29 Jul

50/15/5: A saving and spending rule of thumb


Posted by: Kyra Park

50/15/5: A saving and spending rule of thumb

Saving can be hard, and overwhelming! Here is one great method to improve your savings.

It isn’t about managing every penny. Track your money using three categories.

Key takeaways

  • Consider allocating no more than 50% of take-home pay to essential expenses.
  • Try to save 15% of pre-tax income (including employer contributions) for retirement.
  • Save for the unexpected by keeping 5% of take-home pay in short-term savings for unplanned expenses.

“Budget.” Does anyone like that word? How about this instead: the 50/15/5 rule? It’s our simple rule of thumb for saving and spending: Aim to allocate no more than 50% of take-home pay to essential expenses, save 15% of pre-tax income for retirement savings (RRSP), and keep 5% of take-home pay for short-term savings. (Your situation may be different, but you can still use our rule of thumb as a starting point.)

Why 50/15/5? We analyzed hundreds of scenarios in order to create a saving and spending guideline that can help people save enough to retire. Our research found that by sticking to this guideline, there is a good chance you can maintain your financial stability now and keep your current lifestyle in retirement.

Essential expenses: 50%

Some expenses simply aren’t optional: you need to eat and you need a place to live. Consider allocating no more than 50% of take-home pay to “must have” expenses, such as

  • housing: mortgage, rent, property tax, utilities (electricity, etc.), homeowner’s/renter’s insurance and condo/home association fees
  • food: groceries only; do not include takeout or restaurant meals, unless you really consider them essential, i.e., you never cook and always eat out
  • health care: out-of-pocket expenses (e.g., prescriptions, co-payments)
  • transportation: car loan/lease, gas, car insurance, parking, tolls, maintenance and commuter fares
  • child care: day care, tuition and fees
  • debt payments and other obligations: credit card payments, student loan payments, child support, alimony and life insurance

Keep it below 50%. Just because some expenses are essential doesn’t mean they’re not flexible. Small changes can add up, such as turning the heat down a few degrees in the winter (and turning your AC up a few degrees in the summer), buying – and stocking up on – groceries when they are on sale and bringing lunch to work. Also consider driving a more affordable car, carpooling or taking public transportation.

If you need to significantly reduce your living expenses, consider a less expensive home or apartment. There are many other ways you can save. Take a look at which essential expenses are most important, and which ones you may be able to cut back on.

Retirement savings: 15%

It’s important to save for your future, no matter how young or old you are. Why? Pension plans are rare. In fact, we estimate that about 45% of retirement income will need to come from savings. That’s why we suggest people consider saving 15% of pre-tax household income for retirement. That includes their contributions and any matching or profit sharing contributions from an employer. Starting early, saving consistently and investing wisely is important, as is saving in tax-advantaged retirement savings accounts such as an RRSP.

How to get to 15%: If contributing that amount right now is not possible, check to see if your employer has a program that automatically increases contributions annually until a goal is met. Another strategy is to start by contributing at least enough to meet an employer’s matching amount; then, if you get a raise or annual bonus, add all or part of these funds to your workplace savings plan or individual retirement account until you have reached the annual contribution limit.

Short-term savings: 5%

Everyone can benefit from having an emergency fund. An emergency, like an illness or job loss, is bad enough, but not being prepared financially can only make things worse. A good rule of thumb is to have enough put aside in savings to cover three to six months of essential expenses. Think of emergency fund contributions as a regular bill every month, until there is enough built up.

While emergency funds are meant for more significant events, like job loss, we also suggest saving a percentage of your pay to cover smaller unplanned expenses. Who hasn’t been invited to a wedding – or several? Cracked the screen on a smartphone? Had a flat tire? In addition to those, there are certain categories of expenses that are often overlooked: for example, maintenance and repairs of cars, field trips for kids, co-pays for prescriptions, holiday gifts and Halloween costumes, to name a few.

Setting aside 5% of monthly take-home pay can help with these “one off” expenses. It’s good practice to have some money set aside for the random expenses: that way, you won’t be tempted to tap into your emergency fund, or tempted to pay for one of these things by adding to an existing credit card balance. Over time, those balances can be hard to pay off. However, if you pay the entire credit card balance every month, and get points or cash back for purchases, using a credit card for one-off expenses may make sense.

How to get to 5%: Having this money automatically taken out of a paycheque and deposited in a separate account just for short-term savings can help a person reach this goal.

What next?

