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Here’s how Canadian household debt levels could affect the housing market in 2019

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For months, industry experts have written about how higher interest rates will affect the Canadian housing market in 2019. But according to one economist, they might not be such a sure thing.

The Bank of Canada (BoC) hiked the overnight rate to 1.75 percent in October, part of an extended plan to slowly raise rates, after years of historically low levels. It is widely expected to do so again in 2019, a move which could exert a downwards pressure on the housing market, as mortgage rates rise and homebuyers’ purchasing power shrinks.

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But high household debt levels might cause the BoC to reconsider, according to Stephen Brown, senior Canada economist at Capital Economics.

“Households are even more vulnerable to higher interest rate(s) than we had previously thought,” writes Brown, in his most recent note. “In that environment, the Bank of Canada’s plan to raise interest rates repeatedly could be a serious policy mistake.”

Brown is referring in part to data released last week by Statistics Canada, which found that over the past year Canadians’ savings rate has dropped to just 1.4 percent of their incomes, the lowest level since 2005.

He writes that the low number — which suggests that Canadian households are in a vulnerable position when it comes to their debt loads — could cause the BoC to reconsider its plan to continue hiking rates.

“The Bank will ultimately be forced to reverse course next year, [and reduce rates],” he concludes.

Still, most industry experts maintain that the BoC will stick to its guns and continue to steadily raise rates in 2019. That’s especially true given that, ever since a new mortgage stress test was introduced in January, mortgage debt levels have been on the decline. In fact, mortgage borrowing fell by $3.6 billion in the second quarter of 2018, according to Statistics Canada.

And, a recent report from the Chartered Professional Accountants (CPA) of Canada found that Canadians’ credit quality remains strong, adding to the likelihood that households would be able to withstand higher interest rates.

“In contrast to the situation a decade ago in the US…the number of borrowers with high credit quality has risen from 66 percent in 2002 to 88 percent in 2017,” reads the CPA Canada report. “In turn, the number of low-credit-quality buyers shrank from 17 percent to three percent over that period.”

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New home? Prepare for the unexpected

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(NC) Buying a house, getting married or having your first baby are all major life events that are likely to affect your finances. But whether you’re in the midst of a major life event or not, it’s important to check in on your finances regularly to maintain good financial health.

Your financial health encompasses things like your spending, savings, borrowing and future financial plans. It also means dedicating a set amount of savings for unexpected future events. It can even include optional credit protection insurance, such as TD protection plans, to help cover your debt balances in case of death, a covered critical illness or total disability.

Even though it can be tough to think about the unexpected, life is unpredictable and it’s important to plan for the unexpected. Find more information at td.com.

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Mortgage pitfalls to avoid

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(NC) Throughout life, you may have moments where you’ll make a large purchase or invest in a costly item, like your family home. But whether you’re in the market for your first new property or already have a mortgage, leaving this asset unprotected can be costly.   

Insuring your housing financial debt, as well as debt for other big-ticket items like a new boat for your lakefront cottage or keepsake jewelry like an engagement ring, is a smart investment in your well-being.

To help protect your debt balances like a mortgage, your bank may have optional credit protection insurance products.

“Your home is one of your biggest assets, yet illness can happen at any stage of life. Worrying about your mortgage when the focus should be on health isn’t a situation anyone would wish for,” explains Shirley Malloy, vice president at TD. “Fortunately, we offer mortgage protection to provide coverage for your outstanding balance should you face a covered critical health event.”

Mortgage protection can be purchased whether you’re in the process of applying for a mortgage or already have a home financing solution. But what about protection options for credit card debt?

“Given the unprecedented circumstances of this year, many Canadians are trying to plan for the unexpected to protect themselves and their finances,” says Malloy. “TD balance protection plus is an optional product designed to help you deal with your credit card payment obligations in the event of a covered event, such as loss of employment.”

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Is your internet too slow? It’s probably not you

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(NC) We all know the aggravation of a school lesson that just won’t stop freezing or the family video call that looks more like a photo montage. And, as we adjust to the impact of COVID-19 on our day-to-day, that slow connection can have frustrating consequences.

Working from home and learning remotely, both need fast, stable internet, something not enough Canadians have yet. Even if you have fast devices in your home, if the infrastructure in your area is not optimal, your connection won’t be either.

Right now, cities have the infrastructure needed to ensure access. But rural and remote communities are hugely underserved, with fewer than half having high-speed internet, and fewer than a third of households on reservations have high-speed connections.

Fortunately, change is coming. The Universal Broadband Fund is backing projects across Canada right now to ensure the reliable, high-speed internet connections families need to work, study, access services online, and safely stay in touch with each other.

The fund existed before COVID, but as a response to the pandemic, its timetable has been moved up by four years to a target of 98 per cent of Canadians with high-speed internet access by 2026. With the faster pace, at least 90 per cent of us should be connected by the end of 2021.

The fund is focused on improvements in rural and remote communities across Canada to fix the disconnect between internet access for urban and rural households.  This means more remote work opportunities, better access to remote learning and safer access to healthcare, no matter where you live.

It’s not just for good connections at home, either. The improvements mean much better access to mobile networks on highways between remote communities. The result is better, safer navigation and access to emergency services for your family, even on the road in the middle of nowhere. Mobile projects will be focused on serving Indigenous communities and the roads leading to them.

The shape these improvements will take in your area will depend on where you live. Canada is huge, and its communities are hugely diverse, with diverse needs. Keep an eye out for local projects — they’re a small part of something much bigger.

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