HSBC Canada made history this week when it announced a 0.99% mortgage rate – the lowest advertised rate ever offered in Canada. The 0.99% mortgage rate is available for high-ratio insured purchases (i.e. for those putting less than 20% down). It’s not a fixed rate, but a steeply discounted variable rate of prime minus 1.46%.
RateSpy.com also reported that HSBC launched three more record-low mortgage rates, including 1.39% on a 5-year fixed rate mortgage (high-ratio insured purchases), 1.59% on a 5-year fixed rate for uninsured purchases and switches, and 1.64% on a 5-year fixed rate for refinances. Incredible.
It seems like a no-brainer to take advantage of a 0.99% variable rate mortgage, given that the Bank of Canada has pledged to maintain its key lending rate at a historic low until at least 2023. That’s at least two years of sub-1% borrowing.
“At this point, we can’t blame any well-qualified insured borrower for wanting a piece of this rate. And HSBC’s floating-rate features are fantastic. It’s a standard-charge mortgage that’s fully open after three years and you get to convert to a fixed rate anytime without penalty (not that we’re advocating that). That’s not to mention the much more favourable 3-months’ interest penalty of a variable versus a fixed.” – RateSpy.com
I remember when BMO made headlines in 2012 when it offered the first sub-3% fixed rate mortgage (a 4-year with conditions, if memory serves). Eight years later, HSBC has broken the 1% barrier.
Meanwhile, I have clients and readers who still have mortgage rates above 3%. If you find yourself in that position, it’s time to seriously consider refinancing your mortgage. A mortgage broker can help you run the math and determine if it makes sense to pay a penalty to break your existing mortgage and refinance into one of these record low mortgage rates.
This Week’s Recap:
I was happy to contribute to Young & Thrifty’s Financial Literacy Month piece with my top financial lesson for Canadian millennials.
Last week I explained why I switched back to the Scotia Momentum Visa Infinite card for my everyday spending.
Stay tuned for a couple of interesting profiles coming up on the blog – one that looks at a small family of ETFs with eye-popping returns, and another that looks at a new online service for arranging funerals.
I was happy to see that Wealthsimple Trade (the zero-commission trading platform) has launched a desktop version of its platform (currently in beta and not available to all users). I moved my RRSP and TFSA to WS Trade in January and so far have really enjoyed the experience.
I’m also amazed at the resiliency of the stock market. When my portfolio was down 34% in March, I would have never predicted it would rally and actually be up 7.41% on the year. Unbelievable. I might have an outside shot at reaching my $1M net worth milestone at the end of the year.
Wealthsimple Trade is Canada’s first and only zero-commission trading platform where investors can trade stocks and ETFs for free in an RRSP, TFSA, or non-registered account. Sign up for Wealthsimple Trade today and get a $10 cash bonus.
Weekend Reading:
Our friends at Credit Card Genius have the best credit card offers, sign-up bonuses, and deals for the month of December.
According to the National Institute on Aging, 95 per cent of Canadians take CPP at the age of 65 or earlier, with only 1% deferring until the maximum age of 70.
Michael James on Money offers a case study on his family’s CPP timing choice.
My Own Advisor Mark Seed interviews CPP expert Doug Runchey on the survivorship benefits for CPP and OAS.
A detailed and excellent look at CPP’s commitment to Canada 2050 (Canada’s path to net-zero emissions).
Working longer appears to boost longevity. Here’s Andrew Hallam on the retirement solution that could extend your life.
MoneySense’s Jason Heath shares some unique ideas for your last will and testament.
Rob Carrick answers a reader question about whether it makes sense to use preferred shares as a bond substitute.
Why wouldn’t you want to invest in the companies leading a new world-changing technological paradigm? Ben Felix explains in his latest Common Sense Investing video:
Our vision of the good life is stuck in the twentieth century. Max Fawcett says it’s time to reinvent it—starting with home ownership:
“If you showed someone from the late 1950s the typical Middleton life today, they would probably think society had made extraordinary economic advances. How else could someone middle class afford a beautiful car, an enormous new house (relative to what was normal, say, seventy years ago), and access to the kind of food and wine once the exclusive preserve of royalty and the very rich?”
Rich as I say, not as I do. Nick Maggiulli (Of Dollars and Data) takes issue with many so-called personal finance experts who have gotten wealthy by selling advice to others rather than by using their own advice.
Wealthsimple CEO Michael Katchen says the best path to financial literacy is to build products that people actually understand.
Finally, I want to share this excerpt from Global’s Money123 newsletter (subscribe to it here). It’s an answer to a reader question about retiring on a low income. Here’s the must-read advice from low-income retirement specialist John Stapleton:
“Max out your tax-free savings account (TFSA) when you can and any equivalent employee contribution while working. Avoid RRSPs if you are under age 65 and cash them out slowly before age 65 if you have them. Pay the tax penalty. Put the leftover money in a TFSA.
Take the Canada Pension Plan (CPP) early at 60 unless you receive social assistance.
Apply for Old Age Security (OAS) one month after you turn 64. The OAS application is the same form as that for the Guaranteed Income Supplement (GIS). Apply for the GIS. Don’t tick the box that keeps you from applying for GIS.
If you are GIS-eligible at 65, register for an RRSP with any money you have between ages 65-71. If you don’t have money, consider borrowing from the same institution where you open your RRSP. OAS and the GIS begin at age 65. But people can keep contributing to RRSPs until they turn 71. Contributing to an RRSP effectively lowers your income for purposes of GIS eligibility.
Pay attention to fees. Avoid actively managed funds. Make sure your financial advisors commit to fiduciary standards. Buy inexpensive, well-diversified mutual funds such as D-series funds and always buy from a discount brokerage that you can find online. Never buy or sell individual securities.
Get a no-fee credit card with a low limit. Use it to pay for things but pay your credit card balance in full every month.
Maximize tax-advantaged savings vehicles like registered education savings plans (RESPs) if you have children and TFSAs for each family member who is eligible.
Maximize all entitlements but do everything you can to avoid social assistance whenever possible.
Print this page and keep it with you.”
Have a great Sunday, everyone!