Our guidelines are intended to serve as a starting point. It is important to evaluate your situation and adjust these guidelines as necessary. If you’re close to the 50/15/5 target spending and saving amounts, good job! And for those staying within the guidelines, any remaining income is yours to save or spend as you would like. Some ideas: First, pay down high-interest debt. For other goals, like paying for a child’s college or wedding, you could use the remaining income to save for them. And, finally, for those who want to retire early, or haven’t been saving diligently, putting it toward retirement savings may make sense.

The good news is that it isn’t about micromanaging every penny. Analyzing current spending and saving based on our three categories can give you control and confidence. And remember, almost everyone’s financial situation will change over time. A new job, marriage, children and other life events may change cash flow. It’s a good idea to revisit spending and saving regularly, particularly after any major life events.

Published by Fidelity Investments

21 Jul

Majority of Canadian Buyers Borrowing Their Maximum Approved Mortgage


Posted by: Kyra Park

As home prices soar, so do the mortgage amounts borrowed.

Soaring home prices over the past year have forced a majority of today’s homebuyers to use the maximum mortgage amounts they’ve been approved for.

More than 65% of recent buyers bought the maximum amount of house they could afford, according to the Canada Mortgage and Housing Corporation’s (CMHC) latest consumer survey.

For about 6 in 10 buyers, that amount was less than $500,000, while 8% of buyers spent over $1 million on their purchases.

Yet, only about a quarter (27%) said they paid more than they had planned on their home, while 20% said they paid less than expected.

“This year’s survey includes important takeaways on affordability and how the market has reacted to the pandemic and current economic conditions,” noted Sam Carnavole, CMHC’s Director of Client Relationship Management.

Key Consumer Mortgage Trends

CMHC’s survey was chock full of data that provided important insight into today’s mortgage consumers. Here are some of the key findings from this year’s survey…

Mortgage Types

  • 70% of mortgage consumers have a fixed-rate mortgage
  • 21% have a variable rate
    • 33% for those aged 18 to 24
  • 6% have a hybrid (combination of fixed and variable)
  • 3% don’t know
  • 56% of borrowers have a 5-year term
    • 8% have a 1- or 2-yr term
    • 16% have a 3-yr term
    • 11% have a 4-yr term
    • 5% have a term greater than 5 years
  • 45% of first-time buyers have an amortization of 25 years or more
  • 41% make monthly mortgage payments (53% of first-time buyers)
    • 13% have semi-monthly payments
    • 26% have bi-weekly
    • 8% have weekly
    • 7% have an accelerated bi-weekly

Prices Paid

  • 31% of buyers were involved in a bidding war during their home purchase
  • 66% believe that the bidding process should be more transparent and that all parties should be privy to the bids submitted
  • 45% said if the bidding process was transparent, they’d be less inclined to use a real estate agent
  • 32% of buyers incurred unexpected housing costs, including:
    • moving expenses (32%)
    • land transfer tax (25%)
    • home inspections (24%)
    • mortgage application fees (14%)
    • mortgage-default insurance (13%)

First-Time Buyers Incentive

  • 72% of first-time buyers were aware of CMHC’s First-Time Home Buyer’s Incentive
  • 74% said they would rather maintain the equity in their home vs. participating in the shared-equity program

Homebuying Process

  • 28% said price/affordability was the top factor when considering buying their current home
    • 13% said type of home
    • 10% said neighbourhood
    • 10% cited living space
    • 4% said proximity to work

Down payments

  • 37% of respondents put down more than 20% of their home value
    • Of those, 28% wanted to avoid paying mortgage default insurance
    • 26% wanted to pay down their mortgage as fast as possible
  • Of those who put down less than 20%, the top reasons were:
    • lack of funds (47%)
    • wanting to keep money for other expenses (33%)
    • comfortable with their current debt obligations (15%)
  • Top sources for down payments included:
    • savings outside of an RRSP (38%)
    • equity from a previous home (25%)
    • RRSP savings (11%)
    • gift from a family member (8%)
    • a new loan (5%)
    • a HELOC (4%)

Mortgage Sources

  • 42% of mortgage consumers used a mortgage broker to arrange their mortgage
  • Of the remainder, 94% got their mortgage directly from a bank or financial institution
  • Of those who used the services of a mortgage broker:
    • 85% felt a broker would get them the best mortgage rate or deal
    • 84% said the service they received was excellent
    • 85% said using a broker was convenient and saved them time
    • 84% wanted to use a broker that provided advice and recommendations
    • 81% wanted to use a broker that could meet all of their financial needs
    • 79% felt a broker would increase their chances of being approved for their mortgage
  • Homebuyers who used a broker were presented with an average of three rate offers

