debt means reducing multiple loans to a single monthly payment, which typically has a lower interest rate allowing you to maximize spend on the principal amount.

Once you have put the effort into cleaning up your credit, you will want to keep it that way! A few tips for maintaining your credit and maximizing your financial future include:

  1. Pay Your Bills: This seems pretty straight forward, but it is not that simple. You not only have to pay the bills, but you have to do so in full AND on time whenever possible.  Paying bills on time is one of the key behaviours lenders and creditors look for when deciding to grant you a loan or mortgage. If you are unable to afford the full amount, a good tip is to at least pay the minimum required as shown on your monthly statement to prevent any flags on your account.
  2. Pay Your Debts: Whether you have credit card debt, a car loan, line of credit or a mortgage, the goal should be to pay your debt off as quickly as possible. To make the most impact, start by paying the lowest debt items first and then work towards the larger amounts. By removing the low debt items, you also remove the interest payments on those loans which frees up money that can be put towards paying off larger items.
  3. Stay Within Your Limit: This is key when it comes to managing debt and maintaining a good credit score. Using all or most of your available credit is not advised. Your goal should be to use 30% or less of your available credit. For instance, if you have a limit of $1000 on your credit card, you should never go over $700.

NOTE: If you find you need more credit, it is better to increase the limit versus utilizing more than 70% of what is available each month.

Whether you qualify for a mortgage through a bank, credit union or other financial institution, you should be aiming for a credit score of 680 for at least one borrower (or guarantor). If you are ready to start your home-buying journey, or are looking to refinance your existing mortgage, I’d love to help review your credit score and financial information to get you the most from your money.

9 Sep

Understanding Mortgage Trigger Points

General

Posted by: Mike Hattim

As we move into the Fall market, there are some important things you should be aware of.

While inflation has now likely peaked, we will still be dealing with the repercussions from these heightened levels for a while before things balance out. As inflation is corrected, we are also seeing home prices moving back to normal post-pandemic era.

However, we are still anticipating some final rate hikes from the Bank of Canada coming into the fall.

With that in mind, now is an important time to discuss what this means for your mortgage – specifically in regards to trigger points. Another increase in rates on the horizon will put many variable-rate borrowers near their mortgage trigger points – even for fixed payments.

While static payment variable-rate mortgages are not designed to fluctuate with prime, the reality is that a mortgage payment consistent of two components: your principle and your interest. With the existing rates and subsequent increases expected in the fall, the amount paid towards principle has decreased with an increase in the amount of interest on a static mortgage. For instance, if you are paying $2000 a month on your mortgage, only $200 might be going towards the principle with the rest covering interest. An additional increase to the interest rate, means that your interest portion will spike again and may actually exceed your total payment. When this occurs, it is called hitting your trigger rate.

You can calculate your own trigger rate with the following formula: (Payment amount X number of payments per year / balance owing) X 100) to get your trigger rate in percentage.

If you have reached your trigger rate, don’t panic. You are certainly not alone and there are options:

  1. Adjust Your Payment: Firstly, you may choose to adjust your payment amount to ensure that you still have some going towards your principal balance.
  2. Review Your Amortization Schedule: Consider switching your amortization schedule from 20-year to 25-year which would be ideal if you already have equity in your home. However, if you’re already at your maximum amortization for your lender (i.e. 30-year mortgage), you would need to increase your payment.
  3. Switch to a Fixed-Rate Mortgage: Many borrowers are now choosing to opt for a fixed-rate mortgage to avoid the issue of increased interest and trigger rates. Keep in mind, depending on your mortgage product, you may face penalties if you switch your mortgage mid-term. Be sure to discuss any mortgage changes with me before going ahead.
  4. Pay Off Your Mortgage: The final option that is always there is for you to pay off your mortgage entirely. Though don’t fret if this is not possible!

While I understand words like “inflation” and “trigger rates” can be scary, as your dedicated mortgage professional I am here for you. I would be happy to discuss any concerns you have or help explain in more detail how these changes may impact your mortgage and what your options are.