New mortgage rules, data breaches, and climbing debt levels are following Canadians into the new year. More importantly, how much would it cost Han Solo to insure the Millennium Falcon? Here’s what you need to know to start 2018 informed:
After raising its benchmark interest rate twice in 2017, Canada’s central bank decided Dec. 6 to hold its overnight rate target at 1%. Canada’s economy expanded like a Grow Monster in water last year, but governor Stephen Poloz outlined four key issues adding future “uncertainty”: soft inflation, the degree of excess capacity in the economy, softness in wage growth, and elevated levels of household debt (more on that below). The bank will also be watching our neighbours: “poison pill” propositions from the U.S. threaten North American Free Trade Agreement (NAFTA) talks, and chairmanship of the U.S. Federal Reserve changes hands in February when Janet Yellen steps down to make way for Donald Trump-appointed Jerome Powell. The Bank of Canada’s next interest rate announcement is Jan. 17. It’s expected the bank will stand pat on rates as it processes the effects of the July and September 2017 hikes.
New rules from Canada’s federal financial regulator kicked in Jan. 1, including a mortgage stress test for buyers with a downpayment of 20% or more. This article from Global News is a good explainer on how the new guidelines will affect people renewing, refinancing, or applying for a mortgage — and cases where the new rules won’t apply. In response, some borrowers are turning to the private unregulated lenders, which don’t have to apply the stress test. CIBC’s chief economist tells Bloomberg the risk is shifting: “If we have a significant correction, clearly the unregulated markets will suffer even more because that’s where the first casualties would be. And then you will see it elsewhere.”
Canadians’ debt burden keeps climbing, hits record in third quarter
Household debt loads, one of the aforementioned risks to the economy, continue to rise. Canadians owed a record high of $1.71 in credit market debt (mortgages, credit cards, lines of credit, and other loans) for every dollar of household disposable income in the third quarter of 2017, according to Statistics Canada. Mortgage debt was the main driver behind the increase, rising by 1.5 per cent in the quarter to $1.38 trillion. As borrowers crammed the market ahead of the stricter mortgage rules starting Jan. 1, one BMO economist expects to see “a further increase [in debt loads] in the fourth quarter.”
Biggest takeaway: Canada has no federal laws requiring companies to disclose data breaches (only Alberta has provincial requirements). As reported by BNN, Uber Canada revealed 815,000 Canadian riders and drivers may be affected by a global breach on the same day the federal privacy commissioner announced a formal investigation. Information stolen includes includes “names, email address, and mobile phone numbers.” According to Uber, its investigation “has not identified any location history, credit card numbers, bank account numbers, or dates of birth were downloaded.” Earlier in December, MPs chastised an Equifax Canada executive for the credit bureau’s response to their own breach, which affected 19,000 Canadians, 400,000 Britons, and an eye-popping 145.5 million Americans.
Confirmed clickbait success: UK-based InsureTheGap estimates the astronomical costs of insuring several starships from the films, including Darth Vader’s Tie Advanced X1, Luke Skywalker’s X-Wing, and Boba Fett’s Slave 1 ship (Jabba the Hutt’s Khetanna, however — surprisingly cheap). If you’re a fan of the Fast & Furious franchise, InsureTheGap also estimated the total dollar value of damage caused throughout the films.
Check out our 2017 Digital Money Trends Report, which analyzes how Canadians use financial technology, manage their money, and how they approach mortgages, credit cards, saving, and investing.
Ratehub.ca co-founder and CEO Alyssa Furtado was interviewed on The Business Leadership podcast, discussing her journey founding the company at her kitchen table and growing it to more than 50 employees.