Clinton Wilkins and Todd Veinotte chat about how consumers can protect their finances with the stress test and the flexibility of a variable rate.
In this episode of Mortgage 101 with Clinton Wilkins and Todd Veinotte, as heard on CityNews 95.7 and CityNews 101.1, the guys talk about what the holidays are going to like for Canadians and their finances. The two also recap the year, like inflation, the hot news topics, and the Bank of Canada interest rates. Find out how you can better your finances during the holidays, if people are regretting taking a variable rates and why 2023 could be a hard year from Canadians.
Mortgage 101 with Clinton Wilkins & Todd Veinotte: Budgeting during the holidays
Don’t feel like watching the video? Check out the transcript below.
So much has been in the news this year
Todd Veinotte: [00:00:00:04] It’s the final segment of her fourth season of doing the show. So it’s an auspicious occasion for sure. And we just want to go out on a high note. Would you say that that’s where we’re at this point?
Clinton Wilkins: [00:00:12:11] I think it certainly is going to be a high note. You know, we’ve really had a season full of great topics. We’ve been through, obviously some tough times. We’ve reported on the news around what’s going on with the Bank of Canada.
And, you know, I think that we’ve tried to give as much advice as we can. And I think we’ve talked about income, we’ve talked about assets, and we’ve talked about really what’s going on in the marketplace here in Halifax and across the country for real estate.
So, you know, we certainly had a lot of listeners and, you know, we’ve had a lot of people tuning in. And I think the education is just really important this year. And I think we’d be remiss to say that inflation is really still at all time highs. Now, obviously, there has been some softening since the Bank of Canada has increased the key overnight rate, but it has not yet softened enough.
And obviously some people are going to be having maybe a slightly more challenging holiday season this year compared to previous. And I think next year is going to be a bit of a storm, Todd. I think we all need to tighten our proverbial financial belts, really, and I think that,
Todd Veinotte: [00:01:23:11] But are people doing that, though? Because,
Clinton Wilkins: [00:01:25:24] I don’t know.
Todd Veinotte: [00:01:26:10] We’re heading into Christmas again.
Clinton Wilkins: [00:01:27:26] Yeah.
Todd Veinotte: [00:01:28:14] And the fever pitch hits and the malls and we really want to get out and look. Do people get it?
Are people regretting variable rates?
Clinton Wilkins: [00:01:34:07] It? I’m not sure people get it, yet. You know, we’ve said people that are in a low fixed rate, those rates are not lasting forever. And chances are when that rate comes up for renewal, you are going to renew into a higher rate. Also, consumer goods are at all time highs. You know, we’ve talked about variable rates. Today, Todd, about 70% of consumers are taking a variable rate. You know, we’ve been on obviously in CityNews and Halifax and in Ottawa, and some people are feeling the pinch because of what’s going on with variable rate mortgages.
Some people are regretful that they did take a variable rate mortgage when the rates were low. They thought they were going to stay low forever. And you know, that’s not the case, but the rates will go down again, Todd. I think that’s what we need to remember.
And the people that are regretful, you can’t regret the past. Everything is a snapshot in time with the information that we have at that time. First off, we didn’t think there was going to be a pandemic. Second off, we didn’t think inflation was going to be a runaway train. So the one thing is that, yes. If you took a low fixed rate six months ago, a year ago, two years ago, three years ago, four years ago, it’s cheaper today.
But over the next five years, will it be? We are not sure. Historically, consumers do better in a variable rate. And you, as a consumer who took a variable rate, took it for a reason.
Clinton Wilkins: [00:03:00:11] It was lower at the time and it really provides a lot of flexibility. You can always convert your variable rate into a fixed rate. But if you were to break your variable rate mortgage early, it’s only three months interest. So there’s a lot of pros around variable rate.
Is it more costly today compared to maybe your friend that took a mortgage a year ago? Yes, it is. But what will happen again in another year? We need to remember variable is variable. And I think it’s really about kind of keeping an eye on that.
2023 is going to be hard on Canadians
You know, talking about financial literacy month, the holidays can be a stressful time for anyone. You know, I think that we are very much in a consumer goods environment. We’re in this instant gratification. We want to provide a great holiday to our family and our friends. But I think this year, you know, it’s a more about maybe experiences. I think Mariah Carey said in her song, you know, all she wants for Christmas is you.
