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Mortgage 101 – Bank of Canada and the government | September 2022 Part 1

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’s happening with the Bank of Canada and the government right now. The two also dive into educating consumers, how there is a lot going on with people right now, and how we’re listening to other experts to stay on top of all the news and movement in the economy.

Mortgage 101 with Clinton Wilkins & Todd Veinotte: Bank of Canada and the government

Don’t feel like watching the video? Check out the transcript below.


There’s a lot going on with people right now

Todd Veinotte: [00:00:00:02] We were chatting before we recorded, and it’s five years we’ve been doing this. We’ve talked about this before, but we have new listeners all the time.

Clinton Wilkins: [00:00:06:09] We have new listeners all the time. It’s September. There’s obviously a lot going on right now, Todd. A lot going on in the news and a lot, I think going on with people. You know, there’s a lot going on with people right now. And that’s something we’re certainly cognisant of.

Todd Veinotte: [00:00:19:15] It’s funny you mention that, because obviously being in the news for and doing this type of work for a long time, we can kind of get lost in the moment and think that now is the craziest time ever.

And then, low and behold, there’s something. So I think that that that feeling of these are crazy times have always existed. And we can liken that to your business as well, right?

Clinton Wilkins: [00:00:39:10] Yeah, I certainly agree with you and, and what you’ve said with that, you know, even let’s think about what’s going on in the media. Obviously there was a lot going on with Lisa LaFlamme and you know now

Todd Veinotte: [00:00:50:17] What happened with Lisa LaFlamme.

Clinton Wilkins: [00:00:52:05] Well, I think that doesn’t even need…

Todd Veinotte: [00:00:53:25] She works for CityNews, by the way.

Clinton Wilkins: [00:00:55:03] Exactly. And I’m just trying to give her a shout out here. Obviously, she was in London and is in London and working as a special correspondent for CityNews. And, you know, that really took up a big piece of the news.

Obviously, what’s happened now with the queen’s passing and now a new king obviously took up a big piece of the news. And, you know, in our business, there certainly has a big piece of the news been, you know, taken up around the Bank of Canada and what’s going on with inflation.

Bank of Canada and the Canadian government

Todd Veinotte: [00:01:25:25] Well, yeah. And listen, I think we should also mention that the Conservative Party of Canada, this does tie in because Pierre Poilievre may indeed be the Prime Minister at some point, and he called out Tiff Macklem and the Bank of Canada directly. And it’s, what would that, how might that change that relationship?

Clinton Wilkins: [00:01:43:28] Well, you know, I think that’s certainly, you know, very top of mind. I think probably a lot of Canadians would say, Todd, that the Bank of Canada is not necessarily getting this right.

You know, no one was surprised that there was an increase when the Bank of Canada met and did their announcement last week. You know, we were really prepared for an increase. And, you know, the amount of inquiries that we actually got in our office was probably the least to date when there’s been an increase.

I remember times when there was like a 25 basis point increase and it would be like the sky is falling. People are now so I think conditioned that we’re in a raising rate environment that, you know, they’re maybe not as surprised as they once were.

We’re educating the consumers

Clinton Wilkins: [00:02:26:07] And the one thing that I will say that I think we do really well. It’s what we’re doing right now. We’ve really done a great job at educating consumers on really what’s going on with the Bank of Canada. You know, why is a variable rate right for you or not right for you? And I think people are more educated now or at least taking an active role in their personal finances than maybe they were.

Todd Veinotte: [00:02:51:05] Okay. So let me ask you this question, because you and I have had the chat about variable and fixed rate. And obviously, everybody’s got an opinion. Not everybody shares your opinion. Before we get into that, let everybody know what your what your viewpoint is on the variable versus fixed. And then I’ve got a question I want to double down on that.

Clinton Wilkins: [00:03:06:27] You know, honestly, I am very pro variable. And in our next segment, we’re going to really next segment as we continue on the show, we’re really going to talk a lot about variable versus fixed. But let me just say, you know, historically, about 60% of Canadians take a fixed rate. Our clients, it’s the inverse, about 60% plus are taking a variable. That doesn’t mean 100%, Todd. And let me tell you, a variable rate is not right for 100% of people.

Todd Veinotte: [00:03:33:18] I don’t want to get too far into the weeds of that because we’re going to do a segment. But what I wanted to ask you is you are, you’ve got an immense you and your team here has an immense responsibility here when it comes to the advice that you give.

