Mortgage 101 – Mortgage Strategies for a Shaky Economy

Clinton and Dan discuss the economic impact of trade wars and provide strategic financial advice for mortgage holders.

Dan Ahlstrand
And welcome back. This is Mortgage 101. He’s Clinton Wilkins, and I’m Dan Ahlstrand. We alluded to it in the first segment of the show. There’s a lot of news happening out there, and it’s changing not even by the hour. It’s changing by the minute, and the one that is certainly having the biggest impact on the Canadian economy and Canadians’ lives in general is the ongoing trade war with the United States. Clinton, as somebody that keeps his eye on inflation, on jobs, on bank rates, your thoughts about this latest salvo or the latest salvos in the trade war between our two countries?

Clinton Wilkins
I think it’s very challenging, Dan. Honestly, I think when things were first starting to, I’ll call it, unravel with the U.S., people knew what was going on, and then there’s more and more confusion, and then we got to more stability, and now we’re basically in a place of instability with the U.S. And by the time our listeners are listening, things probably are going to have changed again, but maybe we can just give them a state of the nation. Carney did come out this week and say, Canadians, we really have to brace to potentially be into hard times. And what do hard times mean? It maybe is inflation high, or job numbers are very bad, or GDP is low? It’s really hard to say. To bring it back to mortgage lending, customers are asking me. They’re like, “Well, is the Bank of Canada going to increase the key overnight rate? I think the only time that they’re going to do that is if inflation really gets high. But if we really truly get into a recession, it could be the opposite, where the Bank of Canada lowers the key overnight rate because the government is trying to spur spending to prop up the economy. And again, it’s early days. I think with some of these tariff things, it takes two months, four months, six months for some of the results to trickle down. But there could be some immediate impacts on the job numbers. It’s really too early to know. And again, by the time you’re listening to our show, things could have changed again. We’re reporting what’s going on today, and the tariffs and the counter-tariffs. It is very, very challenging out there.

Dan Ahlstrand
Do you think that we just had a decision from the Bank of Canada, and they held the rate at 2.25%? They meet again in October. Too early to see what the full effect of these tariffs and counter-tariffs will be on the economy, or do you think that the Bank of Canada and the governor will be looking sort of forward-looking?

Clinton Wilkins
I think there are some leading indicators that they look at, and there are several indicators. They’re not just looking at job numbers. They’re not just looking at the GDP. The data that they have, obviously, is much more vast than the data that we see reported, like in the news. And the economists are looking at models and forecasts, and they’re looking at hundreds of data points, really, to kind of come up with a forecast of what the bank is going to do. I think the moral of the story is we need to gird our loins, or whatever a good analogy is. We need to really focus on the needs versus the wants. We need to build a war chest, so to speak. Keep your savings, keep your available credit as high as you can. Don’t be spending. Try to keep the balances low. I think cash flow is going to be king, and I think that’s also very important for people who are looking to do a mortgage transaction today. When you’re buying a house, should you buy one at the absolute top of what your affordability is? No, maybe you should have a little bit more breathing room. Two, if you’re looking to renew or refinance, maybe looking at a longer amortization could make sense. Three, does it make sense to refinance and consolidate some unsecured debt? I think: have cash, keep the debt low, and keep the spending low. That is going to be the recipe for financial health going into the end of 2026 and going into 2027. And there have been so many trends around fitness and weight loss and stuff like that. I think the trend is going to be financial health. Canadians are at an all-time high level of indebtedness, primarily driven by car loans, unsecured debt like credit cards, lines of credit, and those are very unregulated industries compared to mortgage lending. We hear from customers sometimes that getting a mortgage is high friction because we have to they have to prove their income, we have to prove the down payment, have to prove assets, we have to obviously prove what’s going on with their credit, and the reason is the government is trying to protect the Canadian banking industry environment, and we are prepared to go through downturns. And I’m not saying we’re going into a downturn. Things can shift very quickly with the U.S., and we know things are going to be fine. We are really hot on the Straighter moves here. Not that long ago, and so hot on oil, oil is still a concern. But we’re not talking about it as much as we were here a few weeks ago, even a couple of months ago, because we’re tone deaf. We’re tone deaf to some of these issues. But I think overall, my advice to consumers: pay down your debt. If you have available equity in your home, consider a refinance. Start stockpiling some cash and keep the spending to a minimum. That is going to be the answer to being in the best possible financial position to go into more turbulent times.

Dan Ahlstrand
Your advice to somebody that has been watching all of these factors and is wanting to pull the trigger on a mortgage and do a mortgage transaction, but is a little hesitant because of world events. Your advice to them?

