Newsletter December 2021

We wish you a wonderful holiday season!
Stay healthy!!!
Lots of happiness and success in career and personal life!!!

1. Manulife Bank is offering a 1.5% annual return on all contributions into TFSA and RRSP.
2. How many times will the Prime Rate increase and when will it happen?
3. What to do with variable rate mortgages, is it time to switch to fixed rate?
4. What to expect in Real Estate market in 2022?
5. Holiday schedule for our office.

In more details:

1. Manulife Bank is offering a 1.5% annual return on all contributions into TFSA and RRSP.

Manulife Bank is offering 1.5% annual return on all new contributions into TFSA and RRSP, made prior to March 11th, 2022. This is an absolutely open account, funds are accessible. As usual, this interest is offered until April 30th, 2022. An account can be opened without coming to the office, application can be sent by e-mail. We are always ready to analyze your situation and help you understand, what type of account would be more beneficial for you – RRSP or TFSA.

2. How many times will the Prime Rate increase and when will it happen?

Of course we are all concerned with the rate of inflation and understand, that unfortunately, the inflation will lead to increase in interest rates and many will have to pay higher interest on variable rate mortgages and lines of credit.
Everybody is concerned with when the interest rate will begin to rise and how many times is this likely to happen in the near future.
Various articles titles already indicate what may happen.
“BoC signals worries about prices. Keep rate on hold” – Financial Post, December 09’21.
Central Bank of Canada believes that inflation will be high during the first half of year 2022 and will decrease towards 2% in the second part of year 2022.
“Biden says inflation at “peak” and should soon decline rapidly” – Financial Post, December 11’21.
Experts forecast a few increases in year 2022. Some assume there will be 5 increases, but majority believes that there will only be 3 increases and it will likely start around the middle of the year.
“Fed doubles taper, signals three 2022 hikes. Powell pivot.” Financial Post, December 16’21.
“GDP increases by an annual rate of 5.4%, but B.C. floods and Omicron variant inject elements of uncertainty” – Financial Post, December 16’21.
This article indicate that rapid multiple increases should not be happening in the near future.

3. What to do with variable rate mortgages, is it time to switch to fixed rate?

I often say that the best pension program is purchase of Real Estate. But to get to the point when the mortgage is paid off, takes years and we are forced to pay interest on the remaining balance.
This raises a question for those with variable rate mortgage, should the mortgage now be switched to fixed rate?
I wrote an article in Russian newspapers in November regarding variable rates and below you can read one excerpt from the article.

How to choose what is more beneficial – 1.3% variable rate mortgage or 2.79% fixed rate?
In order to surpass the 2.79% rate offered by the banks at the moment, the Bank of Canada would have to increase the Prime Rate 7 times. The timeline for rate increase has already been moved from the end of year 2022 to the summer, maybe sooner, but still, how long would it take the bank to increase the rates 7 times? Obviously more than one year, as this has a significant impact on the economy as well.
By this point we have just come to equalizing the rates, we are still not paying higher interest. In order to begin paying higher interest, the Bank of Canada would have to continue increasing the rate. On top of that, to lose the interest savings that we are going to receive in the near term, the rates would have to increase another 7 times. So when will we reach this point and will we reach it at all?

You can find the full article on our website by going to the following link How to prepare for the increase in Prime Rate in the coming years? | totrov.com.
This article mentions that in some scenarios we can offer a rate of under 1%, with such variable rates available there should be no consideration for a fixed rate.
I urge you to review your mortgage contracts, and if the variable rate is around 1.8% or higher, there is a financial benefit to get a new mortgage with much better rates. Having a low variable rate mortgage will help you benefit even with the Prime rate increase. The article on our website mentions what needs to be done to secure a better rate. We await your calls and e-mails.

4. What to expect in Real Estate market in 2022?

“Housing stays hot as prices set record” – Financial Post, December 16’21.
This article tells us that the Real Estate is not showing any signs of decline, according to data from Canadian Real Estate Association (CREA).
Real Estate company RE/MAX believes that on average, the Canadian market will increase by 9.2%. This is significantly lower the double-digit growth of year 2021 but still shows the overall direction of the market in the coming years.

5. Holiday schedule for our office.

December 24th – the office will be open until 3:00 p.m.
December 25th, 26th, 27th and 28th – the office is closed.
December 29th – the office will be open until 7:00 p.m.
December 30th – the office will be open until 2:00 p.m.
December 31st, January 1st, 2nd and 3rd – the office is closed.
Starting January 4th we will be resuming regular business hours.
If you have an emergency, you can always call me on my cell at 416-456-7706.

As always, we have prepared our calendars.
Again, happy holidays and we wish you all to stay well!!!

Serguei Totrov

Financial Advisor, CFP, CLU, EPC
Mortgage Broker, AMP
TOP – 75 Mortgage Broker in Canada
in 2015, 2016, 2017, 2018, 2019, 2020
416-222-0533
www.totrov.com

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