Mortgage Lenders

  • 61% of borrowers got a mortgage from their existing financial institution
  • 30% of respondents switched lenders for a better interest rate
    • 14% switched for better product terms and conditions
    • 9% wanted better client service from their lender
    • 7% said they switched due to bad client service from their previous lender
  • 33% of consumers were contacted by their mortgage lender after the transaction

Home ownership as an investment

  • 85% agree that home ownership is a good long-term financial investment
  • 81% are confident they have the tools and information to manage their mortgage and debt load
  • 78% believe they got the best mortgage for their needs
  • 77% are comfortable with their level of debt
  • 75% believe their house will increase in value over the next 12 months
  • 70% of consumers say they plan to renovate over the next five years
    • Of those, 18% plan to finance their renovations using a home equity line of credit (HELOC)
    • Another 18% plan to use their credit cards
    • 18% say they will draw from their mortgage
Published by Steve Huebl
20 Jul

No Campfire? No Problem!


Posted by: Kyra Park

Summer means camping, and camping means campfires! With fire bans in full effect across the Island, we thought you might need some alternatives!

Camping without a campfire can throw off even the most experienced campers: It’s your light at night, your stove for breakfast, lunch and dinner, and a source of warmth when it gets chilly.

Some campgrounds ban campfires during wildfire season while others don’t allow them at all. But don’t worry; your trip isn’t ruined if you can’t have a campfire. Here are five tips to help you have a great time without it.

1. Plan Your Food

Without a campfire, you have to rethink meal preparation. This may seem tricky, if you’re used to cooking over a campfire, but it’s easy if you prepare ahead of time. There are three ways you can handle this:

Use a camping stove. If you already pack your camp stove every time, then you’re in luck. If you use a small, portable grill like this one from Weber, check whether it can heat pots and pans. These are often best for cooking directly on the grill itself.

Cook food at home and then eat it cold at the campsite. Some foods to cook at home include: pasta, quinoa, chicken, homemade pizza and macaroni and cheese.

Bring no-cook foods like cold cuts, peanut butter and jelly fixings, cereal, bagels and tuna salad.

2. Bring Nighttime Entertainment

Nights at the campsite are typically spent talking and telling stories around the campfire. Without this to gather around, you need to find other entertainment for your evening. Other than stargazing, you can:

  • Play card games
  • Play dominos
  • Play board games
  • Listen to a book on tape
  • Play a guitar (or other instruments)

3. Pack Extra Warm

Your campfire is an important source of heat on chilly nights at the campsite. Bring extra blankets, sweatpants, sweatshirts and pajamas to make sure you’re warm without it.

4. Don’t Forget Lighting

Without your primary source of light when the sun goes down, it’s important to remember other forms of lighting for the campsite like flashlights and lanterns. Remember to bring extra batteries in case your lights die during the trip. Check out these 6 Lighting Options for the Campsite for fun ideas.

5. Plan for Stargazing

The one benefit of not having a campfire is less light at the campsite, which means you can search the night sky for constellations and shooting stars without going to the campground park or a field. Don’t forget to bring extra blankets—to lie on and to cover up with—so you don’t have to get your tent blankets dirty.


Article from Jessica Sanders- Reserve America

19 Jul

The Latest in Mortgage News: Mortgage Debt Soars as Credit Card Debt Falls to 6-Year Low


Posted by: Kyra Park

Mortgage Debt goes up, and Credit Card Debt goes down!

Canada’s hot housing market was behind a 41.2% annual increase in new mortgages as of the first quarter, Equifax Canada reported.

The average mortgage amount also rose by 20.5% to $326,903.

“Low interest rates and speculation around U.S. inflation impacting our interest rates has fueled mortgage volumes as consumers fear future interest rate hikes,” Rebecca Oakes, AVP of Advanced Analytics at Equifax Canada, said in a release. “Competition among homebuyers is fierce in many markets across the country. We’ll monitor whether [OSFI’s] new mortgage stress test helps to cool off the hot housing market.”

The increased mortgage demand pushed consumer debt in Canada to $2.08 trillion, up 0.62% from the previous quarter and a 4.78% jump from a year earlier.

Meanwhile, a pandemic-induced drop in spending led to credit card debt plummeting to 2015 levels. Equifax said credit card balances dropped an average of 9.9% compared to 2020. “While deferral programs have come to an end for most consumers, government incentives are still in place, which has helped consumers in paying down their credit card debt,” Oakes added.

The average consumer non-mortgage debt now stands at $20,430, a 4.2% drop from Q1 2020.

M3 Group Acquires Outline Financial

M3 Group took another step in its expansion efforts with the addition of Outline Financial to its brokerage brand.

