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CANADA’S DEBT BURDEN: CANADIAN WEALTH SOARS RELATIVE TO DEBT

canada's debt burden
canada’s debt burden

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

If you would like to listen to the audio version of this Brandon Blog, please scroll to the very bottom and click play on the podcast.

Canada’s debt burden growing for Canadians: 2021 Edition

Canada’s fiscal policy faces many challenges, according to the Fraser Institute. The federal and many provincial governments face serious financial challenges due to budget deficits and increasing accumulation of debt. As interest payments increase, there will be less money left for tax cuts, education, and social services. In the aftermath of COVID, the federal and provincial governments must develop long-term plans to address Canada’s growing debt problem.

Canada’s debt burden continues to be the talk of the town in this age of global statism. It’s always cited by statists that Canada’s federal debt is 100+ percent of GDP compared with 80 percent in the early 1980s. It’s even considered a threat to Canada’s sovereignty, a moral hazard, and a burden on future generations by some. However, individuals’ personal share of Canada’s debt burden may not be growing. I will explain some interesting Statistics Canada reporting in this Brandon Blog post.

Canada’s debt burden: The coronavirus is why provinces need financial assistance now

In 2020, the Premier of Newfoundland and Labrador wrote to Justin Trudeau, saying that his province faced an “immediate and urgent financial crisis” and was unable to raise short- and long-term funds.

During the critical period, the letter explained, the government has no alternative methods of funding provincial government operations, including its health care system. The Bank of Canada offered to buy 40 percent of all new provincial bonds four days after the letter was sent.

The province has been hit with a public health crisis of unprecedented proportions, and their provincial peers, who have similar debt-to-GDP ratios, are not far behind. It is likely that the government can do the same for provinces and municipalities that have to shoulder heavy coronavirus-related costs if it can provide zero percent loans to small businesses.

By law, it can.

canada's debt burden
canada’s debt burden

Is Canada’s debt burden a cause for concern?

Following a federal budget deficit of $354.2 billion last year, the Trudeau government budget documents show that the Feds anticipate a deficit of $154.7 billion in 2021/22, and deficits of at least $30 billion for another four years thereafter. There has been a significant increase in debt accumulation. During the next two years, the country’s net debt-to-GDP ratio is expected to rise to 55.3 percent. In spite of low-interest rates, government program spending in 2021/22 is expected to increase by more than 40 percent over 2019/20. Despite the prime minister’s vague promise that a balanced budget will be achieved at some point, there is no timeline for that.

Can Canadians expect a bout of inflation to continue rising? Can we expect an increase in interest rates? Do you expect a depreciation of the exchange rate? Is it possible that the government will default at some point? Are there any limits on the size of the debt?

Over the years, various economists have noted that federal government debt is not the same as “debt” in the way that the term is commonly understood. Even if it means working harder or cutting back on our spending, we expect to have to pay back debt at some point.

Unlike a government, a household has a finite lifespan. The government, however, can, in principle, refinance (rollover) its debt indefinitely while a household must eventually pay off its debt. Governments do not have to worry about involuntary defaults when they finance themselves with convertible debt.

As a burst of inflation has already begun, we should prepare for possible temporary spikes. Governments borrow money because they don’t spend all of their income right away. Some of it is saved until later. Therefore, future tax revenues can be increased without increasing current taxes. Thus, as real incomes increase, consumer spending increases, which in turn generates additional tax revenue. Therefore, the economy grows more rapidly than it would ordinarily.

How does the government handle overspending? Governments need to reduce spending sooner than later when they run up a level of borrowing that is unsustainable. If it does not, then raising taxes is the only option left. Those who are old enough to recall the 1970s know that high taxes tend to slow down economic growth.

Although prices haven’t risen too much so far for Canadians, their rise is inevitable and the end does not seem too close right now. Inflation concerns seem to be making daily headline news. Nonetheless, many people fear that living costs will continue to rise forever.

So that is the government. What has happened to individuals and their contribution to Canada’s debt burden over the last 18 months?

Canada’s debt burden: Canadian Debt To Assets Falls To Nearly Two-Decade Low

According to Statistics Canada, family financial debt is at its lowest level in the last two decades as a percentage of the overall household assets. Throughout the last twenty years, the debt-to-assets proportion has actually never ever been below its long-term average as it is now.

Therefore, Canadians are less likely to file for bankruptcy than in the past. This is supported by statistics on bankruptcies over the past 18 months. David Madani, senior director at Capital Economics, called it rather remarkable.

According to CNBC, Canadian consumer credit rose 0.5%, but non-financial corporate borrowing of business loans declined 1%. Lending to consumers is up. Consumer lending annual growth is primarily fueled by a substantial increase in mortgages and home equity loans, as I mentioned in previous Brandon Blogs. Debt on credit cards has steadily reduced during the pandemic. Three billion dollars more than expected was borrowed by non-financial companies.

canada's debt burden
canada’s debt burden

Canadian Household Wealth Soars, Canadian’s Debt Burden Drops Amid Pandemic: Statistics Canada

I will now turn my attention to the household wealth side of the ratio now that I have discussed the debt side. What’s behind the rise of wealth? The rise in wealth can be attributed to a number of factors:

  • prices for stocks and houses soaring;
  • a generous income support program from the government for jobless individuals;
  • during lockdowns, there are fewer things to spend money on.

Households have saved an estimated $90 billion as a result.

Amid the worst economic downturn in decades, Canadian households are seeing wealth hit a record high while debt burdens shrink relative to income. That is really the entire rise in household wealth story.

Compared to debt, Canadian wealth soared, but the bank executive warned that this might only be a mirage

Debt-to-assets fell to their lowest level since the early 2000s. In response to this, a Bank Exec at the National Bank of Canada believes it produces a “wealth effect” whereby consumers feel wealthy and then spend more. Why not get a new expensive truck for your driveway if you live in a million-dollar house?

Although Canadian banks are warning about the inevitability of rising interest rates and slowing economic growth, some economists say Canadians may be feeling wealthier than ever before. This could mean consumers will start spending again after years of saving for retirement or paying off debt. Capital Economics senior economist David Madani stated, “We’re seeing an increase in wealth.” Consumption is likely to pick up.” He says higher-priced items like cars and houses have also taken over.

Statistics Canada data shows household assets have soared this year. The housing boom created significant equity with little actual financial contribution from owners. When it comes to Canada’s debt burden or a family’s household debt, it’s important to look at the right statistics. It’s also important to remember the most important point about debt is not the debt itself. It’s the ability to pay it back.

canada's debt burden
canada’s debt burden

Canada’s debt burden: Where the heck does my money go?

This is a common question we always hear from people who come to us with financial problems.

I hope this Canada’s debt burden Brandon Blog was informative. With too much household debt and not enough wealth, you are insolvent. You can choose from several insolvency processes. It may not be necessary for you to file for bankruptcy.

If you or your business are dealing with substantial debt challenges, you need debt help, and you assume bankruptcy is the only option, call me.

It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties with debt relief options as an alternative to bankruptcy. We can get you the relief you need and so deserve. Our professional advice will create for you a personalized debt-free plan for you or your company during our no-cost initial consultation.

You are under a lot of pressure. Our team knows how you feel. You and your financial and emotional problems will be the focus of a new approach designed specifically for you. With our help, you will be able to blow away the dark cloud over your head. We will design a debt settlement strategy for you. We know that we can help you now.

We understand that people with credit cards maxed out and businesses facing financial issues need a realistic lifeline. There is no “one solution fits all” method with the Ira Smith Team. Not everyone has to file bankruptcy in Canada. The majority of our clients never do as we know the alternatives to bankruptcy. We help many people and companies stay clear of filing an assignment in bankruptcy.

Because of this, we can develop a new method for paying down your debt that will be built specifically for you. It will be as unique as the economic problems and discomfort you are experiencing. If any one of these seems familiar to you and you are serious about getting the solution you need to become debt-free, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost consultation.

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

canada’s debt burden

Categories
Brandon Blog Post

EXPENSIVE REAL ESTATE MARKET IN TORONTO MAY SLOW DOWN SAFELY DUE TO HOMEBUYER’S GRIDLOCK

real estate market in toronto
real estate market in Toronto

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

If you would prefer to listen to the audio version of this Brandon Blog, please scroll to the very bottom and click play on the podcast.

Real estate market in Toronto introduction

Over the last few years, a lot has been written about the red hot real estate market in Toronto and Vancouver. Not even the COVID-19 pandemic has been able to slow them down. Many have predicted that the real estate market in Toronto is a dangerous bubble about to burst.

There is always a need for housing in Toronto. COVID-19 with the Ontario lockdowns and stay-at-home orders has created much change but has not slowed down the real estate market in Toronto. Many people are moving to the suburbs to get more space now that they have been working and living in their homes 24/7. As a result of travel bans, immigration into Canada has temporarily slowed down immigrants still moving to Toronto.

I recently read two articles that are about totally different aspects affecting the real estate market in Toronto. However, when I put these two very different ideas together, it leads me to the conclusion that natural economic forces may be enough to slow down the market for now without any government intervention.

Real estate market in Toronto: Canadians piled on mortgage debt during COVID-19

In my June 9, 2021, Brandon Blog, IS MORTGAGE DEBT NOW THE OBSESSION FOR MANY CANADIANS? I wrote about the mortgage debt surge and its effect on the overall rise in Canadian consumer debt according to Equifax Canada.