And I think that’s okay. I think we really need to buckle down. We’re in a storm right now, Todd. Chrystia Freeland, when she put out her advice here earlier November, said that Canadians are having a hard time and next year is going to be hard.
It’s going to be dark times. So what can you do today going into the holidays and what can you do in January and going forward to best manage your finances and kind of shelter yourself or shield yourself from the impacts of inflation?
Is selling your home a good option?
Todd Veinotte: [00:04:31:11] And like you’ve said many times, if in fact you are at the point where it’s overwhelming and then again, we want to be positive here, but the reality is that perhaps look at selling, it might be the time for you to sell and start over. And there’s nothing wrong with that either, right?
Clinton Wilkins: [00:04:45:11] I think some consumers, you know, we’re seeing reports in Ontario that some consumers that had a mortgage from an alternative lender or MC, which is a mortgage investment corporation, are not offering renewals because either the value of the home has gone down or they need to regather their capital.
So I think dealing with renewals early, looking at your entire financial situation. There’s nothing dishonourable from selling your home and starting again. That might be the reset that you need. A lot of consumers do still have a lot of equity in their homes, so maybe you can sell that home and buy a smaller home. Maybe you can sell that home and rent, you know, in Atlantic Canada and Halifax, rental vacancies are only at about 1%.
So I think that’s also challenging. But I think looking at it and planning and I do understand the emotional connection to real estate, I get it. I don’t have it specifically. I’m in a very, you know, a business where I bought and sold homes like many times, and I don’t have that emotional connection, but a lot of people do. But don’t let that emotional connection, you know, dig yourself a hole that you can’t maybe get out of.
Look at your finances at least once a month
Todd Veinotte: [00:05:50:24] Yeah, absolutely. Yeah. So and again, just ask the questions, right? If you don’t know, it’s a good time of year. We’re going to get into this, obviously into the new year. We’ll talk about all of this. But it’s instead of waiting till after Christmas, do it now!
Like open everything up, have a look at all the statements and make wise decisions. It’s the best gift that anybody can give to each other as a family. Make, honestly, informed decisions together.
Clinton Wilkins: [00:06:17:11] You touched on it. We’ve joked about wine Wednesday. It doesn’t have to be Wednesday. Doesn’t have to be wine, but open your bills. Talk about what you owe. Talk about how much money you have in the bank. Talk about your income. Talk about your credit with your spouse. If you’re an individual person, then do that with yourself. Maybe make a spreadsheet.
Look at things once a week or once a month, and then that will help you make a budget. People are not good at budgeting. Canadians have not been great at saving either. Obviously, there are some great saving vehicles that you can take advantage of, like RRSPs and TFSAs. But by and large, we’re very heavily indebted and I think paying down the debt now will pay you dividends down the road.
And really making sure that you focus on the needs versus the wants. Because even at this level of inflation, the costs are still going up, but most people’s income is staying relatively stable. So I think really keeping an eye on that is very important.
Todd Veinotte: [00:07:14:24] Yeah, And again, heading into Christmas, have a realistic Christmas. Like have the conversation and have a family conversation about it as well, right?
Clinton Wilkins: [00:07:23:10] Talk to your kids.
Todd Veinotte: [00:07:24:05] Talk to your kids.
Budgeting during the holidays
Clinton Wilkins: [00:07:25:25] Talk to your spouse. And talk about these financial literacy things. You know, I think talk about the credit and talk about all the assets and saving all these things. And I think it will make your household a stronger place. And I think, you know, having a lean Christmas is going to be okay. Really focus on those experiences.
How many times, I’ve seen it, I’ve had it myself, you received gifts and you’re like, okay, that’s nice in the moment, but then you’re like, whatever. Yeah, you want to open something, Maybe you want to open one really great gift, you know what I mean?
Todd Veinotte: [00:08:03:26] One thing that we definitely want to do is wish everybody happy holidays. However, you celebrate throughout the whole region from us at City News and of course, from you in your business, right?
Clinton Wilkins: [00:08:15:02] 100%. You know, our listeners have been very loyal all year long and we do thank you.
If you have any questions, get in touch with us at Clinton Wilkins Mortgage Team! You can call us at (902) 482-2770 or contact us here.