The move follows the company’s recent acquisition of Pinch Financial and the expansion of its National Bank of Canada partnership to Ontario.

Effective immediately, Toronto-based Outline Financial will operate under M3’s Verico banner.

“Professionalism and trust remain core pillars for us, and Outline Financial has an incredible track record of embracing these success principles to drive great results for their brokers,” Luc Bernard, Chairman and CEO of M3 Group, said in a release. “We look forward to leveraging their experience and guidance to continue moving this amazing ecosystem forward.”

The award-winning brokerage, which reports annual mortgage volume of more than $17 billion, will now have access to M3 Group’s offering of products and services, as well as its BOSS submission platform.

CMHC Pulls U-Turn on Mortgage Tightening

The Canada Mortgage and Housing Corporation (CMHC) announced earlier this month that it will be returning to its pre-July 2020 mortgage underwriting practices.

The agency lost about half of its market share among mortgage insurers soon after it  introduced stricter underwriting guidelines last July in response to the pandemic.

Those measures included reducing the maximum total and gross debt service ratios needed for an insured mortgage, increasing the minimum credit score to 680 from 600 and banning non-traditional sources of down payments.

“We are taking this action because our July 2020 underwriting changes were not as effective as we had anticipated and we incurred the cost of a decline in our market share,” CMHC said in a release. “A healthy market share is an important consideration as it helps us fulfill the financial stability aspect of our mandate. We aim to maintain enough presence to be able to: a) step in to support financial stability and b) absorb additional market share as required.”

Private mortgage insurer Sagen reported a rise in market share to about 43%, up from 30-35% a year ago, while Canada Guaranty confirmed its share rose to around 30%, up from mid-20% a year earlier.

This means CMHC will once again consider a Gross Debt Service (GDS) ratio up to 39% (up from 35%) and Total Debt Service (TDS) ratio up to 44% (up from 42%) for borrowers who “have a strong history of managing their payment obligations.” The minimum credit score needed to be approved by CMHC will return to 600 from 680.

Published by Steve Huebl
16 Jul

Canadian Home Sales Continued Their Slowdown in June.


Posted by: Kyra Park

Another month, another slow down in the housing market!

Today the Canadian Real Estate Association (CREA) released statistics showing national existing home sales fell 8.4% nationally from May to June 2021, marking the third consecutive monthly decline. Over the same period, the number of newly listed properties fell 0.7%, and the MLS Home Price Index rose 0.9%, a marked deceleration from previous months.

Activity nonetheless remains historically high, but in contrast to March’s all-time record, it is now running closer to levels seen in the first half of 2020. While sales are now down a cumulative 25% from their peak, and below every other month in the last year, June transactions still managed to set a record for that month (see chart below).

For the second month in a row, sales were lower in every province. The steepest drops were in B.C. (-14.6% m/m) and the Atlantic provinces (down a combined 9.8% m/m). In Ontario, sales fell 9.0% m/m. They posted a much smaller 1.9% m/m drop in Quebec.

June’s decline was helped along by stricter stress test rules implemented at the beginning of the month. We expect these rules to continue to weigh on demand in the near term, although the amount of tightening this time around (+46 bps) pales in comparison to early 2018 (+220 bps), the last time the rules were changed.

The actual (not seasonally adjusted) number of transactions in June 2021 was up 13.6% on a year-over-year basis.

“While there is still a lot of activity in many housing markets across Canada, things have noticeably calmed down in the last few months,” said Cliff Stevenson, Chair of CREA. “There remains a shortage of supply in many parts of the country, but at least there isn’t the same level of competition among buyers we were seeing a few months ago.”

New Listings

The number of newly listed homes edged back a slight 0.7% in June compared to May. In contrast to the past year’s synchronicity in demand and supply trends, the little-changed national new supply figure in June reflected a mixed bag of results, with about half of local markets seeing gains – welcome news for frustrated buyers.

The national sales-to-new listings ratio was 69.2% in June 2021, the lowest reading since last August. That said, the long-term average for the national sales-to-new listings ratio is 54.6%, so it remains historically high; although, it has been steadily moderating since peaking at 90.8% back in January (see chart below).

Based on a comparison of sales-to-new listings ratio with long-term averages, more than half of all local markets were in balanced market territory in June, measured as being within one standard deviation of their long-term average. The was a significant shift compared to most of the past year which saw a majority of markets well into seller’s market territory.

There were 2.3 months of inventory on a national basis at the end of June 2021, up from 2.1 months in May and up from an all-time record-low of just 1.8 months in March. That said, it is still very much in sellers’ market territory. The long-term average for this measure is a little over 5 months.