An article published in the Toronto Star on June 30, 2021, looked at Canadians who piled on mortgage debt during COVID-19 and how some economists fear a significant correction in the market. The thrust of the article is about:

  • the upward pressure on the average price of a home because of bidding wars;
  • how first-time buyers are being squeezed out of the real estate market in Toronto given the rise in the average home price/average selling price of a home in the GTA;
  • both first-time homebuyers and homeowners in urban centres looking to move farther out and even into the country both for affordability and to get more space since they plan to make working from home a permanent feature in their life;
  • how people have maxed themselves out on mortgage debt and how an increase in interest rates may cause financial problems for those homeowners and ultimately a significant correction in the housing markets and a drastic drop in housing prices.

    real estate market in toronto
    real estate market in Toronto

US interest rates

The US Federal Reserve recently announced that based on its expectations for rising inflation this year, it has advanced the timeline for interest rate hikes. However, the Fed offered no indication as to when it will begin reducing its aggressive bond-buying program. Fed Chairman Jerome Powell acknowledged that the topic was reviewed at a recent Fed meeting.

Advancing the time frame for raising the rate of interest is all relative. The policymaking Federal Open Market Committee left its benchmark short-term borrowing rate at near zero. Yet officials indicated that rate increases won’t come until 2023, after saying last March, it saw no increases until at the very least 2024. So interest rates in the US are anticipated to stay very low for the foreseeable future. So if the US Fed is not increasing interest rates any time soon, mortgage rates should not be either.

Canadian interest rates

At its June 9, 2021 conference, the Bank of Canada held its target for the overnight rate of 1/4 percent, with the Bank Rate at 1/2 percent and the deposit rate at 1/4 percent. The Bank is maintaining its present expectations for the overnight rate. This is strengthened and also supplemented by the Bank’s quantitative easing program, which continues at a target pace of $3 billion each week.

With vaccinations proceeding at a quicker pace and provincial constraints easing over the summertime, the Canadian economy is anticipated to rebound strongly, led by consumer spending. Real estate market activity is expected to moderate yet stay very active. Solid developments in global demand and higher prices for commodities ought to bring about a strong recovery in exports and business investment.

real estate market in toronto
real estate market in Toronto

The real estate market in Toronto and interest rates

Therefore, it seems that there will not be upward pressure on interest rates, and therefore probably not on mortgage rates either, soon. Both the US Fed and the Bank of Canada do not seem to be in any hurry to increase interest rates.

Another factor in Canada is the newer mortgage stress test. This newer stress test was created to ensure that borrowers can meet a more stringent economic test to qualify for a home mortgage. Effective June 1 of this year, the newer test requires borrowers to qualify at the higher of an annual rate of interest of either 5.25 percent or 2 percent over the current published home mortgage market rate they can get.

This makes it harder for some to qualify for a home mortgage. The federal government hopes this will lead to lowering the pool of qualified borrowers and therefore at some point, decreasing house prices.

Both the US and Canadian governments seem happy to not try to battle inflation through increased interest rates. Coming out of the pandemic, both countries will welcome their economies bouncing back and growing. Inflation will be a natural by-product of the resurgent economies. Higher prices will mean that employers will have to increase minimum wages if they wish to attract employees to handle business growth. A higher minimum wage without any government intervention of new legislation because of inflationary pressures will be a dream come true, especially in the United States. In Canada, it is always good to head into an election while there is good economic growth.

Given all of the above, I don’t see that the real estate market in Toronto being affected by increased mortgage rates, because, there won’t be an increase in 2021 and possibly not even in 2022. So I don’t see higher interest rates being a factor at all in causing downward pressure on house prices, especially in Canada’s largest city.

Real estate market in Toronto: Homebuyer’s gridlock

The second article deals with homebuyer’s gridlock. How does this relate to the real estate market in Toronto? We have seen that people staying in their homes 24/7 during the coronavirus pandemic has allowed them to reevaluate their long-term housing needs and lifestyle choices. This has kept the Canadian real estate market strong as people see what they like and what they don’t like in their current homes. They want to get more of what they like and want, put their home up for sale and buy that home they feel will suit their needs better.

Other than for perhaps empty-nesters, those making the move are generally buying larger homes. The normal progression is that immigrants coming into Canada, which has been reduced during the pandemic, generally start as renters in Canada’s biggest cities. The dream of all renters is to become first-time homebuyers.

Prospective homebuyers start looking for their starter home. It could be a condominium, a townhouse or semi-detached or detached house. They end up buying from someone who is selling their first home. That person now looks for a larger purchase in the mid-tier. They buy from someone looking to go up into a much larger and perhaps their dream luxury home. Ultimately, the empty-nester luxury home dweller looks to downsize and more than likely will be looking to buy in the condo market. All this market activity fuels the Canadian housing market activity keeping real estate prices strong and strong demand for all types of housing.

Zillow Canada commissioned a new study from Ipsos Reid. Buried among the usual analyses on things like affordability was an unusual item. Home prices across Canada have increased so much, lots of property owners can’t afford to sell. A quarter of house owners all set to sell have not listed, since they can’t afford their next move. This is what a homebuyer’s gridlock is. People are “locked” into their circumstances. It only happens throughout the frothiest of markets, which we are apparently in.

But what happens to market activity if one or more of these different buyer types cannot afford that next move? It means that there will not be as many sellers at different levels of homes. If the number of buyers does not decrease in ratio to the decrease in sellers, this will cause bidding wars and upward pressure on prices.

To determine if there is going to be downward or upward pressure, we have to know the supply and demand statistics for each level of housing. One thing for sure though, if the number of buyers decreases, this means less demand. Less demand means that prices would not increase. They may not drop dramatically, but they certainly will not increase either.

real estate market in toronto
real estate market in Toronto

Real estate market in Toronto summary

With borrowing costs remaining low, the mortgage stress test making sure that borrowers can afford their mortgage at higher interest rates and now many would-be sellers not able to afford that next move up, I don’t agree with those market watchers who are predicting a huge real estate market in Toronto bubble about to burst.

Rather, I see market conditions remaining relatively stable, with perhaps less volume of activity than we have seen over the last couple of years. Average house prices may go down, but I don’t believe it is going to be a huge drop. Rather, I think the real estate market in Toronto may take a bit of a rest, until the next round of price appreciation. Ultimately, population growth in and around the GTA should fuel a new cycle of pent-up demand that will create new demand for ownership housing in Canada’s major cities.

I hope that you found this real estate market in Toronto Brandon Blog interesting. Problems can arise when there are increases in the prices of the goods and services that you need when you already have too much consumer debt.

If you are concerned because you or your business are dealing with substantial debt challenges, whether you need gambling debt help or just plain old debt help and you assume bankruptcy is your only option, call me.

It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties with debt relief options as alternatives to bankruptcy. We can get you the relief you need and so deserve. Our professional advice will create for you a personalized debt-free plan for you or your company during our no-cost initial consultation.

The tension put upon you is big. We know your discomfort factors. We will check out your entire situation and design a new approach that is as unique as you and your problems; financial and emotional. We will take the weight off of your shoulders and blow away the dark cloud hanging over you. We will design a debt settlement strategy for you. We know that we can help you now.

We understand that people and businesses facing financial issues need a realistic lifeline. There is no “one solution fits all” method with the Ira Smith Team. Not everyone has to file bankruptcy in Canada. The majority of our clients never do as we know the alternatives to bankruptcy. We help many people and companies stay clear of filing an assignment in bankruptcy.

That is why we can establish a new restructuring procedure for paying down debt that will be built just for you. It will be as one-of-a-kind as the economic issues and discomfort you are encountering. If any one of these seems familiar to you and you are serious about getting the solution you need to become debt-free, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost bankruptcy consultation.

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

Categories
Brandon Blog Post

IS MORTGAGE DEBT NOW THE OBSESSION FOR MANY CANADIANS?

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

Is mortgage debt surge responsible for pushing Canadian consumer debt levels higher?

For many people in Canada, a house is the centre of the family’s financial world. As a result, if the family’s financial situation changes, the house, and the mortgage that goes with it, become the focus of the family.

Is mortgage debt pressing consumer financial debt higher in Canada?

Equifax Canada recently reported that it is. One effect of the pandemic is that Canadian credit card usage and debt are dropping, as families borrow more cash right for their homes while spending less on everything else.

In this Brandon Blog, I offer some thoughts on why is mortgage debt rising, pushing total Canadian consumer debt above pre-pandemic levels, while credit card debts are falling during the COVID-19 pandemic.

Is mortgage debt surge pushing Canada consumer debt to $2.1 trillion?

Those in the real estate sector in Canada will certainly agree that the housing market is one of the greatest financial factors that influence the success of the Canadian economy. These days, the sector is exceptionally competitive which has a great influence on the housing market.

Competition among residential real estate buyers is fierce in many markets throughout the nation, especially British Columbia and Ontario. The pandemic has actually stimulated a record boom in Canada’s housing market. Low rates of interest, as well as brand-new demand for a larger home, have actually sustained bidding battles for houses.

What’s behind the record-breaking growth in the hot housing market in Canada? Is mortgage debt behind the increase in mortgage debt? Yes, according to Statistics Canada. It stated last Friday that Canadian families incurred a new high level of mortgage debt in the 2nd quarter in a row. Canadian households added record mortgage debt amid low interest, high prices.

Driving hot markets in many regions aided move real estate prices and the average sale price higher, pushing the need for home loans to $34.9 billion in the 4th quarter of 2020. This need beat the previous high of $28.7 billion in the 3rd quarter, Statistics Canada reported.

is mortgage debt
is mortgage debt

Is mortgage debt growth making Canada’s economy vulnerable? The central bank says yes

What is the Bank of Canada‘s worries? The Bank of Canada said that growing mortgage debt makes Canada’s economy vulnerable.

High household debt, as well as inequalities in the real estate market, have escalated in the past 12 months, leaving the economy more prone to economic shocks. The central bank said that although consumer debt had actually dropped in early 2020, a boost in housing debt has more than balanced out that decrease, with total household debt climbing sharply since mid-2020.