Clinton Wilkins
The right time to do a transaction is the right time for you. , I I would say, in terms of buying real estate, so we’ll touch on that first. There were fewer transactions done here in August. What that means is there are properties that went unsold, and these sellers are going to become more motivated. We heard from realtors over the last year that the market is becoming more balanced. Homes sit on the market longer; it will shift to more of a buyer’s market. Not saying that’s the situation today, but it may start shifting towards that. I am, though, seeing longer dates for conditions. I’m seeing more conditions, and I’m seeing buyers and sellers being more negotiable. So what that means is, it is a good time to do a transaction. I think that being said, the right time for someone is the right time for them. The thing is, we get through this, and we get through a few bumps in the road, and we may see a situation where things get heated again, especially if the rates are down. So I always caution people who are waiting on the sidelines to say, about the interest rates. You’re really dating the rate, but you’re marrying that home. So I think just consider that going into the fall. But I think there may be some deals to be had if you’re looking to buy this fall. I think there could be some deals. So, if you had a pre-approval or if you’re thinking about getting pre-approved, there’s time to be getting into a new home before the holidays. You kind of think about it. You’re like, well, the holidays seem so far away. Well, it’s September, the average date for a closing for us is about 60 days, so that’s November, you’re moving in; you can be in a new home for the end of the year. If you’re buying, if you get a preapproval and you’re making an offer in October, you might not be closing until December. So there still is time, and I think that’s exciting. And I think that sellers are going to become more negotiable. But regardless, if you’re looking at buying a home, the first step is getting a pre-approval, and then once you’re pre-approved, you need to enter into a brokerage relationship, really with a good realtor, a realtor that you’re going to jive with. Dealing with us, I say a mortgage takes five hours on average. Maybe it’s five hours’ worth of work for the consumer, but when you go to buy a home and you’re dealing with a realtor, that can be 10, 20, 30, 40, hours, just depending on how much back and forth there is, how many homes you’re going to look at. So I think that’s one thing you need to take into consideration. And I think when you’re trying to choose a realtor, maybe you need to talk to two or three of them, go for a coffee, see who is going to be the best fit. And I always encourage folks when they’re trying to engage with a realtor: don’t engage with the listing agent because if you want to buy that home, you need to go as a customer, and you don’t have the brokerage relationship. I always recommend dealing with a realtor who’s living and working in the area that you want to buy. Obviously, some people are like, “Well, it’s fast. I’ll buy anywhere in HRM or anywhere in Nova Scotia or anywhere in New Brunswick or anywhere in PEI. Use a realtor who’s living and working in the area that you want to buy. They are going to have the insights, and they’re going to be giving you the best advice.

Dan Ahlstrand
You touched on it earlier, Clinton. You mentioned pre-approval and the importance of having a pre-approval. And in these kinds of economic conditions, that can be even more valuable because you can go and get a pre-approval today and have that rate locked in for several months.

Clinton Wilkins
Yeah, you can get a pre-approval today, and the rate is good for 120 days. So that would take you, if you get a pre-approval in September, you’re going to be pre-approved at least until December, if not January, depending on what the date’s going to look like. And that gives you a lot of runway for shopping and for closing. The reason getting that rate hold and a pre-approval is so important. One is knowing that you can actually get a final approval once you make an offer, because there’s nothing worse, nothing, nothing worse than making an offer on a home and then we can’t get it done for whatever reason. Either you didn’t give us the full story, or we didn’t have the full scope of the situation. Okay, so that’s one. Two, having the rate hold in place is so important because just imagine if the rates do go up in October. I’m not saying they’re going to, but let’s just say that they do. You have the peace of mind knowing that if we have the pre-approval, we have that rate hold. That’s really the worst-case scenario. If the rates get better, we’re going to give you the better rate. But if the rates go up, you have at least what you have from that pre-approval. So that’s important too. Still today, believe it or not, we’ve talked about this a lot, but we are getting offers from realtors where customers are not pre-approved. It shocks me. It shocks me, and sometimes it’s high friction, high challenge for the consumer, for the realtor, for everybody involved. We actually had one the other day, so I’m going to tell you this little quick story because we have about a minute here before we need to wrap up this segment. We had a realtor. They were dealing with Big Blue Royal Bank. I’m just going to say it out there, out there. We don’t deal with Royal Bank, so it doesn’t matter. I’m just going to give you the skinny. The client was pre-approved, made the offer; it was a new construction, long, long closing date, and suddenly at the end, the bank says, “Nay, nay, we’re not giving you that mortgage. So, the client starts melting down. So concerned, the realtor’s like, “Okay, Client, what can you do? We can pull this together. At the end of the day, that client got their financing. We got them into the home. Client’s happy, realtor’s happy, builders are happy, sellers and realtors are happy, everyone’s happy. But it was a lot of friction for us and a lot of friction for that customer. So knowing that you have a good pre-approval is so, so important.

Dan Ahlstrand
We’re going to take another break. When we come back, what’s the best product for you, variable or fixed? You’re listening to Mortgage 101.