Home Prices

The Aggregate Composite MLS® Home Price Index (MLS® HPI) rose 0.9% month-over-month in June 2021, continuing the trend of decelerating month-over-month growth that began in March. That deceleration was initially seen more so on the single-family side; although, that trend is now also playing out in the townhome and apartment segments.

The non-seasonally adjusted Aggregate Composite MLS® HPI was up 24.4% on a year-over-year basis in June. Based on data back to 2005, this was another record year-over-year increase; although, given how price growth took off in July of last year, this June 2021 reading may end up being the peak for year-over-year growth.

Looking across the country, year-over-year price growth is averaging around 20% in B.C., though it is lower in Vancouver and higher in other parts of the province. Year-over-year price gains in the 10% range were recorded in Alberta and Saskatchewan, while gains are closer to 15% in Manitoba. Ontario is seeing an average year-over-year rate of price growth in the 30% range, however, as with B.C., gains are notably lower in the GTA and considerably higher in most other parts of the province. The opposite is true in Quebec, where Montreal is in the 25% range and Quebec City is in the 15% range. Price growth is running a little above 30% in New Brunswick, while Newfoundland and Labrador are in the 10% range.

Bottom Line

Since peaking in March, home sales are down 25% from the inferno levels early this year, but demand is still historically strong. Despite the steep pullback, seasonally adjusted sales are roughly 18% above pre-pandemic trends. When the economy opens fully and immigration resumes, the underlying fundamentals for housing demand will rise, especially as university students return to campus living, and adult children move into their own nests.

Sales activity will continue to gradually cool over the next year, but it will take higher interest rates to soften the housing market in a meaningful way.

Condo sales in markets such as Toronto and Vancouver have picked up from their pandemic lows in recent months. This is the polar opposite of what happened earlier in the pandemic, when sales of relatively expensive detached units dominated, raising average prices. Moving forward, if condos consume a rising share of the overall sales pie (perhaps through strong demand for these units, slowing sales of detached houses, or some combination of both), compositional effects could continue to weigh on average prices.

Published by Dr. Sherry Cooper & The DLC Marketing Team

15 Jul

Bank of Canada Tapers Bond-Buying Again.


Posted by: Kyra Park

Bank of Canada ‘On the Vanguard’ of Unwinding Stimulus

The Bank of Canada raised its inflation forecast in the newly released July Monetary Policy Report (MPR), making it one of the most hawkish central banks in the world. The Bank announced its third action to reduce its emergency bond-buying stimulus program by one-third. The central bank was among the first from the advanced economies to shift to a less expansionary policy last April when it accelerated the timetable for a possible interest-rate increase and pared back its bond purchases. In today’s press release, the Bank announced it would adjust its quantitative easing (QE) program again to a target pace of $2 billion per week of Government of Canada bond purchases–down $1 billion from its prior target of $3 billion per week. This puts upward pressure on bond yields, all other things constant. No doubt, the federal government’s funding of the enormous Covid-related budget deficits has been abetted by the central bank’s bond-buying.

The pace of purchases of Canadian government bonds was as high as $5 billion last year. The central bank acquired a net $320 billion of the securities since the start of the Covid-19 pandemic. The bank owns about 44% of outstanding Canadian government bonds.

The Bank of Canada has said it wants to stop adding to its holdings of government bonds before it turns its attention to debating rate increases. Still, officials chose not to accelerate the projected timeline for a possible hike today.

In holding the overnight rate at the effective lower bound of .25%, the Governing Council reaffirmed its “extraordinary forward guidance” that the Canadian economy still has considerable excess capacity. The recovery continues to require extraordinary monetary policy support. “We remain committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2% inflation target is sustainably achieved,” the central bank said in the policy statement. In the Bank’s July projection, this happens sometime in the second half of 2022.

Swaps trading suggests investors are fully pricing in a rate hike over the next 12 months and a total of four over the next two years, which would leave Canada with one of the highest policy rates among advanced economies. This puts the Bank of Canada ahead of the Fed in raising interest rates. Chair Powell told Congress today that the US economy isn’t ready for bond tapering. “Reaching the standard of ‘substantial further progress’ is still a ways off,” he said in prepared remarks. In the U.S., investors aren’t pricing in any rate hike over the next year and only two over the next two years.

July Monetary Policy Report

The Bank revised its forecast for Canadian GDP growth this year from 6.5% in the April MPR to 6.0% because of the more restrictive third-wave pandemic lockdown in the second quarter. Growth is now expected to pick up strongly in the third quarter of this year. Consumer confidence has returned to pre-pandemic levels, and a high share of the eligible population is vaccinated. As the economy reopens, consumption is expected to lead the rebound, increasing spending on services such as transportation, recreation, and food and accommodation.