That is one reason why, effective June 1, 2021, the Office of the Superintendent of Financial Institutions (OSFI, Canada’s leading financial regulatory authority, elevated the home mortgage stress test level for mortgage applications through banks, insurance companies and credit unions. It does not yet apply to private mortgages.

The stress test was raised so that borrowers must now be able to meet the financial test to carry a mortgage at an annual interest rate of either 5.25 percent or 2 points over the actual mortgage market rate they can get, whichever is greater. This will certainly make it harder for some to get approved for a home mortgage. The government hopes this will lead to reducing the pool of accepted borrowers as well as eventually, lowering residence rates.

The June 1 adjustment implies potential mortgagors will certainly need to prove that their finances can stand paying at that greater interest rate, no matter what rate a lender is willing to lend at. OSFI hopes that this adjustment will reduce either the number of buyers or the amount a purchaser can afford to pay given the mortgage financing available to them. The hope is that it will stem the higher pressure on house prices in the country.

Is mortgage debt the only reason Canadian household debt is so high?

As you can see from the above, mortgage debt is up but credit card debt is down. in fact, it is at a 6 year low. So is mortgage debt the only reason total household debt is up? When I speak of mortgage debt, I am talking about conventional mortgage debt. The answer is no.

Equifax Canada also reports that other big-ticket credit products like credit lines have likewise represented a general increase in Canadian financial debt. She said there was a 60 percent rise in house equity credit lines! Like mortgage debt, this is a secured debt registered against the borrower’s home.

People are borrowing these additional home equity lines of credit. The worry is if rates of interest rise, individuals may not be able to pay the debt servicing costs and the debt payments for that financial obligation. Those kinds of loans are usually at a variable interest rate.

is mortgage debt
is mortgage debt

My take on why is mortgage debt and other household debt driving in these directions?

It wasn’t an interest rate boost that forced Canadians to get consumer spending in check – it took a pandemic for many of us to transform our spending practices. Stay-at-home orders, lockdowns, nowhere to go and fewer places to spend our money have all contributed to what we are now seeing. Couple that with many Canadians being able to work from home and Canada’s COVID-19 Economic Response Plan.

Consumer spending shifted away from credit card spending. My personal view is that people’s spending patterns shifted away from consumer goods that normally would be charged to credit cards. Perhaps some of the increase in home equity lines of credit was to consolidate debt by borrowing against their homes to pay down high rate credit card debt.

Also, people were hunkered down working, going to school and generally living 24/7 in their homes. We all got to see the points we love about our home and perhaps noticed for the first time, or at least were bothered for the first time, with little imperfections in our homes. That could lead to increased borrowing in order to do additions or renovations.

It also could lead to selling the existing home and buying a different one and moving. Maybe that drove more demand than there was supply, which caused home prices to continue rising. Increased pricing required increased mortgage application numbers, mortgage borrowing, the individual size of mortgages to increase and drove total mortgage growth. Perhaps FOMO also contributed to the increased demand.

This is merely conjecture on my part, but one thing is for sure. The pandemic could not stop house prices from rising, mortgage debt from increasing and credit card debt from reducing. Overall, household debt increased. The worry now is if interest rates rise, it will take a larger proportion of household income to meet debt servicing requirements. Hopefully, everyone’s household budget will be able to handle it.

Is mortgage debt now the focus for many Canadians?

Apparently so. I hope that you found this Is mortgage debt now the obsession for many Canadians Brandon Blog interesting. If you are concerned because you or your business are dealing with substantial debt challenges and you assume bankruptcy is your only option, call me.

It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties while avoiding bankruptcy. We can get you the relief you need and so deserve. Our professional advice will create for you a personalized debt-free plan for you or your company during our no-cost initial consultation.

The tension put upon you is big. We know your discomfort factors. We will check out your entire situation and design a new approach that is as unique as you and your problems; financial and emotional. We will take the weight off of your shoulders and blow away the dark cloud hanging over you. We will design a debt settlement strategy for you. We know that we can help you now.

We understand that people and businesses facing financial issues need a realistic lifeline. There is no “one solution fits all” method with the Ira Smith Team. Not everyone has to file bankruptcy in Canada. The majority of our clients never do. We help many people and companies stay clear of bankruptcy.

That is why we can establish a new restructuring procedure for paying down debt that will be built just for you. It will be as one-of-a-kind as the economic issues and discomfort you are encountering. If any one of these seems familiar to you and you are serious about getting the solution you need to become debt-free, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost consultation.

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

is mortgage debt
is mortgage debt
Categories
Brandon Blog Post

CANADA HOUSEHOLD DEBT: HOW COVID-19 AFFECTED HOUSEHOLD DEBT AND IS THERE A LOOMING CORONAVIRUS DEBT CRISIS?

We hope that you and your family are safe, healthy and secure during this coronavirus pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

canada household debt

Canada household debt: Pre-pandemic debt pressures

Pre-pandemic, Canada household debt was continually increasing. The number of homes carrying debt has increased significantly over the last decade. In 2012, Statistics Canada reported that for the average household, Canadian households’ debt-to-income (DTI) ratio was 150%. That means that debt was rising at a rate of $1.50 for every dollar of income. This was up from $1.10 or 110% the year before. In the first quarter of 2020, the DTI ratio hit 175.4%. The ratio had been stuck at that level since about 2016.

This increase in debt can have a negative effect on a household’s bottom line — and the larger the debt, the greater the negative effect. In this Brandon’s Blog, I discuss what has happened to Canada household debt during the COVID-19 pandemic.

How COVID-19 Affected Household Debt in 2020: Canada household debt well supported by a temporary income surge

Whether you consider the federal and provincial financial assistance given to Canadians primarily through Canada’s COVID-19 Economic Response Plan as an income surge or not, findings released by Canada Mortgage and Housing Corporation (CMHC) in November 2020 show that the government assistance did help Canadians cope with Canada household debt.

The key findings in Canada in the CMHC report were:

  • Q2 2020 Canada household debt ratio is 17% down from the Q1 ratio at 158%.
  • The DTI ratio for home mortgage debt was also down, falling from 115% to 105%.
  • These declines were a straight outcome of a boost in household disposable income.
  • The degree of outstanding Canada household debt had not changed.
  • On average, Canadian household disposable income grew by almost 11% between the Q1 and Q2 of 2020 and by 15% year over year.
  • The government’s temporary transfer of money to Canadian families had the effect of decreasing the Canada household DTI ratio to a ratio not seen since 2010.

    canada household debt
    canada household debt

COVID-19: The second wave brought uncertainty on household debt

How Has COVID-19 Affected Canada Household Debt? Around the time of the second wave, the COVID-19 pandemic had actually changed the family financial picture. The DTI ratio is a crucial indication of financial obligations as a vulnerability for primarily the financial real estate industries.

The Canada household debt-to-income ratio decreased in all significant Canadian cities in the second quarter of 2021. Under regular scenarios, such a decline would certainly indicate a general strengthening in families’ capacity to pay off financial debt. Federal government subsidies effectively supported the household lost income. This more than likely helped Canadians with lowering their non-mortgage debt throughout those months. Nonetheless, the mortgage part of Canada household debt has increased in the majority of metropolitan areas while employment has contracted.

At the same time, mortgage deferrals on mortgage payments offered by Canadian financial institutions stopped. This of course leads to worries about the ability of Canadians to stay current on their mortgage payments, even with the current extremely low-interest rates. Other government assistance programs have already ended or are coming to an end. The end of the government support programs leading to the temporary boosting of household income now brings uncertainty as to how Canadians will be able to manage to carry and pay down their household debt levels.

Canada household debt: Higher-income increases drive DTI ratios down

Statistics Canada also came out with an interesting report about the economic impacts of how COVID-19 affected household debt in 2020. The key findings of the Statistics Canada report are:

  • The gap between the lowest and highest income groups declined in 2020. As you might expect, the reason was that lower-income families received a greater share of government COVID-19 funds than higher-income households. Therefore, lower-income households saw more growth in household income than high-income earners, so, the gap closed.
  • There was a more powerful rebound in disposable income for lower-income households as well as younger households. Again, government coronavirus pandemic-related funds transfers are the reason why.
  • Lowest-income and youngest families experience the biggest decline in wages and salaries. As mobility restrictions, shutdowns and lockdowns took place across Canada, travel, food and beverage and the hospitality industries were hard hit because of closings for an extended period. These industries provided employment for many lower-income people. Layoffs resulted in declines in wages and salaries.
  • The dollars of COVID-19 assistance doled out by the federal government surpassed the losses in employment and self-employment incomes suffered.
  • COVID-19 support procedures have the biggest impact on lower-income and more youthful households.
  • Families were able to reduce monthly expenses to the point where it was less than their monthly income from all sources to boost their savings and cash balances on hand in 2020.
  • Lowest-income and youngest families saw the largest wealth gains.
  • Low lending rates facilitated home buying for lower-income and younger Canadians.
  • Lower-income families restricted their consumer debt balances on credit cards and other non-mortgage debt.
  • Younger homes restricted consumer credit (non-mortgage) borrowing in spite of higher consumer spending.
  • The biggest changes in DTI ratios occurred in lower-income and also younger families as opposed to higher-income households.

    canada household debt
    canada household debt

Canada household debt: How will COVID-19 affect financial assets, delinquency and bankruptcy?

The Canada Emergency Response Benefit (CERB) supplied financial support to Canadians who experienced negative financial impact by the COVID-19 pandemic. Eligible Canadians obtained $2,000 for a 4-week period (the same as $500 a week), between March 15 and September 26, 2020. Roughly $82 billion was paid to about 8.9 million Canadians through the CERB program which ended in September 2020.

