Ratehub.ca Roundup: July 2017
It’s officially summer — technically, it’s the season when business news tends to slow down, but last month was rife with personal finance news. If you’re still recovering from Canada Day weekend festivities, here are some stories you may have missed in June:
Canadians’ love for debt taking us into uncharted territory, PBO report warns
It’s frequently reported that Canadians are up to our necks in debt, but a new report from the Parliamentary Budget Office (PBO) is sounding the alarm on increasing financial vulnerability. As reported by the CBC, Canadian households owed $174 for every $100 of disposable income in the first quarter of 2017. What’s most concerning is the debt service ratio, which measures household income against monthly debt payment obligations — the PBO says Canadian households owed $14.20 in debt payments (principal and interest) for every $100 in disposable income, and that number is expected to rise to $16.30 per $100 by the end of 2021. The PBO says households’ ability to service their debts “will become stretched even further as interest rates rise to more ‘normal’ levels over the next five years.”
Canadian provinces ranked by average consumer debt: Equifax report
Can you guess where your province ranks among average debt load? As Global News reports, a new Equifax report found that Canadians’ total credit card debt hit a high of $1.7 trillion at the end of 2016, with Canadians carrying an average of $22,125 in non-mortgage debt. Unsurprisingly, average debt loads vary across the country — check out the article to see where your province ranks.
Merchants may soon ask customers to pay surcharge when using credit cards
Thanks to a recent class action lawsuit, you might be required to pay a surcharge if you pay with a premium credit card at certain merchants. Retailers large and small have long complained about fees charged to them by credit card providers (most notably, Walmart), and The Canadian Press reports MasterCard and Visa have reached a settlement in a 2011 lawsuit that alleges they forced merchants to accept all their credit cards, even the premium ones that charged retailers higher fees, but didn’t let merchants recoup the cost by adding a surcharge for customers who use those cards. Neither company admitted wrongdoing, but will pay $19.5 million as part of the settlement and allow retailers to add a surcharge at their discretion.
There are a few caveats: the new rules won’t come into effect until 1.5 years after provincial courts approve the settlement, there will be a cap on the surcharges, and the Canadian Federation of Independent Businesses said it doesn’t expect smaller merchants to widely apply the surcharge.
Monthly payments on new mortgages growing faster than inflation, CMHC says
The Canada Mortgage and Housing Corporation (CMHC) says the average monthly mortgage payment for new loans climbed 4.6% year-over-year to $1,328 in the fourth quarter in 2016. With that number outpacing inflation, the CMHC expressed concern about homeowners being able to meet their payment obligations going forward — especially as interest rates inevitably rise.
But despite high prices, CMHC reported the same day that mortgage delinquencies are actually low in hotspots such as Toronto and Vancouver — prairie cities hit hard by the oil slump and a smattering of east coast cities had higher-than-average delinquency rates, while Saint John, N.B., had the highest rate of any metropolitan area in Canada during the first quarter of 2017.
If you’re a would-be homeowner on the hunt in one of Canada’s ridiculously hot housing markets, you should know about double-ending: the practice of a realtor representing both the buyer and seller in the transaction. The CBC shares the story of one Toronto couple who lost $30,000 (and their dream home) after receiving ethically questionable advice from an agent representing both parties.
As reported by the CBC, when the couple viewed a Mississauga, Ont. condo, the agent in question advised them to bid $71,500 over asking, waive all conditions (including a status certificate, which informs the buyer of the financial status of the condominium corporation), and offer a $30,000 non-refundable deposit to cinch the deal. Their offer was accepted, but the couple was shocked to find out the Canada Mortgage and Housing Corporation (CMHC) wouldn’t insure their mortgage when it found critical issues with the condo corporation’s reserve fund and pending legal issues against the developer. The deal fell through, and the couple lost their $30,000 deposit.
Double-ending isn’t illegal, but experts say it’s risky and possibly dangerous for uninformed buyers and sellers. One interesting thing: the spurned couple did get their deposit back after threatening to sue the condo seller, the real estate agent, and its brokerage, but settled out of court — after they signed a confidentiality agreement to not name any of the parties involved.
Ratehub.ca updates
During the Great Depression, more than 9,000 U.S. banks failed — guess how many went bust in Canada? In June, Ratehub.ca launched our Canada 150 money facts campaign, highlighting five centuries of finance in our country with 150 unique facts on banking, business, currency, economy, government, insurance, policy, real estate, stock market, and wealth.
Bustle knows what’s up: money is a feminist issue. Ratehub.ca co-founder and CEO Alyssa Furtado is among the women quoted in this excellent article on 23 money-saving tips from experts (Hint: Alyssa’s is #12), part of Bustle’s Get Money series on how millennial women earn, spend, save, and invest their money.
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