Housing resales have moderated from historically high levels but remain elevated (Chart below). Other areas of housing activity—such as new construction and renovation—remain strong, supported by high disposable incomes, low borrowing rates and the pandemic-related desire for more living space.


CPI Inflation Boosted By Temporary Factors

The Bank revised up its inflation forecast for this year but asserted once again that inflation would return to 2% in 2022. This is a controversial call consistent with central-bank mantras around the world. The BoC said, “Three sets of factors are leading to this temporary strength. First, gasoline prices have risen from very low levels a year ago and are above their pre-pandemic levels, lifting inflation. Second, other prices that had fallen last year with plummeting demand are now recovering with the reopening of the economy and the release of pent-up demand. Third, supply constraints, including shipping bottlenecks and the global shortage of semiconductors, are pushing up the prices of goods such as motor vehicles.

The BoC expects CPI inflation to ease by the start of 2022 as the temporary factors related to the pandemic fade. Economic slack becomes the primary factor influencing the projection for inflation dynamics thereafter. The uncertainty around the outlook for the output gap and inflation remains high. Because of this, the estimated timing for when slack is absorbed is highly imprecise. In the projection, this occurs sometime in the second half of 2022. After declining to 2% during 2022, inflation is expected to rise modestly in 2023 as the economy moves into excess demand. The excess demand and resultant increase in inflation to above target are expected to be temporary. They are a consequence of Governing Council’s commitment to keeping the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2% inflation target is sustainably achieved.

Inflation is expected to return toward the target in 2024. The projection is consistent with medium- and long-term inflation expectations remaining well-anchored at the 2% target. Both businesses and consumers view price pressures as elevated in the near term. A large majority of respondents to the summer 2021 Business Outlook Survey now expect inflation to be above 2% on average over the next two years. Nonetheless, firms view higher commodity prices, supply chain bottlenecks, policy stimulus and the release of pent-up demand as largely temporary factors boosting inflation higher in the near term.

Bottom Line

Only time will tell if the Bank of Canada is correct in believing that inflation pressures are temporary. Financial markets will remain sensitive to incoming data, but for now, bond markets seem willing to accept their view. The 5-year GoC bond yield has edged down from its recent peak of 1.0% posted on June 28th to a current level of .936%. As well, the Canadian dollar has weakened a bit, to US$0.7993, since the release this morning of the BoC policy statement. The loonie, however, remains among the strongest currencies this year vis a vis the US dollar.

Published by Dr. Sherry Cooper & The DLC Marketing Team

13 Jul

Canadian Jobs Market Rebounds in June As Lockdown Eases.


Posted by: Kyra Park

Lock downs ease, and employment rates increase!

This morning, Statistics Canada released the June 2021 Labour Force Survey showing employment rose 230,700 (1.2%) in June, rebounding from a cumulative decline over the previous two months of 275,000. Total hours worked were little changed. The national unemployment rate fell 0.4 percentage points to 7.8%.


Jobs continue to swing back and forth as the various COVID waves drive lockdowns and reopenings. Hopefully, we’re in the last of the reopenings. Services accounted for all of the gains. Hospitality jobs were the biggest gainer, as expected, adding 101k positions, but they remain well below pre-virus levels. Restrictions are expected to continue easing through the summer, which should mean more solid gains over the next couple of months. Other sectors seeing a boost from the reopening were retail/wholesale (+78k), education (+26k) and health care (+20.5k). Goods sectors were down across the board, with losses concentrated in construction (-23k) and manufacturing (-12k).

Beyond the headline increase, one of the bigger stories in this report is the sharp 0.6 ppt rise in the participation rate to 65.2%. That’s the largest increase in a year and leaves the rate 3-4 ticks away from pre-COVID levels. Compare that to the U.S., where the participation rate is still nearly 2 ppts lower than in early 2020. The rise in the participation rate limited the decline in the jobless rate to 0.4 ppts to 7.8%, still some wood to chop there. The rising participation rate should alleviate some concerns about widespread labour shortages.The bulk of the gains were in pandemic-exposed sectors, like retail, food and accommodation, that got hit most by the new containment measures. Employment in accommodation and food services was up 101,000. The retail sector added 75,000 jobs.

Increasing vaccination rates and falling Covid-19 case counts have allowed the country to finally re-open restaurants, bars and retail stores after months of closures. Ontario began allowing patio dining earlier this month, and several cities in Quebec have further relaxed restrictions, allowing indoor dining for the first time this year.