The Canada Recover Benefit (CRB) sustains Canadians that have actually not returned to work as a result of COVID-19 or whose earnings have actually been reduced at the very least by 50%, and who are not eligible for Employment Insurance (EI). Eligible Canadians should be searching for work and accepting a job where it is reasonable to do so. The CRB gives $500 a week for up to 38 weeks. It is available only for 1 year. You make an application for the CRB for 2 weeks a time through your online CRA MyAccount. You have to wait until after you’ve missed out on 2 weeks of work to apply.

So the CERB is over. The CRB will get kicked to the CRB by this Fall. The Canada Emergency Wage Subsidy for support businesses continuing to employ people is supposed to end this June. Mortgage payment deferrals are over. Although during the first wave courts were closed so lawsuits were not advancing and at the same time collection agencies were not hounding people.

The courts have been open and litigation continuing for some time now. Over the last few weeks, people calling in to inquire about consumer proposals and personal bankruptcy have been saying they are getting calls from collection agencies looking for money, including, credit card debt payments. So pretty soon we should be back to business as usual as far as debt collection is concerned.

To date, as indicated above, COVID-19 has allowed Canadians in general to increase their financial assets and their rise in household net worth. As already described, for those lower-income families, the government support measures have actually had an increase in household income.

Delinquencies in Canada household debt have been ignored to a large extent in 2020 and bankruptcy filings were the lowest on record in 2020 in two decades. I expect that to change, as nobody is currently addressing any form of debt hangover. That is debts that people had pre-pandemic where no principal has yet been paid down and lenders have been understanding and therefore not pressing for collection. As collection calls increase, I expect that personal insolvency filings will also.

I expect that there will also be an increase in corporate insolvency filings. So far in Canada, most of the filings have been large retailers, certain cannabis companies and Laurentian University seeking bankruptcy protection in order to restructure under the Companies’ Creditors Arrangement Act (CCAA). As the economy gets better, companies will need to restart, hire more staff and generally gear up for an increase in business.

Companies will need capital to do so. Unless a company is sitting with a large cash balance, which for the majority is unlikely, they will need to tap into available lines of credit or do fresh borrowing. Lenders who have been understanding to date, may not wish to increase their exposure to certain companies or industries. If companies do not have the cash to operate, they will fail.

How will COVID-19 affect financial assets, delinquency and bankruptcy? I will now provide you with some thoughts to consider.

Canada household debt: Predictions and financial challenges for 2021

Canadians will be facing a great financial challenge as the economy rebounds from the economic impacts of the coronavirus. Canada’s economy pretty well made a sudden stop due to the COVID‑19 pandemic crisis.

This has actually caused extensive income losses, producing a tough scenario for many Canadian families. This is especially true for those that are highly indebted. From a financial stability point of view, a key worry is whether homes can stay up to date with their financial obligation payments. Highly indebted Canadians may very well end up in a financial crisis.

The COVID‑19 pandemic has a worldwide reach, and its aftermath is a lot more uncertain than how we recover from a normal recession. Economic activity will most certainly rebound as mandated lockdowns are gradually relieved. However, this will likely be a slow process, implying some of the macro-financial results of the pandemic might linger.

The Bank of Canada is worried about the 2021 financial challenges for all Canadians. To what degree can homes weather the storm? Canada’s central bank says that this eventually depends on:

  • the financial wellness of households last February 2020;
  • the efficiency of Canadian government support measures and policy activities targeted at the recovery; and
  • the rate at which the labour market recuperates.

The Bank of Canada will be looking at many Canada household debt factors as the economy recovers. Specifically concerning are the more financially vulnerable households. Things that will give the Bank of Canada concern about household liabilities are:

  • Mortgagors (the homeowners) with not many financial guardrails.
  • Home equity credit lines can supply a financial reserve however at the expense of increased borrowing.
  • Will government fiscal policy aid in supporting Canadians until household income can get back to or exceed pre-pandemic levels?
  • Unemployment rates may not be a fully accurate indicator of household revenue losses.

Only time will tell how 2021 unfolds for Canadians and the economy.

canada household debt
canada household debt

Canada household debt summary

I hope you enjoyed this Canada household debt Brandon Blog post. Are you worried because you or your business are dealing with substantial debt challenges and you assume bankruptcy is your only option? Call me. It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties while avoiding bankruptcy. We can get you the relief you need and so deserve.

The tension put upon you is big. We know your discomfort factors. We will check out your entire situation and design a new approach that is as unique as you and your problems; financial and emotional. We will take the weight off of your shoulders and blow away the dark cloud hanging over you. We will design a debt settlement strategy for you. We know that we can help you now.

We understand that people and businesses facing financial issues need a realistic lifeline. There is no “one solution fits all” method with the Ira Smith Team. Not everyone has to file bankruptcy in Canada. The majority of our clients never do. We help many people and companies stay clear of bankruptcy.

That is why we can establish a new restructuring procedure for paying down debt that will be built just for you. It will be as one-of-a-kind as the economic issues and discomfort you are encountering. If any one of these seems familiar to you and you are serious about getting the solution you need, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost consultation.

We will get you or your business back up driving to healthy and balanced trouble-free operations and get rid of the discomfort factors in your life, Starting Over, Starting Now.

We hope that you and your family are safe, healthy and secure during this coronavirus pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

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canada household debt
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CANADIAN CONSUMER DEBT: NEW REPORT SHOWS COVID-19 INSPIRES INCREASE IN CANADIAN MORTGAGE DEBT

The Ira Smith Trustee Team is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting. We hope that you and your family are safe and healthy.

Canadian consumer debt introduction

On November 30, 2020, Equifax Canada reported that total Canadian consumer debt climbed 3.8% to $2.041 trillion in the third quarter of 2020 compared to the third quarter in 2019. Canadian household average debt is extremely high.

The purpose of this Brandon’s Blog is to discuss what Canadian consumer debt is, what Canadian households have been doing with credit use during the pandemic and what the Equifax Canada reporting means for household debt.

The pandemic can’t stop Canadian consumer debt increase

The reporting indicates that the rise in Canadian consumer debt came mainly from debt growth in mortgage debt and auto loans. Mortgage balance increases came from both refinancings of existing mortgage debt and new mortgage applications.

The thinking with auto loans is that it resulted from Canadians purchasing vehicles that they had intended to purchase earlier in the year. Concerning mortgages, the refinancings were to consolidate higher interest rate non-mortgage debt, for credit products such as credit cards, into a new higher mortgage amount at much lower interest rates.

This obviously brings down the overall average debt interest rate. The new mortgages are tied directly into Canada’s housing market that the pandemic, so far, could not stop either.

All this has taken place with the backdrop of businesses closing and jobs being lost because of the pandemic. As well, millions of Canadians took advantage of payment deferrals on loan payments, especially mortgage deferrals on home mortgages. Finally, Equifax points out that the largest growth in mortgages came from those 35 years of age and under.

So you although you would think that the pandemic, business closures and job losses would result in an overall Canadian consumer debt increase due to hardship, that is not the case. The rise in Canadian consumer debt has been very focussed and is more about an opportunity for those that have maintained a good income.

While mortgage and auto loans increased, other non-mortgage debt products, such as credit cards and unsecured lines of credit, showed net decreases in outstanding balances. The reason for this is that with Canadians working from home and otherwise staying home while receiving government subsidies, they are spending less. On average, on a net basis, that means Canadians used some of their money to pay down non-mortgage Canadian consumer debt.

The debt-to-income ratio and Canadian consumer debt

On June 12, 2020, Statistics Canada reported that the debt-to-income ratio hit an all-time high of 178% in late 2017. The Statistics Canada report in June 2020 said it was at 177%.

The debt-to-income ratio is the degree of just how much financial obligations a household has, compared to its disposable income. That is, the money you have readily available to spend or invest, on an after-tax basis.

A ratio of 177% means that, throughout all Canadian families, we jointly owe $1.77 for every single dollar of disposable income we have. So that means on average, household debt as compared to household disposable income is very close to the all-time high.

What are the consequences of the debt-to-income ratio and Canadian consumer debt?

The general agreement is that too much Canadian consumer debt makes households financially susceptible. If you’re a financial policymaker, such as the Bank of Canada, you worry that too much debt makes the Canadian economic climate much less resistant to future economic shocks. One of the things worrying the Bank of Canada was expressed recently by Deputy governor Toni Gravelle “that fear hasn’t played out during the pandemic, despite it being the worst downturn since the Great Depression.”

At the personal level, we are likely concerned not with macroeconomic principles, but rather, can we afford to make our monthly payments and delinquency rates. Canadians generally, and unfortunately, do not consider what would happen to their ability to pay if something unexpected occurs such as increases in the rate of interest, or the loss of your job.

Using debt is also correlated with optimism regarding our financial futures. Individuals that expect their financial situation to improve are far more likely to be willing to take on more financial debt. Statistics Canada research reveals that individuals’ assumptions concerning their financial circumstances are strongly correlated with both their amount of total Canadian household debt and their debt-to-income ratio.

Even the most optimistic households, however, are still subject to borrowing rules set by financial institutions. The increase in mortgages, be it a refinancing or a new mortgage, is obviously by people who can meet the borrowing rules. Lenders look at the household’s debt service ratio. This calculation suggests to lenders what the household’s capability to make its debt payments according to the repayment schedule is.

So what this tells me is that the housing market, especially the hot expensive cities of Vancouver and Toronto, is being fuelled by those who have good jobs and who can work from home. Probably white-collar jobs and professionals who see the combination of super-low interest rates, their household debt and debt-to-income ratio as an opportunity. They are not as worried about their debt levels or average debt. They are optimistic about taking on more consumer credit.

canadian consumer debt
canadian consumer debt

Are there dangers with the current level of Canadian consumer debt?

