In this video, we'll discuss the Bank of Canada's decision to raise interest rates again, and what this means for you as a consumer. We'll also discuss how you can make money count in the current economy by using smart financial planning strategies.
As a viewer, you may be wondering what this means for the economy as a whole. The Bank of Canada has raised interest rates again, indicating that they are somewhat concerned about the inflation rate in Canada. This may mean higher prices for you as a consumer in the short term, but it also means that you should be aware of financial planning strategies that can help you make money count in the current economy.
The breakdown...
On October 27th, the Bank of Canada raised the overnight rate by 50 basis points to 3.75%. Canadians have been hearing this story all year. Finally, the central bankers are hinting that they understand the pain that these rate hikes are causing Canadians. The problem: we still don't know the magnitude of the impact that these rate hikes will have. Has the Bank of Canada done enough? Have they done too much already?
The problem with the way we evaluate inflation is that we examine year-over-year costs. This makes it a lagging indicator. Rate hikes impact a borrower's ability to service their debt, therefore making it a change that is only realized in the medium to long-term future. This makes it very tough to evaluate how many rate hikes are too many or too few.
Also on the show...
Marcus also looks back to a clip from a past episode where he accurately predicted that the "new normal" would not be here to stay. The ability to think they'd be able to work from home forever led a lot of Canadians to go out and buy houses outside the city, which drove up suburban real estate prices. Now, those people have seen the cost of owning property increase exponentially. Furthermore, they have to commute back to the city for work. At some point, a lot of Canadians will find themselves having to sell.
We have seen declines in prices already with a shortage of supply. Seeing a big supply influx would be another tough blow to the real estate market. The US markets have been on a nice rally, however it will likely be short-lived until the US Federal Reserve pivots. A lot of people, Cannect included, think a little bit too much has already been done in terms of rate hikes, but it is still clear that they are not done yet. The only way to firmly turn around the markets is to pivot.
0:00 - Intro
0:46 - Bank of Canada did not hike the interest rate as much as people thought they might.
5:08 - The measurements we use to examine inflation are lagging and the impacts of interest rate hikes usually take a year to see.
7:12 - People will soon feel the impact of rising debt servicing costs and some will have to sell their house.
9:33 - Marcus knew that “the new normal” wouldn’t last forever. Condo prices have not had as much of a fall as suburban homes because they didn’t go up during Covid.
12:50 - Unless we see a big pivot from the US Federal Reserve, the markets should see more pain ahead. Have we already done too much?
18:05 - A lot of people bought houses in the suburbs during Covid under the impression they could continue to work from home. Now they can’t afford those properties.
22:56 - We are likely approaching the end of these rate hikes, so a variable rate might be worth sticking to.
25:50 - Unfortunately we still don’t know the real impact these rates will have on the lives of Canadians.
31:24 - Global update: Russia, Ukraine. The US has some blame for this war too.
38:20 - Options for accessing flexible equity in this interest rate environment.
42:23 - Conclusion
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