With the June gains, Canada has recovered 2.65 million of the 3 million jobs lost at the height of the pandemic last year. The nation created 263,900 part-time jobs, with full-time employment down 33,200.Employment growth in June was entirely in part-time work and concentrated among youth aged 15 to 24, primarily young women. Increases were greatest in accommodation and food services and retail trade, consistent with the lifting or easing public health restrictions affecting these industries in late May and early June in many jurisdictions.

The number of employed people working less than half their usual hours fell by 276,000 (-19.3%) in June. Total hours worked were little changed and were 4.0% below their pre-pandemic level.

The employment increase in June was in part-time work, which rose by 264,000 (+8.0%) following combined losses of 132,000 over the previous two months. The overall level of part-time employment was essentially the same as in February 2020, before the COVID-19 pandemic. Increases in the month were driven by accommodation and food services and retail trade—two industries where part-time workers represent an above-average proportion of employment—and were concentrated among youth.

After falling by 143,000 over the previous two months, full-time work was little changed in June and was 336,000 (-2.2%) lower than its pre-pandemic level.


The number of private-sector employees rose by 251,000 (+2.1%) in June, following two monthly declines. As of June, the number of private-sector employees was 2.5% lower (-313,000) than in February 2020.

In the public sector, employment rose by 43,000 (+1.1%) in June, bringing it to 180,000 (+4.6%) above pre-pandemic levels. Employment in this sector has trended up following the initial wave of the pandemic, particularly driven by increases in health care and social assistance, public administration, and educational services.

The number of self-employed workers fell by 63,000 (-2.3%) in June and was down 7.2% (-207,000) compared with February 2020. Self-employment is a broad category that includes workers in various situations, including working owners of incorporated or unincorporated businesses and independent contractors. Compared with June 2019, declines in the number of self-employed were widespread across multiple industries and were concentrated among the self-employed with paid help.


To fully understand current and emerging labour market trends, it is essential to consider employment change against the backdrop of population change, which totalled 1.1% (+334,000) between February 2020 and June 2021. To keep pace with this population growth and maintain a stable employment rate—that is, employment as a proportion of the population aged 15 and over—employment would have had to grow by 203,000. Instead, total employment was 340,000 lower in June than in February 2020, and the employment rate was 1.7 percentage points lower (60.1% compared with 61.8%).


Among Canadians who worked at least half their usual hours in June, the number who worked from home fell by nearly 400,000 to 4.7 million. For 2.6 million of these people, working from home represented an adaptation to the COVID-19 pandemic, as this was not their usual work location. At the same time, the number of people working at locations other than home rose by approximately 700,000 to 12.3 million.

Almost one-third (31.4%) of workers aged 25 to 54 and more than one-quarter (27.2%) of those aged 55 and older worked from home in June. Due to their concentration in industries where working from home is less feasible, such as accommodation and food services, a far smaller proportion of youth aged 15 to 24 (12.9%) did so.

Regionally, Ontario and Quebec led the way higher, though B.C. and Nova Scotia had solid increases as well. Interestingly, even with restrictions easing through most of the country, only five provinces reported job gains.


Bottom Line 

The jobs report is the last major piece of economic data before next week’s Bank of Canada policy decision, where it’s expected to continue paring back its stimulus efforts. The Bank of Canada is among the first from advanced economies to shift to a less expansionary policy, having already cut its purchases of Canadian government bonds to $3 billion weekly from a peak of $5 billion last year.

Analysts anticipate that will come down to C$2 billion per week at the July 14 meeting before eventually falling to a weekly pace of about C$1 billion by early next year. In addition to the bond tapering, the market has priced in at least one interest rate hike by this time next year.

Canada’s economy remains 340,000 jobs shy of pre-pandemic levels. The unemployment rate was below 6% before the pandemic.

With vaccination rates rising and restrictions easing, economists are predicting a strong rebound in the second half. According to a Bloomberg News survey of economists earlier this month, Canada’s expansion is seen accelerating to an annualized pace of 9.1% in the third quarter, with a 6% gain in the final three months of 2021. Consumer and business confidence regarding the outlook has recently hit record highs.

Published by Dr. Sherry Cooper & The DLC Marketing Team

8 Jul


Posted by: Kyra Park

As a first-time buyer, I am here to give you some tips on homebuyer mistakes to be on the lookout for so you can avoid them for the best experience possible!

Thinking You Don’t Need a Real Estate Agent
You might be able to find a house on your own, but there are still many aspects of buying real estate that can confuse a first-time buyer. Rely on your agent to negotiate offers, inspections, financing and other details. The money you would have saved on commission can be quickly gobbled up by a botched offer or overlooked repairs.

