Houses have been expensive in Canada for a decade or more, but low interest rates helped first-time buyers get into the market.
Now, rates are rising and the cost of carrying a mortgage is growing by hundreds of dollars a month for people who got into the housing market in recent years. With inflation rising as well, these young households are in a world of pain they likely never expected. Just 18 months ago, interest rates were still in the basement and inflation just wasn’t a thing.
Young homeowners, help the Globe and Mail personal finance team learn more about what you’re up against. If you bought a home in the past five years and have a mortgage, please take our totally anonymous survey. We’ll report back on what we find.
Canada had high interest rates – much higher than today – in the 1980s and early ‘90s. But the stress and strain of higher borrowing costs arguably hits harder today. The ratio of debt to disposable income has soared in recent decades, a function of both declining borrowing costs and the rise of consumer culture.
Incomes are rising by more than they have in recent years, but not by enough to offset increases in the cost of living. Food and fuel – gasoline and natural gas – are two inflation hot zones right now and add to the pressure on homeowners.
For more than 10 years, the narrative on home ownership was to buy and enjoy the ride as low rates kept your payments manageable and prices rolled ever higher. The economics of home ownership have changed drastically – it’s a story that demands to be told.
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Rob’s personal finance reading list
His life, and his wallet, were never the same
A refreshingly honest take on pet ownership. Love the dog, but the expenses!
So you think restaurants are expensive
The New York Times on “members-only restaurants,” where you pay a fee to get in the door to pay for your meal. Access is being monetized. Pass.
The panic of modern work
The Bear is a must-watch TV show about an acclaimed chef who returns home to Chicago to run his deceased brother’s sandwich shop. Here’s an article that links the mega-stress environment of the sandwich shop with the feelings some people have about life in today’s job market.
A F.I.R.E.-side chat
An introduction to what I think of as a personal finance protest movement – financial independence, retire early, or F.I.R.E. What’s the protest against? The panic of modern work.
Ask Rob
Q: Why does my broker charge a discretionary fee to manage my TFSA when I just own a few dividend stocks?
A: Portfolio management fees ideally buy you not just management of your investments, but some degree of financial planning as well. For higher net worth investors, tax and estate planning advice might be in the mix as well. With a small portfolio of dividend stocks, you may not need much in the way of portfolio management. If you’re not getting additional services like financial planning, then it’s worth thinking about managing your own portfolio through a digital broker.
Do you have a question for me? Send it my way. Sorry I can't answer every one personally. Questions and answers are edited for length and clarity.
Today’s financial tool
A briefing on how to get started as an investor from the Ontario Securities Commission’s GetSmarterAboutMoney.ca website.
The Money-Free Zone
The 100 greatest TV shows of all time. Plenty to argue over, with good coverage of shows for all generations.
In case you missed these Globe and Mail personal finance-related stories
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- On the job hunt? Here’s some tips on how to negotiate for the best salary, other perks
- I’m struggling with the new-found freedom that retirement brings
More Rob Carrick and money coverage
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Even more coverage from Rob Carrick:
- 🎧 Catch up on Stress Test: Is the middle class dead for millennials and Gen Z? • Gas prices are soaring. Are electric vehicles an affordable solution? • Crypto is booming, but should you invest? • How are young Canadians dealing with soaring rents? • Inflation is squeezing our finances. What can we do about it? • Is a hot housing market squeezing Canadians out of their small towns?
- ✔️ The housing file: How bad is housing affordability? Even a crash won't help • Sell the family home to lock in profit and then rent? Better not • Why young adults can't afford houses: Hard work got you more in the past than it does now • Five reasons you should not buy a house till you're at least 30 • Now more than ever, owning a house is not a retirement plan
- 📈 Investing: The 2022 ETF buyer's guide: Best Canadian equity funds • The 2022 Globe and Mail digital broker ranking: Does the zero-commission revolution flip the script on who's best? • With bonds sinking, conservative investors are waking up to risks they never saw coming • A five-step plan for dealing with the sad fact that almost every investment is falling lately • The best financial advice in advance of retirement? Work on your marriage • One-year GICs are the best deal in town for safety seekers • What to do if the financial plan you paid thousands for disappoints
- 💰 Your money: Are you prepared for the pandemic wealth boom to blow up in our faces? • This hard-working 24-year-old is nailing it financially. But where’s the happiness? • Who should and shouldn’t worry about the wave of rate increases this year, and what every stressed-out borrower should do right now • Don’t make this potentially costly assumption about the CPP Survivor’s pension
Rob Carrick