Money123: Risks with mortgage relief, grocery rebate arrives, B.C. port strike’s impact on prices

What to know about stretching amortizations

Homeowners struggling with rising mortgage rates might turn to extending their loan’s amortization period for relief. But that strategy comes with its own costs and risks, experts warn.

Stretching your mortgage amortization — paying back the loan over a longer period of time to reduce monthly payments — is one way lenders have helped prevent consumers from defaulting amid a rapid rise in the Bank of Canada’s benchmark interest rate.

The Financial Consumer Agency of Canada standardized that approach, among others, in a set of guidelines released this week dictating how its federally regulated financial institutions should support struggling mortgage holders.

It said extending amortizations should be done for the “shortest period possible,” however.

Extending amortizations should be looked at as only a stop-gap measure to provide mortgage relief, Ratehub.ca’s Penelope Graham says, because the extra costs added to mortgages when amortizations are extended can “add up rapidly.”

Read more about how much extending amortizations by even five years can cost you.

Check your bank account for the ‘grocery rebate’

Some Canadians should have gotten a bit of inflation relief from the federal government this week as the so-called grocery rebate promised in the 2023 budget went out on Wednesday.

Grocery rebate payments are being delivered by direct deposit or cheque through the Canada Revenue Agency (CRA). Approximately 11 million low- and modest-income Canadians and families will have qualified for the support, according to the federal government.

The rebate, which arrives alongside the July GST credit, will provide up to $467 for eligible couples with two children; $234 for single Canadians without children; and $225 for seniors, on average.

The amount received will be calculated based on “your family situation in January 2023 and your 2021 adjusted family net income,” the CRA said in a news release last week.

Here’s what else to know.

B.C. port strike could refuel inflation

A strike among cargo loaders at some of Canada’s busiest ports could see inflation rise again amid a return of supply chain constraints, experts warn.

The disruption at B.C. maritime gateways, including the Port of Vancouver — the country’s busiest port — began on Canada Day, with unloaded cargo containers piling up this past week.

The seamless loading and unloading of cargo ships in B.C. is critical to the smooth functioning of Canada’s economy, and an extended disruption is certain to impact consumers, according to experts who spoke to Global News.

Fraser Johnson, professor of operations management at the Ivey School of Business, says consumer electronics, clothing, appliances and cars are among those goods that typically flow through B.C. ports.

In addition to delays, the costs associated with businesses adapting their supply routes in the face of the strike will likely see consumers pay more in the long run, Johnson says.

“It won’t take a lot of disruption in terms of a strike at the Port of Vancouver to start to hit consumers, both in terms of availability and in their pocketbooks.”

Find out more here.

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– THE QUESTION –

“I’d like to know if using RRSP contributions towards a down payment for a mortgage is recommended in order to make a larger down payment or if it’s better to just keep saving? I’d like to be in a home within five years, but don’t know if the best use of my RRSP money is to let it grow over that time and buy a house that will probably cost more or take it out early and try to get in sooner.”

— A Money123 reader 

“It sure has been a bumpy ride. Seeing asset prices jump back and forth is unsettling – opening investment statements to see values declining isn’t a pleasant experience for anyone and it is understandable to feel the need to make wholesale changes when this happens.

Before ‘giving up’ on a portfolio, however, I think it makes good sense to revisit your objectives, your time horizon, and your overall risk tolerance and determine if the portfolio is suitable. After reviewing these factors, you can then determine if changes need to be made and if so, what are those changes.

I understand the question mainly asks how to get out of your current investment portfolio. But an equally important question would be when you get out – where does it go? Therefore, I think the first step to help find the best way forward would be to determine what changes should be made. It would be hard to give someone directions if they don’t know their final destination.

So my best recommendation here would be to revisit your goals, objectives and other important factors (either with an investment professional or on your own) to help determine a more suitable investment plan. Something that will help strike the balance between your competing stated objectives (capital preservation and keeping up with inflation). Once you determine what your portfolio should look like, then it will be easier to determine the best steps to get it there.”

– Derek Dedman, vice-president and portfolio manager, WDS Investment Management

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