Going With The First Real Estate Agent You Find
As much as not having a real estate agent can be a disadvantage, having the wrong one can also make the process more difficult. You don’t want to get halfway into house-hunting before realizing your real estate agent is wrong for you. Ideally, you want to source an agent from a friend or family referral. However, if you are stuck or looking for more options, I would also be happy to provide some referrals as your mortgage professional.

Getting Your Heart Set on a Home Without Doing Your Homework
The house that’s love at first sight may not always be what it seems, so it is important to keep an open mind. If you jump in too fast you may be too quick to go over budget or you might overlook a potential pitfall. Taking the time for proper inspections, budget comparisons and long-term family planning can go a long way in ensuring your first home is the right home!

Committing to More Than You Can Afford
This is one of the most common mistakes that first-time homebuyers can run into, but to ensure your future financial security it is imperative to truly consider your budget. You don’t want to sacrifice retirement savings, an emergency fund or potential holiday for mortgage payments. You need to stay nimble to life’s changes and overextending yourself could put your investments—including your house—on the line.

Fixating on the Lowest Interest Rate
A reasonable interest rate is important, but not at the expense of heavy restrictions and penalties. Make a solid long-term plan to pay off your mortgage and then find one that’s flexible enough to accommodate life changes, both planned and unexpected. I would be happy to discuss all of your mortgage options with you to ensure that you get the best overall mortgage product with an affordable rate that suits YOU!

Choosing a Fixer-Upper Simply for the Cheaper Listing Price
That old character home may have loads of potential, but it is vital to be extra diligent during the inspection period. What will it really cost to get your home to where it needs to be? Negotiating a long due-diligence period will give you time to get estimates from contractors in case you need to back out.

Diving Into Renovations as Soon as You Buy
Whether or not you choose a fixer-upper or simply want to update some things in your new home, it is important not to rush into them. While renovations may increase the value of your home, overextending your credit to get upgrades done fast doesn’t always pay off. Take time to make a solid plan and the best financial decisions. Living in your home for a while before renovating will also help you plan the best functional changes to the layout.

Not Researching the Neighbourhood
It may be the house of your dreams, but annoying neighbours or a nearby industrial zone can be a rude awakening. Spend some time in the area before you make an offer and talk to local business owners and residents to determine the pros and cons of living there.

Opting Out of Mortgage Insurance
Your home is your largest investment and it is imperative that you protect it. Mortgage insurance not only buys you peace of mind, it also allows for more flexible financing options. Plus, it allows you to take advantage of available equity to pay down debts or make financial investments. If you are ready to search for your first home, don’t hesitate to reach out to me today for expert advice, referrals and mortgage solutions that are right for you!


6 Jul

CMHC Changes Underwriting Practices on Mortgage Loan Insurance


Posted by: Kyra Park

OTTAWA — Canada Mortgage and Housing Corp. is easing its underwriting criteria for mortgage loan insurance after changes it made last year were not effective and caused it to lose market share.

The federal housing agency said Monday that it returned to considering a gross debt service ratio of up to 39 per cent and a total debt service ratio of up to 44 per cent for borrowers who have a strong history of managing payment obligations.

Gross debt service refers to the maximum amount of gross annual income that can be used for home-related expenses like mortgages, heat or condo fees, while total debt service is calculated when these expenses are combined with monthly debt payments owed on items such as credit cards or cars.

The agency will also now request at least one borrower or guarantor seeking insurance have a credit score that is greater than or equal to 600.

“We are taking this action because our July 2020 underwriting changes were not as effective as we had anticipated and we incurred the cost of a decline in our market share,” CMHC said in a release.

Last July, the agency required a minimum credit score of at least 680 and limited the gross and total debt servicing ratios to 35 and 42 per cent respectively, which it expected to decrease purchasing power by up to 11 per cent.

Those moves were meant to protect homebuyers, reduce government and taxpayer risk and support the stability of housing markets while curtailing excessive demand and unsustainable price growth during the pandemic.

CMHC’s decision to reverse its policy won’t have much impact on consumers because the change is focused on insurance that lenders obtain, said James Laird, the co-founder of Ratehub.ca and president of the CanWise Financial mortgage brokerage.

When CMHC made their standards more difficult, he said other options were available from rivals Sagen and Canada Guaranty.

“When one company has tougher underwriting criteria than their two competitors, then naturally the market starts to use the two competitors, much more,” said Laird.

CMHC declined to share who they lost their market share to or how much of it was lost.

Published by The Canadian Press