Those who have lost their jobs or business are not buying more expensive homes. Those whose hours are constrained by the pandemic also are not the ones buying. So this highlights a divide in the Canadian economy. Those who can afford to view this pandemic as a financial opportunity vs those who are barely hanging on not knowing how they are going to make next month’s rent payment.

The statistics show that 12% of brand-new loans were by Canadians already taking advantage of payment deferral programs. So presumably, those who took advantage of mortgage deferrals in particular also took advantage of credit use for the opportunity I would guess to refinance other household debt.

They rolled higher rate non-mortgage Canadian consumer debt into much lower rate mortgage debt. Another financial opportunity for those with enough income to meet the lender’s borrowing requirements. This produced growth in mortgage debt but a decline in mortgage delinquency rates.

But there is also the other end of the economic scale. Recently, Prosper Canada, a national charity dedicated to expanding economic possibilities for Canadians living in poverty with program and policy innovation, released its report titled “Roadblock to Recovery: Consumer debt of low- and moderate-income Canadians in the time of COVID-19″.

This report shows the effect of household debt on low-income families. The reports main findings are:

  • Many, but not all, low and moderate household income families carry debt.
  • Low household income families spend an average of 31% of their incomes repaying debt, while moderate household income families spend an average of 18%.
  • Fewer low household income families have debt loads backed by assets than their higher-income counterparts. Only 20% of indebted low-income households and 39% of indebted moderate-income households carry mortgage debt.
  • Fifty-nine percent of indebted low household income families and 56 percent of indebted moderate-income households carry some amount of credit card, unsecured lines of credit and/or installment loan debt, making this the most common type of debt among these households.
  • Twenty-four percent of indebted low household income families carry student loan debt compared to just 15% to 17% of households at other income levels.
  • For many households, especially those outside urban centres, automobiles are a necessity of life. However, auto loans pose several risks to low- and moderate household income borrowers with low credit scores.
  • Financial counselling support for insolvent borrowers is of uneven quality and there are few sources of free, quality financial debt counselling available to Canadians struggling to avoid insolvency. These groups also have no financial plan.

Canadian consumer debt patterns show there are two economic Canadas

The COVID-19 pandemic has actually highlighted in plain terms exactly how unprepared most Canadians are to weather a major economic shock. The above-noted studies show in stark terms that there are at least two economic Canadas.

The first are those who can afford to refinance their mortgage or buy a home to get a new mortgage. The other Canada has lost jobs, businesses and are low to middle income. The low to middle-income groups are in financial trouble and their Canada consumer debt is generally not backed by assets.

However, those who might experience financial problems are not limited to one of the groups. Those who do the refinancings and new mortgages are buoyed by their own optimism for the future. They may tend to just keep taking on more debt. They are not prepared for an unforeseen shock. They will not realize that they are in trouble until they hit the wall.

How do you know if your Canadian consumer debt is a problem?

There are several warning signs that your Canadian consumer debt is a problem. Major indicators are:

  • Your bank account is overdrawn every month.
  • You are using credit cards for daily expenses.
  • You have already taken on payday loans and have started to receive collection telephone calls.
  • Your debt levels are rising are about to hit the maximum of all of your credit lines.
  • You are behind on your loan payments.

If you see your debt levels will soon be out of control, the time to act is now. Contact me and I will review your situation and provide you with a financial counselling session at no cost to you.

Canadian consumer debt summary

I hope you have enjoyed this Canadian consumer debt Brandon’s Blog.

Do you or your company have too much debt? Are you or your company in need of financial restructuring? The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. However, more importantly, we understand the needs of the entrepreneur or the person who has too much personal debt.

You are worried because you are facing significant financial challenges. It is not your fault that you are in this situation. You have been only shown the old ways that do not work anymore. The Ira Smith Team uses new modern ways to get you out of your debt troubles while avoiding bankruptcy. We can get you debt relief freedom.

The stress placed upon you is huge. We understand your pain points. We look at your entire situation and devise a strategy that is as unique as you and your problems; financial and emotional. The way we take the load off of your shoulders and devise a debt settlement plan, we know that we can help you.

We know that people facing financial problems need a realistic lifeline. There is no “one solution fits all” approach with the Ira Smith Team.

That is why we can develop a restructuring process as unique as the financial problems and pain you are facing. If any of this sounds familiar to you and you are serious about finding a solution, contact the Ira Smith Trustee & Receiver Inc. team today.

Call us now for a free consultation.

We will get you or your company back on the road to healthy stress-free operations and recover from the pain points in your life, Starting Over, Starting Now.

The Ira Smith Trustee Team is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting. We hope that you and your family are safe and healthy.

canadian consumer debt
canadian consumer debt
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CMHC INSURANCE: ENGAGING NEW RULES FOR COVID-19 MORTGAGE APPROVAL

chmc insurance
chmc insurance

The Ira Smith Trustee Team is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

The Ira Smith Trustee Team wishes all of our Canadian readers a healthy, happy and safe Canada Day.

cmhc insurance
cmhc insurance

If you would prefer to listen to the audio version of this Brandon’s Blog, please scroll to the bottom and click on the podcast.

CMHC Insurance introduction

CMHC insurance is helping to stabilize Canada’s economic system as well as sustain the financial health of families during the COVID-19 pandemic. Effective July 1, 2020, CMHC insurance rules are changing. It will affect the cost of real estate in Canada. It is also designed to minimize risks to CMHC and therefore the Canadian economy.

I describe what those changes are and why they are being made in this Brandon’s Blog.

What is CMHC Insurance?

In simple terms, CMHC insurance is insurance provided to mortgage lenders to protect them in case of mortgage defaults. If the lender needs to sell the home and suffers a loss, CMHC insurance pays off the lender to cover that loss.

CMHC insurance allows lenders to continue making mortgage loans at reasonable interest rates to those people who would not otherwise qualify. At the present time, the down payment required to get CMHC insurance is only 5 percent of the purchase price. One of the changes that I describe below, is that it will rise to 10 percent.

How Much Is CMHC Insurance

Like any other insurance product, there are CMHC insurance premiums. The mortgage lender pays the insurance costs. It is determined by taking into account the size of your mortgage and the amount of your down payment. The lending institution passes this cost on to the borrower. It can be paid as a lump sum or included in the mortgage which obviously affects the mortgage payments.

Here is a link to the CMHC insurance page where you can use the CMHC insurance premium calculator. This will allow you to calculate your potential mortgage insurance premium rates.

CMHC And The COVID-19 Pandemic Response

Early on, in coordinated action with the Bank of Canada and with Finance, CMHC relaunched a program to make certain that financial institutions have access to term financing. The reason is so mortgage lenders can have the necessary liquidity to continue to offer mortgage financing. This ensures that the mortgage market and therefore the real estate markets remain functional.

Under the program, the Canadian government can buy up to $150 billion of insured home mortgages. They are also prepared to increase the issuance of traditional securitization programs, as needed.

On top of that, CMHC acted quickly to assist Canadians who are having difficulty paying their home mortgage as a result of the coronavirus pandemic. Acting with Genworth Financial Canada and Canada Guaranty, CMHC is using short-term deferral of mortgage payments for up to 6 months to help Canadian homeowners. CMHC believes that about 12 percent of homeowners have elected to postpone repayments until now. This number may in fact grow depending on what happens with job recalls and government support programs this Fall.

The same mortgage deferral is offered to multi-unit real estate owners in order to accommodate the loss of rental income. As well CMHC has taken actions to guarantee that charitable, as well as co-operative housing service providers, remain able to get government rent subsidies. CMHC is urging recipients of federal assistance to refrain from evictions during the COVID-19 pandemic.

Almost everything CMHC insurance has done in response to the COVID-19 situation talks about allowing Canadians to borrow. The federal government is taking on more financial debt to fund COVID-19 support programs. Mortgage deferments are adding to already historically high household debt.

CMHC Insurance guidelines

Canadians are amongst the global leaders in household financial debt. Pre-COVID-19, the proportion of gross financial debt to GDP for Canada went to 99 percent. This is due to not only more borrowing, but also declining GDP. CMHC estimates that it could go to over 115 percent in Q2 2020 and get to 130 percent in Q3, before decreasing. At those levels, GDP growth is choked off.

CMHC is now forecasting a decline in average real estate prices between 9 to 18 percent in the coming 12 months. The resulting mix of greater mortgage debt, declining home prices as well as increased unemployment is the reason CMHC takes issue for Canada’s longer-term financial security.

CMHC is trying to figure out how to handle expanding mortgage debt “deferral high cliff” that looms in the autumn when some jobless people will need to start paying their home mortgages once more. As long as one-fifth of all home mortgages could be delinquent if Canada’s economic situation has not adequately recuperated.

CMHC insurance feels a responsibility to prevent enhanced losses that arise from dropping real estate prices. CMHC believes that if it does not act, a first-time buyer looking to buy a $600,000 house with a 5 percent down payment stands to lose over $90,000 of value on their $30,000 financial investment if rates fall by 10 percent. In contrast, a 10 percent down payment provides more of a cushion.

CMHC insurance will be expected to cover losses if properties need to be sold. For these reasons, CMHC is evaluating whether it needs to alter its underwriting because of its assessment of future market conditions.

CMHC Insurance rules are changing

CMHC says that its support for homeownership cannot be endless. Canadians believe that owning a home is crucial for retirement savings. Over the past 20 years, the typical Canadian homeowner has had a tax-free gain of $340,000 from their house. CMHC believes that house prices and the resulting mortgage debt levels are significantly unreachable for first-time buyers.

