As the new year approaches, it's a natural time to reflect on our personal goals and set resolutions for the months ahead. Your home and finances are key areas where small, intentional changes can lead to big improvements in security, stability, and quality of life.

Here are some resolutions to get you started!

Create a Realistic Home Budget

A well-planned budget is essential for financial peace of mind. Whether you're new to budgeting or want to refine your approach, creating a realistic budget helps prioritize spending, track bills, and put money toward meaningful goals.

• Identify Fixed and Variable Expenses: List out fixed costs, like mortgage payments, utilities, and insurance, as well as variable ones, such as groceries and entertainment.
• Set Savings Goals: Include savings as a "non-negotiable" in your budget, earmarking funds for home repairs, investments, or emergencies.
• Track and Adjust: Track spending throughout the month and adjust where necessary. Financial apps like Mint or You Need a Budget (YNAB) make it easier to stay on course.

Set Goals to Build Home Equity

Building home equity is a key path to increasing net worth. Whether you're planning to sell or stay in your home long-term, building equity can offer financial flexibility and security.

• Make Extra Mortgage Payments: Even a small additional payment toward your mortgage principal each month can shorten your loan term and reduce interest costs. A biweekly payment plan is another effective method to pay down the principal faster.
• Consider Strategic Home Improvements: Invest in upgrades that boost home value, like kitchen and bathroom remodels, or energy-efficient upgrades like new windows or solar panels. Prioritize improvements that add the most value to your property.

Develop a Plan to Pay Down Debt

Paying down debt (especially after the holidays!) can help free up cash flow. It is key to focus on high-interest debts first, such as credit cards, to maximize your payments.

• Use the Debt Avalanche or Snowball Method: The avalanche method involves paying off high-interest debts first, while the snowball method focuses on smaller debts first. Choose the one that best fits your motivation style
• Consider Refinancing or Consolidation: If you have a high-interest mortgage or multiple debts, refinancing or consolidating might reduce interest rates, making debt repayment more manageable

Celebrate Milestones: Paying off debt can feel challenging, so celebrate progress. Every milestone achieved brings you closer to financial freedom.?

Commit to Energy Efficiency to Lower Bills

Saving on energy costs can have a significant impact on your budget, especially in colder or warmer months. Simple changes around the home can save you money while benefiting the environment!

• Invest in Smart Thermostats: A programmable thermostat can automatically adjust heating and cooling based on your schedule, saving energy when you’re not home.
• Switch to LED Lighting: LED bulbs use significantly less energy and have a longer lifespan than traditional bulbs.
• Insulate Windows and Doors: Adding weatherstripping to doors and windows keeps drafts out, making your heating and cooling systems more efficient.

Review Your Insurance Policies and Coverage

Insurance is a key element of financial security, but it’s easy to forget about it until something goes wrong. As you head into the new year, this is a great time to make sure you’re fully covered!

• Assess Homeowners and Mortgage Insurance: Review coverage limits and ensure your policy covers potential risks, including natural disasters if you live in high-risk areas.
• Shop for Better Rates: Contact your provider for discounts or shop around for new rates. Bundling policies, like home and auto insurance, can often yield savings.
• Update Beneficiaries and Coverage: Life circumstances change, and your insurance should reflect that. Update your beneficiaries, adjust coverage, and ensure policies align with your financial goals.

Setting resolutions for your home and finances doesn’t have to be daunting! Start with small, actionable goals to help transform your finances - and your mindset - for 2025!

There is an unprecedented disparity between the economic and financial situation in the US and Canada. The Canadian economy is far more interest-sensitive than the US and, therefore, slowed more dramatically in response to the Bank of Canada’s restrictive policy to bring inflation back to its 2% target level.

The jobless rate in Canada has reached 6.5%, well above the level in the US, and job vacancy rates have plummeted. Wage inflation has been sticky at 4.9% but will likely edge downward in response to excess supply in the labour market.

Inflation accelerated to 2% y/y in October, compared to the cycle-low 1.6% in September, mainly because gasoline price deflation slowed. The odds of another 50 bps rate cut by the central bank—on the heels of a jumbo cut in October—have diminished, but a 25 bps cut is in the bag.

Market-driven interest rates in Canada are well below those in the US, owing to weaker economic activity and lower inflation. US interest rates surged on the news of the Trump election victory. Ten-year US Treasury yields rose sharply to a post-election high of nearly 4.5% on the presumption that with a Republican majority in the House and the Senate, Trump will move ahead with tax cuts, tariffs and deregulation. Trump has also threatened to limit the independence of the Federal Reserve.

Canadian long-term yields have risen far less since the election. Short-term interest rates are also lower in Canada than in the US. The Bank of Canada has eased monetary policy four times for a total decline in the overnight policy rate of 125 bps, compared to only one rate cut of 50 bps by the Fed. This unprecedented divergence bodes well for a rebounding housing market in Canada.

