Mortgage 101 – Indebtedness and Looking Beyond the Bank Balance

Dan Ahlstrand and Clinton Wilkins talk about the importance of Financial Literacy Month, understanding finances beyond just bank balances, and predictions for home purchase prices going into 2025.

Financial Literacy Month Introduction

Dan Ahlstrand
Today is a very special day here on the program, and for longtime listeners of the show, you will know that our next guest has been here many times. He comes in, usually about once a month, and we talk about all things mortgage, we like to refer to him as our mortgage guru. November is Financial Literacy Month here, and it has become a bit of a tradition that one Thursday, during Financial Literacy Month, we welcome our financial or our mortgage guru and the host of Mortgage 101, Clinton Wilkins, into the studio to do a live edition. And that’s what we’re doing today. Clinton, welcome, sir.

Clinton Wilkins
Thanks for having me. You know, it’s great to be back in the studio. I mean, we used to do this all the time. Obviously, pre-COVID, but you know, we’re in a different world. And, yeah, I love the format of what we’re doing for Mortgage 101, right now. But, it’s great to be here, and we’re going to take some calls from our listeners in the back half.

Dan Ahlstrand
We have a whole hour planned with Clinton today. We’re going to talk a little bit about mortgages, obviously, but we’re also going to talk about we’re going to kind of focus, on financial literacy and how important it is to know what’s going on out there. Because we deal with this stuff as as citizens in the community every single day and it is almost shocking to to hear how much people don’t know about, you know, debt and insurance and, mortgages and just the day-to-day stuff that we deal with every day.

Clinton Wilkins
Well, people aren’t taught this in school. It’s things that people learn along in their lives. I think people make a lot of mistakes when we’re looking at like financial topics, and there’s still a taboo, you know, we’re not talking about these subjects with our spouses. We’re not talking about it at the dinner table. But I think this Mortgage 101, shows that we have been here. I mean, we’ve been doing this for six years. We’ve broken down some of these barriers. We’re talking about some of these subjects that, you know, it’s like lifting the rug up a little bit. Let’s talk about it. Let’s look in the mirror before we look out the window. November is a great time to think about it. Sometimes it’s a great time to have a reset before going into the holidays. You know, before the show, we talked about how the holidays can be one of the most challenging times, right? For consumers. I think learning about where your finances right now and making a plan for going into the holidays is important.

Dan Ahlstrand
Your finances are more than just your bank balance, right?

Clinton Wilkins
Oh, definitely. And I think that’s what some people do. I think some people manage their finances. They log into their online banking every morning and say, okay, do I have any money to spend? And you know, they’re making sure that their bills are paid and things like that. But there are so many other aspects to finances. And you know, a household’s financial, health, than just the bank balance.

Dan Ahlstrand
Financial Literacy Month, how important is it to educate people about not just what’s on the on in their bank account, or if they make enough room in their credit card so they can go out for the weekend.

Canadian Indebtedness and Economic Concerns

Clinton Wilkins
I think it’s important. It’s just a great building spot. I think the one thing that we want to talk about through the show, is how can we keep Financial Literacy Month going throughout the year, Canadians are just so, so indebted. Dan, we’re at the highest level of indebtedness ever in Canada, and compared to other developed countries, we have the highest debt-to-income ratio in Canada. We’re at about 180% of annual income to indebtedness, which is much higher than our counterpart in the US. You know, we always, maybe frown upon what’s going on in the US. Their interest rates are much higher than ours. But when we’re looking at, you know, inflation, and we’re looking at even the Canadian dollar, and we look at indebtedness, Canada, we’re not in a great spot right now, and it concerns me as a consumer, but it also concerns me as someone who works in the financial industry, we want to make sure that consumers are going to be secure and, in a good product, and that they’re going to have the best possible financing for their situation. We want to make sure that happens. And when things change in the economy, like inflation and interest rates that can have a big impact.

