Tag Archives: Bank of Canada

Sept 18: Best from the blogosphere

In early September the Bank of Canada raised its key interest rate by another .25% up to one percent from .75%. This decision followed the first hike in July and could be just the second in a string of increases, some economists have predicted in light of the announcement.

In this issue of Best from the Blogosphere, we sample several interesting media articles and blogs that will help you understand how rising interest rates will impact your both ability to manage debt and carry a mortgage.

Robert McLister, mortgage columnist at the Globe and Mail offers 10 things to ponder now that the Bank of Canada has put every mortgage lender on alert. He says adjustable-rate borrowers (whose mortgage payments float with prime rate) will see their payments jump about $12 a month for every $100,000 of mortgage balance.

He also notes that variable rates can still make sense for strong borrowers with a financial cushion or those who might need to break their mortgage early (since variable-rate penalties are usually lower).

But to justify the risk of a variable mortgage, McLister suggests that you look for a rate that’s at least two-thirds of a percentage point less than your best five-year fixed option. That buys you insurance against three more rate hikes.

Kerry K. Taylor aka Squawkfox discusses 6 ways an interest rate hike affects your finances. For example, variable-rate mortgages, or adjustable-rate mortgages, will see an increase as financial institutions increase their lending rates. Home equity lines of credit (HELOCs) and lines of credit will cost more. Student loan interest rates can be either fixed or variable (floating). As with mortgages, Taylor says those repaying a variable-rate student loan will see their interest rate go up immediately, while those on fixed rates won’t see a jump until it is time for renewal.

In MoneySense, Martin MacMahon and Denise Wong consider What the latest rate hike means for you. Economist Bryan Yu with Central 1 Credit Union told the authors that people carrying a lot of debt on their credit card will probably start to notice higher interest charges. “They’re going to be facing the quarter-point increase on terms of that debt for their servicing… That’s a quarter point on an annual basis. So, it is going to be a bit of a pinch going forward, ” he says. “In these circumstances people should be looking at paring back some of that debt over time.”

The Globe and Mail’s David Berman explores why even though interest rates are rising, your savings account isn’t growing. Many financial institutions have already passed along this week’s central bank quarter-percentage-point hike to borrowers, raising their prime lending rates to 3.2% on Thursday – but you may need a powerful microscope to see any increase in your savings rates. “Why? The simple reason is because lenders can get away with it,” Berman says.

James Laird, co-founder of Ratehub.ca and president of CanWise Financial mortgage brokerage believes at some point, as rates in Canada continue to rise, there will be an adjustment to all deposit and savings products.  “But it just seems to be that [financial institutions] just don’t look at it as closely as they do on their lending side,” he concludes.

The bank’s decision to raise its key lending rate to one per cent on September 6th, from 0.75 per cent, apparently surprised the markets, which sent the loonie soaring. The Canadian dollar, which had been trading around 80.5 cents U.S. in the morning, spiked by more than a cent to around the 82-cent mark immediately after the Bank of Canada’s announcement. It’s the highest level the currency has seen since June 2015.

So If you have invested in U.S. stocks or have American dollars socked away in a bank account for your next vacation south of the border, the spike in the value of the loonie as a result of the interest hike is bad news. But the soaring loonie as a result of the Bank of Canada’s interest rate announcement is great news if you are planning a U.S. vacation that is priced in American dollars. However, a higher loonie could also slow Canada’s economic momentum, as it will make exports more expensive.


Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

Aug 21: Best from the blogosphere

By Sheryl Smolkin

If you want to take a break from swimming and sunning in the waning days of summer, here is our latest selection of personal finance vides for your viewing pleasure.

There was a lot of panic recently after the Bank of Canada finally raised its overnight rate after seven years. In her  latest video, Jessica Moorhouse gives a quick recap on what this interest rate hike was all about and what you should do about it (especially if you’re in debt!).

The Globe and Mail’s personal finance columnist Rob Carrick offers several ideas to reduce the impact of the interest rate increase on your finances. If you have a mortgage, he suggests paying down the principal, even with money you were planning to put into an RRSP.

Father Jonathan Chevreau and his daughter Helen are interviewed on CBC Business news about what it is like when “boomerang kids” move home years after they left the first time.

Click here to listen

Kornel Szreibjer, host of Build Wealth Canada interviewed Randy Cass CEO of Nest Wealth, a robo advisor service. Robo-advisors are a class of financial advisers that provide financial advice or portfolio management online with minimal human intervention. For more ways to listen to the podcast click here.

 

And finally, couples manage finances in different ways. MoneySense profiles three different couples who talk about their financial goals and steps they have taken to meet them.


Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

Feb 2: Best from the blogosphere

By Sheryl Smolkin

It was the dead of winter in my neck of the woods last week, but that didn’t stop bloggers and personal finance writers across the country from writing and tweeting to stay warm. In particular, the blogosphere was buzzing about the “first world problems” of Vancouver couple  Eric and Ilsa (a doctor and a dentist) with five kids and earning potential of $450,000/year who can’t make the numbers work to build a house in pricey Vancouver.

In a disconcerting column in the Globe and Mail, Gail Johnson wrote about every homeowner’s worst nightmare. Fred Weekley, the mayor of the district of Katepwa Beach in Saskatchewan managed to intercept a fraudulent transfer of the title of his family home, but others seniors with paid up homes have not been so lucky.

On MoneyWise, Sean Cooper wrote Turning an RSP Into Income: My Mom’s Story. Like many baby boomers, Maureen found herself ‘house rich, cash poor’. After working so hard to pay down her mortgage she wasn’t too keen on a reverse mortgage, so she sold her house for top dollar and moved to a low maintenance, less costly condo.

Many bloggers make a career out of passing on their tips for living frugally, Barry Choi on Money We Have talks about Money Well Spent for a change. I agree that travel and eating out (if you can afford it) are two of life’s great pleasures. We also have a Kitchen Aid Mixer, but I have never felt the need for a Vitamix.

If you are wondering what the drop in the Bank of Canada’s lending rate to .75% this week could mean for your finances, take a look at Tim Shufelt’s piece in the Globe and Mail The winners and losers following the Bank of Canada’s surprise rate cut.

And for all of you who have been day-dreaming about a new car but realistically need to stick with your current vehicle for a few more years, Stephen Weyman on HowToSaveMoney.ca gives helpful hints on How to make your new car last forever. A good rust-proofing job, finding the right mechanic, knowing how much car repairs should cost and buying your own parts for up to 90% off will help.

Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information with us on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.