Effective July 1, 2020, CMHC insurance is changing its insurance underwriting for all new applications. The changes are:

  • limiting the Gross/Total Debt Servicing (GDS/TDS) proportions. The test will allow for 35% of gross income to be spent on housing. It will also only allow total borrowing costs to be 42% of gross income.
  • requiring a credit rating a minimum of 680 for at least one borrower; and
  • non-traditional sources for a down payment that is from borrowed funds will no longer be counted as equity for insurance purposes.

CMHC has also taken another action to further handle the risk to the CMHC insurance business, as well as inevitably Canadian taxpayers. During this uncertain time, CMHC has put on hold mortgage insurance coverage for refinancing, unless the funds are used for repair work or reinvestment in the real estate. While making this decision on multi-unit properties requiring CMCH insurance, they have not yet figured out what is going to happen when these mortgages cannot be renewed without CMHC insurance.

CMHC insurance says that COVID-19 has subjected enduring vulnerabilities in Canadian financial markets. It believes that its actions will safeguard home purchasers, minimize government and taxpayer risk as well as sustain the stability of real estate markets.

These new requirements will certainly curtail demand amongst the general Canadian population. The new CMHC insurance rules will also lower the number of people qualifying. One thing CMHC barely mentions, other than for language about saving Canadian taxpayers from losses, is that it will slow down the growth in the portfolio of CMHC insurance provided mortgages. This is what it really is all about.

CMHC Insurance rules summary

I hope you have found the CMHC insurance Brandon’s Blog interesting and helpful. The Ira Smith Team family hopes that you and your family members are remaining secure, healthy and well-balanced. Our hearts go out to every person that has been affected either via misfortune or inconvenience.

We all must help each other to stop the spread of the coronavirus. Social distancing and self-quarantining are sacrifices that are not optional. Families are literally separated from each other. We look forward to the time when life can return to something near to typical and we can all be together once again.

Ira Smith Trustee & Receiver Inc. has constantly used clean, safe and secure ways in our professional firm and we continue to do so.

Income, revenue and cash flow shortages are critical issues facing entrepreneurs, their companies and individual Canadians. This is especially true these days.

If anyone needs our assistance for debt relief Canada COVID-19, or you just need some answers for questions that are bothering you, feel confident that Ira or Brandon can still assist you. Telephone consultations and/or virtual conferences are readily available for anyone feeling the need to discuss their personal or company situation.

The Ira Smith Trustee Team is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

The Ira Smith Trustee Team wishes all of our Canadian readers a healthy, happy and safe Canada Day.

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INSOLVENCIES IN CANADA: THE CALM BEFORE THE SCARY STORM?

The Ira Smith Team is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

Insolvencies in Canada introduction

Insolvencies in Canada are at a record low. Is it the calm before the scary storm?

Consumer insolvencies in Canada have been driven to unusually reduced degrees in recent years because of sustained low-interest rates and strong property values.

In this Brandon’s Blog, I discuss what could very well happen in the 4th quarter of 2020 and into 2021.

Insolvencies in Canada – recent history

The lower number of insolvency filings is not a new phenomenon. Insolvencies in Canada have been at historically low levels for many years. It was not until last year that personal insolvency filings increased year over year.

In 2019, consumer insolvencies for the 12-month period finishing December 31, 2019, increased by 9.5% compared to the 12-months ending December 31, 2018. Personal bankruptcy decreased by 1.2%, while consumer proposals were 17.9% higher.

After many successive years of steady decline, business bankruptcies in Canada had reached a plateau level in 2019. Typically speaking, business bankruptcies in Canada have been stable.

During the 1st quarter of 2020, the Office of the Superintendent of Bankruptcy Canada (OSB) reports that between the 4th quarter of 2019 and the end of the 1st quarter of 2020, for insolvencies in Canada:

  • Total insolvency filings decreased by 5.4%.
  • Consumer filings were down by 5.5%.
  • Business insolvency filings were 2.6% lower.
  • In all cases, bankruptcy filings were drastically lower and restructuring proposals were essentially flat.
  • For personal filings, Alberta was basically flat while the other provinces and territory showed decreases.
  • In business filings, Ontario showed a slight increase (8.3%) and British Columbia showed a huge increase (43.5%). Again, it was restructuring proposals, not bankruptcy, making up the majority of business filings. All other provinces and territories showed a decrease.

Then the effects of the economic shutdown of the country started taking hold in April 2020.

April 2020 insolvencies in Canada and the United States

The total variety of insolvencies in Canada (both bankruptcy and proposal filings) decreased by 38.7% in April 2020 contrasted to March 2020. Personal bankruptcy decreased by 41.5% and proposals decreased by 37.2%.

The number of insolvencies filed in April 2020 was 43.5% less than the total in April 2019. Consumer bankruptcies decreased by 43.1%, while consumer proposals decreased by 54.8%.

The story in the United States is very similar. American Banker reports that presently in the US, personal bankruptcy filings are actually reduced year over year. It reports that according to information from the federal courts, there were 186,000 consumer bankruptcy cases in the first quarter of 2019. By comparison, there were 175,000 for the initial quarter of 2020.

A lot more noticeably, the rate of consumer insolvency cases for April of 2020 was 46% lower than in April of 2019.

There are a variety of reasons in both countries. From my discussions with a couple of US bankruptcy lawyers, I am friendly with, it seems the reasons in both countries are generally the same.

In no particular order, the main reasons are:

  • Mortgage payment deferral programs masking what might otherwise be increased delinquencies.
  • Lower overall credit card spending while people are at home in self-quarantine.
  • Various government programs supplying much-needed cash to unemployed people and businesses.
  • Government programs deferring the timing for filing income tax returns and the payment of income tax.
  • Moral suasion so far stopping banks, credit card companies and collection agencies from aggressively making collection attempts during this time.
  • The closure of the courts making it impossible to sue anyone.

    insolvencies in canada
    insolvencies in canada

The economy is starting to reopen

In conjunction with the federal government, the provinces and territories are starting to reopen cities and businesses. No doubt there will be a lot of growing pains as the economy reopens. What should we expect? What will it mean for insolvencies in Canada?

In his first speech as Governor of the Bank of Canada, on June 22, 2020, Tiff Macklem stated that he expects there will be an initial boost to the Canadian economy as it reopens and activity resumes. He does not expect that good news to last very long. Rather, he expects there will be the 2nd stage of economic recovery that will certainly be long and slow, due to the remaining unpredictability around the coronavirus.

The federal government will need to wean Canadians off of the various support programs. When that happens, all the financial pain currently hiding under the radar will rise to the forefront. COVID-19 support programs, payment deferrals and other “time outs” will end and the courts will reopen. Creditors will get back to business as usual in chasing delinquent accounts. The federal, provincial and territorial governments will feel they have done enough to the tune of trillions of dollars. Their attitude will be, in so many words, it is now time for you to stand on your own two feet again.

In fact, some government attitudes are already changing.

Will temporary layoffs be a harbinger for business insolvencies in Canada?

Throughout the coronavirus pandemic, BC seemed to handle their lockdown and other COVID-19 things a bit differently than the other provinces and territories. As they now consider reopening, BC businesses are worried.

British Columbia businesses are discouraged by Labour Minister Harry Bains’s failure to recognize the seriousness of problems facing the mainly small and medium-sized businesses. Their issue is the possibility for thousands of companies to have to make an insolvency filing. Their main worry is that they will be compelled to make severance payments as a result of the unexpected scenarios brought by the COVID-19 pandemic.

The Minister has it within his power to supply a Ministerial Order to expand the temporary layoff time frame under the Employment Standards Act to provide companies with the breathing room” required to survive, recoup, and facilitate return-to-work for laid-off staff.

All provinces and territories face extraordinary difficulties as a result of the economic results from COVID-19. Few business owners can plan for or have the cash-on-hand to terminate all or a considerable part of their labour force at the same time throughout the very best of times.

BC companies will be faced with fears as the clock ticks to target dates beginning in very early July requiring several companies to either recall or permanently terminate laid-off staff members. They don’t have enough business or money to rehire everyone. They also don’t have the cash to make the severance payments. Without legislative support, this problem will face all Canadian businesses.

In the nick of time, the federal government has come to the rescue. On June 23, 2020, Prime Minister Justin Trudeau announced that the federal government has expanded the period for temporary layoffs by as much as 6 months. Employers now have more time to recall staff members who were laid off due to COVID-19.

Now, for employees who were laid off before March 31, the government has proposed that their employers have the earlier of 6 months or up until December 30 to recall their staff. For employees laid off between March 31 and September 30, their company will have up until December 30, unless a later recall day was given on their layoff notification.

I caution that this is a proposal floated by our PM right now and not actual legislation. Labour legislation is largely left up to the provinces and territories. It is interesting to note that the Feds seem to be stepping into this. As we all know, ultimately, businesses will either be able to survive or will have to restructure under our laws for insolvencies in Canada.

Will extending employee recalls be a harbinger for personal insolvencies in Canada?

So now that employees can expect to remain unemployed for longer, what is that going to mean? For several years now polls have shown that Canadians are on the brink of insolvency. As I already mentioned, rock-bottom interest rates and rising real estate values, leading to lots of home equity lines of credit room to borrow on. This has kept Canadians in debt and out of becoming one of the statistics for insolvencies in Canada.

So the question is, once the Canada Employment Response Benefit (CERB) runs out, what will the unemployed do? Seems to me there are a few options, none of them good:

  1. Cut back on spending as much as possible. In places like the Greater Toronto Area (GTA), you have to be a magician to be able to live on $2,000 per month (after putting away the amount you will have to pay eventually in CERB income tax).
  2. Burn through the rest of your savings until you have no cash.
  3. As a result of 1 or 2, go deeper into debt on your lines of credit and credit cards until you have no more borrowing room.