Dan Ahlstrand
We talk about interest rates a lot, and a lot of the focus is on that key overnight rate, the Bank of Canada rate. But that’s not the only sort of it’s not number that we should be looking at.

Clinton Wilkins
Definitely. Canada has lowered the key overnight rate a lot more than the US has lowered it. So I think that’s important. And the one thing that I’m watching right now, and I’m not an economist, but will call me a bar stool economist, we’re here obviously giving my commentary, in my opinion, the Canadian dollar right now is very, very low, and that’s going to impact consumers more than they think, you know, I think when you think about the Canadian dollar being low, you’re like, Well, I’m not going to the US anytime soon. I’m not going to be travelling, I’m not going to be impacted. But we need to remember that things that we’re buying, a lot of these things are potentially coming from the US, and that can make a big difference as well. The other thing that I’m watching a lot is the tariffs because that’s going to have a big impact going into 2025 and inflation is the next thing. Our inflation has been edging up a little bit. We’re still at this 2% mark, so we’re still in pretty good shape. But when we’re looking at the Canadian dollar, and we’re looking at even GDP, and what’s going on in inflation, this is going to impact what’s going to happen with the Bank of Canada going into 2025.

Dan Ahlstrand
Lots of things done. Package there the dollar impact. We saw an immediate one-cent drop on that tweet from President-Elect Donald Trump earlier this week, in your world. I mean, we’re buying houses in Canada, and you know this, the dollar shouldn’t impact us, but that’s not the case because if somebody’s putting new construction or those kinds of things, it seems, works at American dollars these days and it impacts the housing market and the mortgage world.

Clinton Wilkins
They’re the biggest economy, and, for us, we’re their biggest trade partner. You know, the trade that we’re doing between the US is as much as China and Europe put together, and we think that Canada is just so small, but it is a big impact. Our economies are not tied one to one, Dan, but there are a lot of ties that are going to impact us here on Canadian soil. So, it’s something we certainly need to watch. I’m concerned, and it’s something that we’re going to continue to monitor. Obviously, throughout the year, the Bank of Canada meets eight times a year, and there is another meeting here before the end of the year. So, we’re kind of cautiously optimistic that we’re going to still see a reduction here on December 11.

Dan Ahlstrand
You and I talked about this on the earlier edition of Mortgage 101, this past month. You were, optimistic about it. Has that changed a little bit with the political waters changing?

Clinton Wilkins
I have a lot more questions, and I think what’s going on in the US and with the president-elect, I’m less certain on as deep of cuts as I was, and I think we’re really gonna have to watch on what the FED does in the US. You know, we don’t move one to one. I know I’ve said this, but they need double the amount of cuts to have the same impact as like 25 basis point cut would have with us. So, if we reduce by 25 BIPs, they need 50 BIPs to have the same impact. It’s just the way that their economy is just much, much larger than ours. But the one thing that we also need to be cognizant of, their interest rates are much, much higher than ours, and their economy is in a much better condition overall than ours is.

Dan Ahlstrand
In Nova Scotia Clinton, we just had an election on Tuesday. One of the big promises made by Tim Houston on the campaign trail is in April, he intends to take a one percentage point off of HST in your world, in the mortgage world, what does that mean?

Clinton Wilkins
I think that for new construction properties, it can certainly make a difference, I think, to the average consumer, maybe from buying a home, not a huge, huge impact. You know, my real question is going to be, if we’re reducing the tax, and we’re putting more money into the pockets of Canadians and Nova Scotia specifically. Does that mean that we’re going to go to now spend that other 1% somewhere else and drive up inflation? I don’t know, you know, 1% I’m not sure it’s going to move the needle that much. If we’re looking even at the percentage of decrease, that’s less than a 10% decrease in the overall taxation, I don’t think it’s going to make much of a difference for me. I think it’s a little bit more of the optics. But we are very heavily taxed here. It’s not just sales tax, from income tax to property tax. We’re taxed really in every aspect of our life. And I think any tax reduction overall is going to be good. Our economy here in Nova Scotia, I think, is quite strong compared to some other provinces, we’ve done very well. I think our biggest challenge right now, at least from where I sit every day, is really around housing. We’re seeing these same stories across the country, but I think that we are disadvantaged here because we were not doing the construction. So we need to continue doing more and more.

