Mortgage rates and housing affordability understandably continue to dominate the news cycle as Canada’s banking regular announced a stress test for uninsured mortgages and the Bank of Canada held tight on interest rates. Here are some developments you might have missed in October:
Canada’s central bank announced Oct. 25 it’s keeping its policy interest rate at 1%, following back-to-back hikes in July and September. As the economy cools after a blistering start to the year, the bank said in a press release there’s “substantial uncertainty” surrounding the renegotiation of the North American Free Trade Agreement (NAFTA). On Nov. 1, the U.S. Federal Reserve left its own key interest rate unchanged at a target of 1% to 1.25% as the U.S. economy grows “at a solid rate.” The Bank of Canada’s final rate announcement of 2017 is scheduled for Dec. 6.
As the fallout from its high-profile data breach continues, The Canadian Press reports Equifax has whittled down the number of Canadians affected by the hack from 100,000 to 8,000. However, the number of Americans affected has risen by 2.5 million to a total of 145.5 million — almost half of the U.S. population. The consumer credit bureau is facing investigations in both Canada and the U.S., as well as pending class action lawsuits, after it announced Sept. 7 that hackers compromised its systems and stole personal information including names, birthdates, Social Security and driver’s license numbers, and in some cases, credit card numbers. The revised Canadian numbers are no doubt little comfort to those affected, such as a Toronto mother and son who were notified by Equifax that their personal information, including account passwords and security answers, were compromised.
Attention, new homebuyers: Scotiabank predicts mortgage carrying costs will rise 8% in the next year in part due to interest rate increases and stricter mortgage rules, but household incomes are only expected to go up by 2.5%. Higher costs + less income to pay those costs = “further erosion in affordability.” The bank says the Canadian housing market has “peaked,” and it expects a slowdown in home sales. There’s a silver lining for existing mortgage holders: Scotiabank’s outlook says those with fixed-rate mortgages have some protection.
More good news: a report by RBC Economics says housing affordability in Canada hit a 27-year low in the second quarter of 2018. Toronto experiencing the biggest decline year-over-year, while the Vancouver area remains the overall least-affordable place to buy a home. Outside of Ontario and British Columbia, affordability is more stable. In the report, RBC Economics says it expects the Bank of Canada to raise its benchmark interest rate at its next announcement on Dec. 6 and three more times before the end of 2018.
An interesting (and hypothetical) look at how two investors (age 30 and age 60) can best invest their TFSAs, which allow Canadians to earn investment income and withdraw money tax-free.
Ratehub.ca is co-organizing the Canadian Personal Finance Conference, to be held on Nov. 25-26 at the Toronto Reference Library. The weekend conference is aimed at finance bloggers, writers, and anyone who wants to learn more about managing money. This year’s theme, women in finance, features an all-female lineup of expert speakers.
On Oct. 17, the Office of the Superintendent of Financial Institutions (OSFI) announced a stricter qualifying rate for borrowers with a down payment of 20% or higher. For Maclean’s, CanWise Financial president and Ratehub.ca co-founder James Laird runs the numbers on two scenarios to show what the new “stress test” means for a family’s bottom line.