Weekend Reading: Bank of Canada Hikes Rates (Again) Edition

The Bank of Canada raised its key interest rate again this week, marking the third time since last summer that they’ve increased the benchmark lending rate. It now sits at 1.25 percent, while Canada’s big banks all moved their prime ending rate to 3.45 percent.

The move has financial experts warning of the impact on household debt, which sits at a staggering $1.71 per dollar of disposable income. Increases to prime rate will have an immediate impact on variable rate mortgages and lines of credit. Here’s Garth Turner on what the rate hike means for Canadian borrowers.

Meanwhile, fixed rates, which are affected by the bond market, ticked up earlier this year. The best 5-year fixed mortgage rates can still be found at around 2.79 percent. However, qualifying for a mortgage has become more difficult as the new ‘stress test’ forces borrowers to qualify at the posted rate, which just went above 5 percent for the first time in four years.

My own mortgage is up for renewal this fall and I’ll stick with my philosophy of finding the best of either the five-year variable rate or a 1-or-2-year fixed rate. Last time the 2-year fixed rate won out. This time I’m betting on the return of the deep-discount variable rate.

If you’re facing the same dilemma, RateSpy has a great checklist on when you should consider a fixed or variable rate.

This Week’s Recap:

Many thanks to Rob Carrick for featuring me in his latest Carrick on Money: “He dumped his dividend stocks. How’s that working out?

On Monday I shared my budget and provided a free downloadable Excel spreadsheet. I’d love to hear your feedback on it.

On Wednesday Marie explained how to take advantage of member benefits and discounts.

And on Friday Marie continued her ‘Building Your Wealth’ series with a look at alternative investments.

Be sure to check-in with us again next week as I’ll be diving into annuities and showing you how much a lump sum will actually pay you per year.

Weekend Reading:

The Dividend Guy Blog took issue with my switch from dividends to indexing, as well as Rob Carrick’s comment about the “dividend investing cult.”

Michael James shared his 2017 investment returns and subtly announced he retired last summer. Congrats Michael!

Ben Carlson updates his favourite investing performance chart for 2017 – the periodic table of investment returns.

In the latest Canadian Couch Potato podcast, Dan Bortolotti interviews financial planner and author Shannon Lee Simmons, and also explains why Bitcoin doesn’t belong in your portfolio.

Why is the U.S. stock market so unique? Along with Japan, it’s the only market that isn’t dominated by a handful of companies:

“What’s striking about these statistics is not only that these countries have concentrated holdings but that those holdings are often in very few sectors. For example, the Canadian ETF has 64 percent of its holdings in just two sectors (financials and energy). It’s even worse in Russia, where 71 percent of stocks are in financials and energy. China has 64 percent in technology and financials.”

Jason Heath explains pension income splitting; including the kind of pension that qualifies, when it makes sense to defer and the tax consequences to watch out for.

Finally, Ben Carlson again with a thoughtful post on why you should be working less.

Have a great weekend, everyone!

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3 Comments

  1. Michael James on January 21, 2018 at 1:23 pm

    Thanks, Robb. Retirement has been great so far. I won’t rule out some consulting work, but I seriously doubt I’ll ever work 9-to-5 again.

    I find the name calling (your investing method is a cult, NO your investing method is a cult) to be pointless. Most index investors screw up by making some poor market-timing choices. So do some people who call themselves dividend investors. Most dividend investors believe they can pick superior stocks, which may be true in some cases. And most dividend investors believe at some level that dividends come for free and that they will get their full share of price appreciation as well. The minority from both camps who don’t make these mistakes are likely to fare very well.

  2. The Dividend Guy on January 21, 2018 at 2:00 pm

    Thx for the mention Robb. After reading your article, I think you did the right thing for your situation. But I just think that Rob was a bit fast with the ETF-investing-is-the-best-thing-in-the-world praise 😉
    Cheers,
    Mike.

  3. Yvan on January 21, 2018 at 5:42 pm

    We would have loved to get a mortgage at 3.45 % when we bought our condo back in 1987. Our first mortgage was at 10.5% and then we renewed at 17.5%. Times were tough then too.

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