cost of living crisis

Thursday November 2, 2023

A surge in mortgage renewals in Canadian banks over the next three years may lead to substantial payment increases for borrowers due to rising interest rates, potentially affecting credit losses and bank profits.

Editorial Cartoon by Graeme MacKay, The Hamilton Spectator – Thursday November 2, 2023

Haunted by High-Interest: The Looming Spector of Canadian Mortgage Renewals

In the eerie aftermath of Halloween, a haunting spector looms over Canadian mortgage holders, threatening a grim future of financial distress. The dread doesn’t come from ghouls or ghosts but from the imminent renewal of mortgages, unleashing a chilling cascade of increased interest rates set to torment thousands.

August 29, 2023

Recent analyses by RBC reveal a daunting reality: more than $900 billion in mortgages within Canadian banks are slated for renewal over the next three years. This impending wave of renewals, as pointed out by RBC researchers led by analyst Darko Mihelic, spells potential financial peril for many homeowners. An alarming 60 per cent of mortgages in Canadian chartered banks are anticipated to undergo renewal by 2026. As fixed-rate mortgage terms established prior to the Bank of Canada’s interest rate hike in October undergo renewal, borrowers are slated to face staggering increases in their monthly payments, a significant burden detailed in the report titled “Canadian Banks: A Review of Mortgage Payment Shock.”

The report forewarns that unless interest rates experience substantial declines, credit losses are bound to surge, potentially peaking in 2025 and beyond. These credit losses are estimated as outstanding payments owed to companies, including mortgage defaults. Alarming as it is, this prediction aligns with the Office of the Superintendent of Financial Institutions’ directive to major banks to bolster reserves for potential debt defaults, nearly tripling the amount set aside for bad loans compared to the previous year.

News: About 60% of outstanding mortgages facing payment shock in next 3 years: RBC  

July 18, 2023

While some industry experts like Carl De Souza, senior vice-president at DBRS Morningstar, express confidence in the resilience of major Canadian banks against mortgage defaults, the forthcoming surge in renewals poses a significant threat to banks’ profitability and homeowners’ financial stability. However, the report suggests that the impact of mortgage losses might be mitigated to some extent due to Canada’s relatively low unemployment rate, which remains below pre-pandemic levels.

Nevertheless, the impending renewals paint a stark picture for homeowners. Banks are exploring options to alleviate the impending financial shocks, including renegotiating mortgage terms from variable to fixed rates. Currently, more than half of Canadians opt for a three-year fixed-term mortgage, but the stark difference in interest rates from previous years is ominous. Rates for a three-year fixed-term mortgage have climbed substantially, with estimates indicating a potential surge from the comparatively lower rates of 2019 to an alarming 6 to 8 percent at renewal, spelling financial distress for borrowers.

The report predicts a staggering increase in payments at each milestone year. In 2024, more than $186 billion in mortgages will renew, signifying a 32 percent payment shock. By 2025 and 2026, the looming numbers continue to surge, with estimated renewals of $315 billion and $400 billion, respectively. Payments are expected to soar by 33 percent and a staggering 48 percent, respectively, on a weighted average basis.

News: As inflationary pressures grow, Canadians increasingly struggle to make monthly mortgage & credit card payments 

May 13, 2010

Even if there’s a hopeful return of the Bank of Canada’s key interest rate to 0.25 percent by 2026, the projected increase in payments still stands at a significant 20 percent. RBC’s estimations suggest a potential return to a lower interest rate in the future, yet the haunting reality of surging payments remains a foreboding certainty.

The post-Halloween season brings no respite as the grim spector of mortgage renewals hangs ominously over Canadian homeowners. The alarming forecasts and stark statistics paint a chilling picture of financial turmoil, urging caution and preparedness to weather the impending storm of high-interest renewals. (AI)

 

Tuesday September 19, 2023

Editorial Cartoon by Graeme MacKay, The Hamilton Spectator – Tuesday September 19, 2023

Trudeau’s Desperate Bid to Salvage Sinking Polls and Soaring Food Prices

August 2, 2023

As Trudeau’s government grapples with plummeting poll numbers, the decision to summon CEOs from Canada’s grocery giants — Loblaw, Sobeys, Metro, Costco, and Walmart — to a meeting in Ottawa has become a high-stakes gamble in the quest to address the pressing issue of rising living costs. With housing and grocery prices skyrocketing, Trudeau is under immense pressure to demonstrate effective leadership, as recent polls show his government facing its worst ratings since 2015.

Trudeau’s announcement to hold the grocery CEOs accountable comes after weeks of relentless criticism from the opposition, particularly the Conservatives, on the handling of affordability issues. In a bold move, Trudeau warns these corporate leaders that they have until Thanksgiving to present a plan to stabilize food prices, with the threat of potential tax measures looming if they fail to deliver.

News: Grocer summit to ‘take the heat off’ Ottawa, not tackle food inflation: experts  

March 8, 2023

This shift in stance reflects a newfound urgency, given that Trudeau had previously dismissed the idea of a windfall tax on grocery chains as “simplistic.” However, mounting public frustration and political survival seem to have swayed his perspective.

The parliamentary committee’s concerns about grocery giants profiting excessively from food inflation and the Competition Bureau’s call for increased competition have further fueled the government’s resolve to take action. Amendments to the Competition Act are in the pipeline to bolster the bureau’s authority to address market issues, fostering competition that could benefit consumers.

Led by Industry Minister François-Philippe Champagne, discussions with grocery CEOs will focus on solutions, particularly with the top five grocers that dominate 80 percent of the market. Critics, including NDP Leader Jagmeet Singh, argue that Trudeau’s plan lacks specificity and accountability, raising the challenge of translating discussions into meaningful actions for Canadians.

News: Minister says Canada’s largest grocery chains have agreed to ‘work’ on stabilizing food prices  

December 8, 2016

Ultimately, the outcome of this meeting holds both immediate and long-term implications — not only for grocery prices but also as a litmus test for Trudeau’s leadership. The nation watches closely to see if this initiative will be a turning point or merely a desperate attempt to regain popularity amid a sea of sinking poll numbers. One thing is clear: Canadians are expecting tangible results that reflect positively on their household budgets. (AI) 

 

Friday August 5, 2022

Editorial Cartoon by Graeme MacKay, The Hamilton Spectator – Friday August 5, 2022

Out-of-office reply: Prime Minister Trudeau, family on holiday in Costa Rica

March 14, 2019

Prime Minister Justin Trudeau is heading to Costa Rica for a two-week vacation with his family.

The Prime Minister’s Office says the family is returning to the same place where they stayed over the Christmas holiday in 2019 and that they are paying for their own accommodations.

The prime minister must fly on a Royal Canadian Air Force plane for security reasons — even for personal travel — and the family’s flights on the last trip to and from Costa Rica cost the government about $57,000, with thousands more spent on flight crews’ stay in San Jose.

The PMO also says it consulted with the office of the federal ethics commissioner about the coming holiday.

In 2017, Trudeau was found to have violated conflict of interest rules related to a 2016 vacation he took to Aga Khan’s private island in the Bahamas.

The PMO says Trudeau will get regular briefings while he is away. (The National Post)