Once all of this has happened, the only thing left to do will be to consult with a licensed insolvency trustee (formerly called a bankruptcy trustee) to discuss your realistic options for eliminating debt.

Insolvencies in Canada summary

I hope you have found the insolvencies in Canada Brandon’s Blog interesting and helpful. The Ira Smith Team family hopes that you and your family members are remaining secure, healthy and well-balanced. Our hearts go out to every person that has been affected either via misfortune or inconvenience.

We all must help each other to stop the spread of the coronavirus. Social distancing and self-quarantining are sacrifices that are not optional. Families are literally separated from each other. We look forward to the time when life can return to something near to typical and we can all be together once again.

Ira Smith Trustee & Receiver Inc. has constantly used clean, safe and secure ways in our professional firm and we continue to do so.

Income, revenue and cash flow shortages are critical issues facing entrepreneurs, their companies and individual Canadians. This is especially true these days.

If anyone needs our assistance for debt relief Canada COVID-19, or you just need some answers for questions that are bothering you, feel confident that Ira or Brandon can still assist you. Telephone consultations and/or virtual conferences are readily available for anyone feeling the need to discuss their personal or company situation.

The Ira Smith Team is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

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BANK OF CANADA NEW STUDY ON CANADIAN HOUSEHOLD DEBT

Bank of Canada: Introduction

There has been talking for many years now about the Canadian housing market and more particularly about the Toronto and Vancouver markets. The Bank of Canada (BOC) recently published a staff analytical note titled: Reassessing the Growth of HELOCs in Canada Using New Regulatory Data. This Brandon’s Blog discusses this new study which shows Canadians have been tapping into the equity in their homes using them as automated teller machines (ATM).

Recent Bank of Canada Staff Analytical Note

The BOC staff warned that home equity may be concealing financial distress. They go on to warn that Canadian real estate owners may be hiding financial vulnerability using complex debt products.

BOC staff published this analytical note examining new home equity data. The new data gives more insight into home equity borrowing. The home equity line of credit (HELOC) borrowing has now been formally analyzed. HELOCs are usually advertised as a component of combined plans, provided with a mortgage and often, other credit items, such as personal lending and credit cards. Such a mixed plan can generally be broken down into a HELOC element, which is non-amortizing, as well as a home mortgage component, which is amortizing. Additionally, a part of the home mortgage component in such a combined strategy might be readvanceable, even though it is amortized.

The borrowing limit in combined plans is commonly tied to regional house prices. As market value increases, households can borrow much more. In the last few years, integrated mortgage-HELOC plans have actually expanded in importance. The BOC’s new analysis shows that it currently accounts for close to 40 percent of household residential debt owing to the chartered banks. In this way, Canadians are using their homes like debit cards at an ATM, but without having to go to the Bank to take out the money.

New reporting requirement for HELOCs

A new reporting standard has now been developed. A brand-new reporting form has been established to systematize the reporting on HELOCs. This new reporting is the end result of a years-long collective effort between the BOC, the Office of the Superintendent of Financial Institutions (OSFI) and the Canadian financial institutions. It is designed to improve the surveillance of financial stability concerns. The new reporting classifies household secured lending into:

  • stand-alone HELOCs
  • conventional home mortgages
  • integrated mortgage-HELOC plans

Also, it supplies a reporting on the consolidated plans into individual HELOC (non-amortizing) and mortgage (amortizing) parts. This will allow a better understanding of home equity debt.

I am sure that readers of my Brandon’s Blog are already familiar with the traditional segments of personal residential debt; first mortgage, second mortgage and secured line of credit. As the BOC statistics show, the less familiar combined mortgage HELOC product has become increasingly popular. No doubt some of that new popularity has been due to the heavy marketing of this new hybrid product by the chartered banks.

The readvanceable mortgage

I think in the future it will be better known by a name reflecting what it really is, such as readvanceable mortgages. They combine the fixed-rate mortgage with a variable rate HELOC. The amount of HELOC credit extended automatically increases with payments against the mortgage portion. So, borrowers can immediately replace the traditional mortgage debt with a new HELOC debt in exchange for the monthly payment against the mortgage principal.

Canadian homeowners can use the funds advanced by the HELOC portion for basically any use they want, including, home renovations, paying down higher interest rate debt or for investment. Under the readvanceable mortgage, borrowers, of course, will pay more interest on their total residential debt. The reason being that as you pay down the mortgage principal, the HELOC element availability increases.

It will be very tempting for Canadians to use this extra credit to pay down higher interest household debt they may be falling behind on, or at least, now be able to make the monthly payments on that higher interest rate debt, such as credit cards. So, the chartered banks, of course, will love this readvanceable mortgage credit product. More interest will be paid on the debt secured against the home while the higher interest rate payments continue to be made. A win-win for the bank, but not so much for Canadian household debt.

Canadian household debt can now replace higher rate debt with perpetual debt. There will be no incentive for Canadian households to reduce overall debt as long as interest rates stay low. It is great for the banks but not exactly a reason for households to celebrate.

Canadian household debt has a new love of these more complex loans

Let us go over Canada’s new love of these more complex loans. The BOC analysis confirms an increase in consolidated mortgage-HELOC plans, at 6.7 percent year over year. These plans appear to be taking market share from the conventional stand-alone mortgages and also traditional HELOCs; stand-alone home mortgages grew by a modest 2.0 percent,

While stand-alone HELOCs contracted by 7.6 percent during this time period. Furthermore, the new information on elements of combined plans shows that the growth of these plans is driven by the amortizing home mortgage element, which grew by 7.7 percent while the non-amortizing portion grew by 3.3 percent. These are all the same year over year statistics.

The balance of HELOCs (both stand-alone HELOCs and the non-amortizing part of the integrated mortgage-HELOC plans) is $173 billion as at the fourth quarter of 2018, $70 billion less than the previous amount of $243 billion. The overall balance of HELOCs reduced by 1 percent year over year. The overall balance of home mortgages (both stand-alone home loans and the amortizing element of mixed plans) increased by 3.8 percent.

So what does this Bank of Canada study really mean?

Against the background of the fear of climbing interest rates, tighter home mortgage qualification requirements and the stagnation in household spending throughout 2018, the information from existing regulatory filings reveals that HELOC balances expanded much faster than home mortgages. This suggests that families were had not stopped to borrow against the value of their residences even as borrowing tightened.

The convenience of accessibility to rotating credit supplied by standalone HELOCs and the new combined plans might help with the buildup of Canadian household debt. It will come at the cost of building equity in one’s home. Canadians collecting huge amounts of debt secured by their real estate may find themselves with marginal (or even negative) real estate equity if the value of their home falls.

These complex loan products may likewise be hiding emerging financial distress if Canadians are taking equity out of their homes to manage various other financial debt obligations or to fund their everyday expenses because they lack other cash resources. These are all factors to consider when tracking and analyzing both stand-alone HELOCs and the strategies of the combined plan.

Do you have too much debt?

Are you or your business in financial distress? Do you not have adequate funds to pay your debts as they come due?

If so, call the Ira Smith Team today. We have years and generations of experience aiding individuals and companies searching for financial restructuring or a debt settlement arrangement. As a licensed insolvency trustee (previously called a bankruptcy trustee), we are the only experts certified, acknowledged as well as overseen by the federal government to provide bankruptcy and insolvency guidance as well as execute methods to assist you to remain free from bankruptcy and your debts.

Call the Ira Smith Team today so you can reduce the tension, anxiety, and discomfort from your life that your financial problems have triggered. With the unique roadmap, we develop simply for you, we will promptly return you right into a healthy and balanced problem-free life.

You can have a no-cost evaluation so we can assist you to repair your credit and your debt problems. Call the Ira Smith Team today. This will certainly enable you to return to a brand-new healthy and balanced life, Starting Over Starting Now.bank of canada

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FINANCIAL SECURITY REPORT: HALF OF CANADIANS CAN’T MAKE ENDS MEET

Financial security Introduction

Brand-New Ipsos study findings were released on April 22, 2019, simply 2 days prior to the next Bank of Canada interest rate announcement. This brand-new survey shows exactly how Canadians really feel about their financial security or its absence. Ipsos claims almost fifty percent of Canadians cannot make ends meet on a monthly basis.

Fifty percent of Canada is worried about the effect of increasing rates of interest on their financial resources. They feel even worse about their debt load from just a couple of months back.

Canadians maxed out on debt

Canadians are maxed out on debt with 48% of Canadians on the edge of bankruptcy. They claim that they go by the end of every month to within $200 or less far from financial insolvency.

In regards to Canadians and their beliefs, people are worried about their debt levels and financial security. Forty-eight percent of those questioned claim they cannot make ends meet. They understand that they are most likely to take on even more debt at the end of each month to pay all of their expenditures. So practically fifty percent of all Canadians need to handle even more debt to satisfy their current expenses, which in part includes existing debt repayments!

It’s no longer about purchases – that ship has already sailed!

It ends up from the survey that this isn’t about the fact that we’re in a low-interest-rate atmosphere any longer. It also isn’t about people making high-end or lifestyle new purchases that are considered unnecessary.

They have actually already done all that. Especially people in Toronto and Vancouver that have stretched to buy costly houses, home furnishings and appliances. They used the low-interest rate mortgages and home equity credit lines to do it.

New debt on top of old debt

So now they understand that they better not take on even more debt. However, guess what? It is currently far too late for almost half of Canada. People are claiming they currently just cannot make ends meet. Therefore, they have no choice but to take on even more debt.

Brand-new debt to make old debt repayments! Undoubtedly, these individuals stay in a hazardous downward spiral. People are questioning whether can continue in this way and are thinking about personal bankruptcy.