Clinton Wilkins: [00:03:45:08] Of course, every day.

Todd Veinotte: [00:03:46:12] Massive responsibility here. This is this could potentially change people’s trajectory of their lives, what you say carries a lot of weight, including this issue right here. People listen to you and react based on what you say.

So how do you how do you balance that as a media figure, as a professional, as a guru, as I refer to you, how do you balance that? Because you must sometimes I don’t want to say worry about that, but you must consider that.

Clinton Wilkins: [00:04:12:04] I think there certainly is some pressure to it and I think it’s really about asking the right questions, but also listening because, you know, there’s risk and reward no matter which choice you make. And I think that’s really important to understand.

As we know we’ve been in a raising rate environment, you know in terms of variable rates, we’ve been raising rate environment where the fixed rates are right now. And there’s no right answer.

Listing to what other experts are saying

What is the right answer today based on what we know about somebody’s income, about their assets, and about their credit and really about their risk tolerance. So, you know, the advice is multipronged. And I think that’s where it’s really important to evaluate the entire picture.

Todd Veinotte: [00:04:57:10] Do you listen to other people?

Clinton Wilkins: [00:04:58:23] Of course I do.

Todd Veinotte: [00:04:59:20] I mean, like other experts.

Clinton Wilkins: [00:05:01:19] Oh! 100% every day. I listen, I watch and I learn from economists and other mortgage brokers and realtors and lawyers. And, you know we’re really on top of this every single day. And, you know my advice changes and the advice is different for different people and at different times when we give the advice, it’s a snapshot in time and that’s where things are today.

Obviously, we want to take what we know from the past and what we think is going to happen in the future, but we don’t have a crystal ball. And I think that’s important to remember: That the advice is really at that snapshot and really what’s going on and the information that we have at that time as well.

Has the Bank of Canada gotten it wrong?

Todd Veinotte: [00:05:46:27] Okay. So you said the Bank of Canada got it wrong. That’s what Pierre Poilievre said as a matter of fact, he says he’d fire Tiff Macklem, although I don’t think…

Clinton Wilkins: [00:05:53:20] He might not be the only person that says that.

Todd Veinotte: [00:05:55:14] And I don’t think even the Prime Minister can arbitrarily fire the governor of the Bank of Canada. That all said, you said that you agree with part of what he said, drill down more into what you mean by that. What did they get wrong? Did they wait too long to raise interest rates?

Clinton Wilkins: [00:06:08:17] You know, I don’t want to like kick this dead horse, but the governor of the Bank of Canada had said that interest rates were going to be low for the foreseeable future and that was after the pandemic had struck when they really brought the interest rates down. They were really trying to provide the confidence to Canadians that these rates are going to be low for the foreseeable future.

The one thing that they forgot about was Canadians stayed home for two years, didn’t spend their money, and then unleashed all this new capital into the market buying consumer goods, travelling, spending money on transportation, etc., etc.. and that’s really what has driven inflation. We also didn’t think that there was going to be a war. So there’s a lot of factors that the Bank of Canada didn’t take necessarily into consideration, whether they knew or they didn’t know because they probably didn’t think there was going to be a war either. And we probably didn’t think this pandemic was going to go on as long as it has.

And every time the Bank of Canada has been in this raising rate environment, there’s been a recession. And what happens when there is a recession? They have to lower the borrowing rates to then stimulate spending and bring the economy back to where they want kind of that key inflation to be or that or that median inflation.

Todd Veinotte: [00:07:28:07] Time horizon, though. And I suppose if you knew that, then you’d be wealthier than you are.

Clinton Wilkins: [00:07:33:10] We don’t know how long it takes, but guess what? It takes months and if not years for increases then to kind of trickle down. It’s a trickle down effect.

Todd Veinotte: [00:07:42:25] Incremental.

Clinton Wilkins: [00:07:43:15] Incremental, yeah. And you know, the one thing that we also need to remember is whether you’re in a variable rate or whether you’re not in a variable rate, Todd, we are all being impacted by the increase in the key overnight rate. It’s not just your borrowing that you’re that we’re looking at, it’s the cost for businesses to raise capital, the cost on other borrowing products that you may have.

It’s not just a variable rate mortgage. There’s going to be other implications of the overnight rate being increased, as well as what’s going on with inflation. Certainly some good numbers coming out of the US, we’re starting to see some softening. So I think things are going to be moving in the right direction.

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.


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