Housing activity picked up in October and early November in response to the surge in new listings, giving potential buyers a broader range of choices and lower interest rates. The steepening yield curve portends more significant declines in variable mortgage rates—tied to the prime rate, which declines with every cut in the overnight rate, than fixed rates, which move with longer-term bond yields.

The Bank of Canada, concerned about a weakening Canadian economy, will continue to cut the overnight rate at every meeting between now and mid-2025. By then, the policy rate will be roughly 2.5%, half the level at the peak in BoC tightening. This will likely trigger a robust spring housing season.

There is plenty of pent-up activity in the Canadian housing market as buyers have waited for lower interest rates and home prices, and sellers have been reticent to list their properties, hoping for a housing recovery. This is beginning to turn around as every easing move by the Bank of Canada boosts economic activity, particularly in the interest-sensitive housing sector.

Refinancing your mortgage can be a smart financial move for many reasons, and as your trusted mortgage advisor, I’ve seen how much it can benefit homeowners!

Ideally, refinancing is done at the end of your mortgage term to avoid penalties, but the timing can vary depending on your goals.

For some, it’s about unlocking the equity in their home to fund renovations or cover big expenses like college tuition. For others, it’s an opportunity to consolidate debt, lower their interest rate, or change up their mortgage product.

Let’s take a closer look at some of the ways refinancing your mortgage can help!

• Get a Better Rate: As interest rates have continued to decrease with the Bank of Canada updates these past few months, now is a great time to consider refinancing for a better rate and lower overall mortgage payments! Experts anticipate the Bank of Canada will move to have the overnight rate down to 2.75% next year.
• Consolidate Debt: When it comes to renewal season and considering a refinance, this is a great time to review your existing debt and determine whether or not you want to consolidate it onto your mortgage. In most cases, the interest rate on your mortgage is less than you would be charged with credit card companies or other forms of financing you may have. Plus, having all your debt consolidated into a single payment can keep you on track!
• Unlock Your Home Equity: Do you have projects around the house you’ve been dying to get started on? Need funds for a large purchase such as a new vehicle or post-secondary education? When you are looking to renew your mortgage, it is a great opportunity to consider refinancing in order to take advantage of the home equity you have built up to help with these larger changes in your life!
• Change Your Mortgage Product: Are you unhappy with your existing mortgage product? If you have a variable-rate or adjustable-rate mortgage, you may be considering locking it in at the lower rates. Alternatively, you may want to switch your current fixed-rate mortgage to a variable option with the interest rates expected to continue decreasing into 2025. You can also utilize your refinance to take advantage of a different payment or amortization schedule to help pay off your mortgage faster!

PLUS! Some latest changes by the Government of Canada will make it even easier for you when it comes to your renewal and refinancing options:

• Those of you who may have an uninsured mortgage will no longer have to pass the stress test as of November 21st. This means that you have more flexibility when it comes to rates and mortgage products in renewal cases where you wish to switch lenders without adding additional funds to your mortgage!
• Beginning January 15, the federal government will allow default-insured mortgages to be refinanced to build a secondary suite. If you’ve been considering adding a suite to your property, you may be eligible to access up to 90% of your home’s equity for this purpose.

No matter your plans or situation, please don’t hesitate to reach out to me for expert mortgage advice!

The 2024-2026 mortgage renewals "cliff" is manageable as long as the Bank of Canada cuts interest rates and the job market and economy don't weaken too much. Owing to the 75 basis point rate decline through September and the 50 bps cut in October, not all mortgages will renew at higher rates next year.

Royal Bank economists estimate that total mortgage payments in 2025 will increase by about 0.1% of total household disposable income as many extend amortizations to keep payments low.

The jobless rate, though declining a tick in September to 6.5%, is meaningfully higher than before the pandemic and is likely to rise to 7% next year.

The total number of job openings in the economy is 25% below what it was a year ago, and if it were to weaken further, the unemployment rate would rise even more.

Earlier this cycle, there were more job vacancies than people looking for work, so the drop in job openings didn't have a material impact on the economy. But that's no longer the case. September's inflation data confirms that the job market trend is downward.

Economic growth has been below potential since 2022, and preliminary third-quarter data indicate another slowdown to about 1.3% growth in Q3, well below the BoC's initial forecast. Hiring intentions remain woefully inadequate in the face of staggering population growth.

Business start-ups are also sluggish, reflecting a business climate undermined by overly restrictive monetary policy.

The BoC must now aggressively cut interest rates. Monetary policy remains highly restrictive.

The Bank of Canada's Business Outlook Survey shows no sign of stabilization in the short term. Indeed, hiring intentions were virtually unchanged in Q3 and remained below the historical average. A significant number of companies are overstaffed.

The latest data show that the private sector vacancy rate is plummeting and has reached its lowest level since 2016. More than half of all small- and medium-sized businesses are fearful of weakening demand for their goods and services.

The number of active companies fell sharply in the second quarter due to a sharp jump in business closures and a low number of start-ups. The stagnation in the number of active companies in Canada since 2022 is undoubtedly one consequence of the extremely powerful tightening of monetary policy.