It is true that the survey has a small sample size. This Ipsos survey reveals growing tension and grief. Nevertheless, personal bankruptcies remain historically low in this nation. Undoubtedly, there are local distinctions. Albertans are experiencing far more personal insolvencies as a result of the slowness in the energy market.

I think there are 2 really basic reasons for almost half of Canadians dealing with financial insolvency yet personally bankruptcy levels are down. First, financially troubled Canadians are utilizing the consumer proposal arrangements section of the Bankruptcy and Insolvency Act (Canada) (BIA). This is a good thing because they are avoiding bankruptcy.

Second, people still have adequate equity in their houses. So, they are still able to borrow for brand-new debt to satisfy old debt payments other living costs. This is not a good thing. The thing Canadians do not seem to be doing yet is tightening their belts and lowering month-to-month expenses.

Bank of Canada

The Bank of Canada (BOC) increased its overnight interest rate 5 times since mid-2017. At the end of 2018, everyone, including the BOC assumed that fad was most likely to continue. Nevertheless, in its first 2019 interest rate announcement, the Bank altered its signals and currently appears completely satisfied to hold steady on the interest rate for what might be for the rest of 2019.

On April 24, 2019, the BOC announced that it was maintaining the overnight bank rate target at 1 ¾ percent. The BOC did so based on its observations of the Canadian and global economies.

Their statement included, that in Canada:

  • economic development throughout the very first half of 2019 is anticipated to be slower than was forecast for in January 2019.
  • The oil price decrease and recurring transport restrictions have actually suppressed financial investment and exports in the oil industry.
  • Financial investment and exports outside the oil market, at the same time, have been adversely impacted by unpredictability and the global downturn.
  • Beyond the oil and gas market, the financial investment will be sustained by high prices of other commodities and exports will broaden with reinforcing international need.

As far as the global market, the BOC stated:

  • The global economy reduced by greater than the Bank projected in its January Monetary Policy Report.
  • Continuous unpredictability connected to trade disputes has weakened business views.
  • Stagnation throughout many countries has resulted.
  • In reaction, several reserve banks have reported a slower speed of monetary plan normalization.

As a result, the BOC kept its target for the overnight rate at 1 3/4 percent.

Financial questions for Canadians

Virtually fifty percent of Canadians currently are sorry for the debt they have. I believe what this does is brings recognition for you to have a serious discussion in your home. The discussion requires to be about:

  • Exactly how near the margin are you living?
  • What household costs could you drop?
  • Could you survive if one of you were to lose your job?
  • If not, what can you do now to prepare for that if it were to one day happen?
  • Have you filed all your income tax returns and paid all your tax obligations?
  • Did you get a tax refund and what are you most likely to do with that cash to help with your situation?
  • Are your Christmas gifts expenses all paid or are you still rolling those costs on your credit card bill every month?

Despite that the job market has seen wage strength, the Canadian economic situation has not produced great financial signals. There are spots that seem to be a little murkier. Our rising cost of living is nearing 2% on an annualized basis and we’re paying much more for gas at the pump. We’re paying a lot more for produce. So there are things that are costing us even more simple to manage. So if income is increasing a bit, costs are climbing much more.

So Canadians are currently really feeling a little sweaty. They aren’t certain what is most likely to take place. Currently, there appears to be a little bit of a rest on the interest rates.

Canadians need to set up a proper household budget

I would certainly suggest that not everybody has taken a hard look at their financial situation. There’s plenty of presumptions that can take place due to the fact that you just do not understand your numbers. I see that occurring all the time.

So perhaps people really feel a little even worse off than they actually are due to the fact that they do not understand their numbers. They understand they stay in difficulty, however, do not have the capability to assemble a roadmap for saving themselves.

A truth check is needed instantly. Most likely fifty percent of those that claim they cannot make ends meet can save themselves without turning to an insolvency process. If they just recognized their realities about their very own money situation. The other half of the half, or 25% of Canadians, probably do meet the financial insolvency definition and need professional help.

The trick might just be that Canadians need to promptly get a good handle on what their month-to-month income and expenses truly are. Share that info with the entire household and make and follow a household budget that has everybody’s agreement. Your financial security in retirement may depend upon it.

Readers of my Brandon’s Blog will know that I always state the advantages of correct budgeting. To check out this budgeting topic you can look as far back as my collection of blogs that began late in 2014 with A BALANCED BUDGET IS TO FINANCIAL HEALTH WHAT A BALANCED DIET IS TO PHYSICAL HEALTH. You can additionally check my more recent 2019 blogs, USEFUL TIPS FOR SAVING MONEY CANADA: THIS PRO ATHLETE TEACHES US and also MY BILLS ARE HIGH: 6 THINGS TO IMMEDIATELY DO.

What about you or your company?

Do you have way too much debt? Are you having difficulty making your month-to-month expenses? Is your company having a hard time handling its economic difficulties that you cannot figure how to get out of?

If so, call the Ira Smith Team today. We have decades and generations of experience assisting people and companies looking for financial restructuring or a debt settlement plan. As a licensed insolvency trustee, we are the only experts recognized, accredited and supervised by the federal government to provide insolvency advice and carry out alternatives to aid you to stay clear of bankruptcy.

Call the Ira Smith Team today so you can end your tension, stress and anxiety that your financial problems have triggered. With the special roadmap, we develop unique for you, we will right away return you right into a healthy and well-balanced hassle-free life.

You can have a no-cost evaluation so we can help you repair your debt difficulties. Call the Ira Smith Team today. This will most certainly permit you to return to a brand new healthy life, Starting Over Starting Now.financial security

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DO BANK OF CANADA INTEREST RATE HIKE DATES AFFECT YOUR MONETARY POLICY?

Bank of Canada interest rate hike dates: Introduction

I have recently written blogs on debt help and signs you need bankruptcy help. I have ended recent blogs with a question: “Are you worried that the future interest rate hikes will make presently affordable commitments entirely unmanageable?”. So, I thought I would write this blog on Canada interest rate hike dates and what it all might mean in 2019.

Bank of Canada interest rate hike dates

The Bank of Canada (BoC) scheduled dates for the interest rate announcements for 2019 are as follows:

  • January 9
  • March 6
  • April 24
  • May 29
  • July 10
  • September 4
  • October 30
  • December 4

Bank of Canada interest rate hike dates: 2018

In 2018, it was expected that the BoC would raise interest rates slowly towards the end of 2018 and into 2019. The BoC has actually hiked its trendsetting rate of interest, which affects borrowing expenses across the economic climate, five times since the mid-2017, up from a reduced amount of 0.5 percent. The BoC interest rate stands at 1.75%. It was raised to that level in October 2018 and has not risen since.

Bank of Canada interest rate hike dates: 2019 issues

So the BoC on March 6, 2019, decided to keep its target for the overnight rate of 1.75%. Let me explain the main reasons why.

First, there is a slowdown in the worldwide economic climate. It has actually been extra obvious and more widespread than what they were preparing for. It is much more obvious and a lot more widespread than what the BoC was projecting as recently as January 2019! The higher adverse impact on the global economic situation affected their choice.

Second, global trade stress and unpredictability are weighing heavily on self-confidence and economic activity. There is tension worldwide on the trade front between several different scenarios, including Brexit and nations. This results in weakened consumer self-confidence and the confidence of the total worldwide economy. If the China/USA trade war is settled, the world economic scene might improve a bit.

Domestically in Canada, there are reasons they required to keep the BoC rate where it was:

  1. Exports fell short of expectations.
  2. Business investment did not reach the anticipated level.
  3. Consumer spending was weak.
  4. The housing market was soft.

Consumer spending is a big part of GDP and the cost of living in Canada. As well it has a huge influence on the Canadian economy. The Canadian real estate market is a high ticket item and there are plenty of industries that are affected by and depend upon a vibrant housing market. Each of those measures was either short of expectations or soft on its performance.

Based on both these worldwide and made in Canada influences that I have pointed out, the BoC determined they were going to keep their interest rate and not hike it. As recently as October 2018 the financial press was reporting that rates will gradually be climbing throughout 2019. Increased unpredictability is now introduced on the timing of future rate increases.

What about the rest of 2019

We might now go all of 2019 without any price rise. It depends on future occasions. I believe that there are four main variables to watch:

Core inflation continues to be near 2 percent. The Canadian consumer price index reduced to 1.4 percent in January, greatly as a result of lower oil prices. The BoC expects the cost of living index to be somewhat below the 2 percent target for the majority of 2019, reflecting the influence of short-lived variables, including the drag from reduced energy prices and a bigger output gap.

We will certainly see exactly how some of these variables may transform between now and the spring. For the July and succeeding rate statement dates, we will certainly have to see what the spring real estate market looks like. As I stated above, the real estate market is a large driver of both housing spending as well as consumer spending.

What it means for you

The reality is that the BoC overnight rate holding firm is great information if you were going to be buying a house this year. Five year fixed mortgage rates have actually declined somewhat in 2019.

If you have a variable rate home mortgage or line of credit/home equity credit line, the rate hold is likewise excellent news for you.

What about you?

Is the tension, stress, anxiety, and pain of your debt negatively influencing your health and wellness?

If so, call the Ira Smith Team today. We have years as well as generations of experience aiding individuals and companies needing financial restructuring. As a licensed insolvency trustee, we are the only professionals accredited and followed by the Federal government to provide debt restructuring options.

Call the Ira Smith Team today to make certain that we can begin aiding you. We will rapidly return you right into a healthy and balanced worry-free life. We can develop a debt settlement strategy simply for you to prevent bankruptcy, where we can also make the interest clock stop ticking away at you. By doing this, all your payments go only against the principal balance owing.

You can have a no-cost appointment for us to gather the necessary information to advise you on how to fix your debt difficulties. We can end your pain so that you will begin your clean fresh start, Starting Over Starting Now.

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