Dan Ahlstrand
Let me ask you that question, I wouldn’t be doing my job if I didn’t. During the election campaign, some of the promises were being made by the liberals in the NDP building, 8000, 80,000 houses. What’s the market like right now? Particularly, with new home construction, Clinton? Is it growing? Is it difficult to get started because of all of the pressures, labour shortages and those kinds of things?

Real Estate Market Outlook

Clinton Wilkins
I think it’s very challenging. I think new home construction is tough, but we need all kinds of units across the board. I did read an article this morning on NovaScotia.com and one of the big landlords here in Halifax has said that the higher-end rental properties have slowed. So, they have some vacancies, and the average rental price for our two bedrooms has decreased. I think from a rental perspective, maybe we are getting into more of a balanced market, you know, Dan, two years ago, you couldn’t even find an apartment to rent. It doesn’t matter what the price was, and when you did, there were 10 people lined up for it. We certainly have had a lot of construction here, and there’s going to be a lot of new units coming online in 2025 we’re looking at the cranes in the sky. Even outside of the studio, some apartments are being built all around here on the peninsula. I think from a rental perspective, at least in the downtown Halifax core, it’s going to be a little bit more balanced. I think going into 2025, from a purchase perspective, there are not enough units to buy, and there’s more of a building than a market. So, we’re still in a seller’s market. For sure.

Dan Ahlstrand
What is the market like, Clinton? For not just necessarily new homes, but existing homes?

Clinton Wilkins
Much busier than last year this time, I will say. I think that we’re going to project, and I’ll go on a limb here, I think we’re going to see about a 5% increase in purchase price next year, and I think we’re going to see at least a 5% increase in activity. I am projecting that is going to be very busy in terms of real estate. From a mortgage lending perspective, I think it’s going to be our best year ever. Part of the reason is that 60% of mortgages are coming out for renewal in the next two years. So our listeners, there’s a lot of them, chances are your mortgage is going to be renewed. So, I think that’s going to be important for you to obviously, continue to stay tuned to our show. We’re gonna talk more about that, and we wanna make sure everyone’s protected. Financial Literacy Month overall, we wanna talk about income, assets and credit, and how is that going to impact you.

Dan Ahlstrand
Why is a 5% increase in the purchase price?

Clinton Wilkins
Because I think there’s more demand really in the market, from a purchase perspective, than there is supply. So I think the more and more supply that comes in, I think that will start, you know, eating up some of that demand. But it’s going to be years before I think we have enough new units built to kind of eat up the demand for buyers here.

Challenges in the Rental Market

Dan Ahlstrand
The concern of the pandemic, when people were buying houses two and three and $400,000 above asking and then the worry was, is that, well, okay, when the market kind of corrects itself, there was going to be a decrease in property value.

Clinton Wilkins
That’s not happening. We have not seen this here. We’ve not seen it like what’s happened in Ontario and BC, those markets have been very negatively impacted, specifically because of the interest rates. That’s what slowed their marketplace. I think there was still the demand, but people couldn’t qualify right here. People can certainly qualify. That price point, around the average of the 400 to 600,000 is very, very busy. I think the 700,000 plus, was slower, but we’re starting to see more activity in that piece of the market as well.

Dan Ahlstrand
You’re listening to a very special edition of Mortgage 101. He’s Clinton Wilkins. It’s Financial Literacy Month. We’re on for the next 45 minutes to discuss mortgages, to discuss ways to protect yourself, to maybe educate you a little bit more on financial literacy, and we’re going to take our first break. You’re listening to the Todd Veinotte show. I’m Dan Ahlstrand, and we’re back in minutes.