Money123: Living rent-free in your inbox

Waiting for rent relief? Read on

A tight rental market has driven up prices in recent years, but experts say there are some signs of relief that could see rent growth “stabilize” in the months to come.

The latest data from Rentals.ca and Urbanation shows the average asking rent for all property types in May rose above $2,200 for the first time. That’s up 9.3 per cent year over year, the same jump seen the month before.

While cities like Toronto and Vancouver — already the most expensive markets in Canada — are showing modest easing in rent prices, other relatively affordable markets such as some Alberta cities are seeing costs balloon.

“We’re seeing an enormous influx of not just international migrants coming to Alberta, but migration from the rest of the country, as young Canadians look for more affordable pastures,” said Randall Bartlett, senior director of Canadian economics at Desjardins.

Where economists see hope for easing on the horizon are in plans to reduce the flow of temporary residents into Canada and the robust pace of rental construction in recent years. But that might not be enough to see overall prices fall, experts warn.

Read on for where rent prices are already showing signs of easing in Canada.

Debt loads weigh unevenly on Canadians

Debt levels in Canada are leaving many households in a “fragile situation,” a new Desjardins report shows.

But the impact of high borrowing costs is not hitting all Canadians equally.

The top income quintiles of Canadian households actually have the most debt, but that’s offset by having more assets and investments as well, the report notes.

For lower-income households, their debt makes up a larger share of their wealth, representing a relatively heavier burden.

“The effect of indebtedness is really unequal for Canadian households of different revenue categories,” Lorenzo Tessier-Moreau, Desjardins principal economist, told Global News.

“Canadians on the lower spectrum of income are impacted a lot more by the effect of interest rate hikes.”

With expectations for more interest rate cuts to come in 2024, read on about how lower-income households might be impacted.

E-bike in the budget?

With Ottawa consulting on whether or not it should follow allies’ leads in laying tariffs on electric vehicles, a move some experts say could jack up prices on EVs, others are suggesting an e-bike might be just the option for eco-conscious consumers.

Winnipeg-based bike advocate Patty Wiens told Global News that she sold her car when she saw the benefits of an electric bike.

“I was spending about $10,000 a year on car payments, insurance and gas. And that’s not even counting the parking downtown. So if you count that, you could buy an e-bike every year and throw it in the trash and you’d still be about $5,000 ahead,” she said.

Advocates say that while many Canadian motorists default to the car, there are plenty of cities and commutes that are well-served by e-biking year-round.

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– THE QUESTION –

“I recently came into a chunk of money ($15K) and am heading into a mortgage renewal in a couple of months. I still have ~$200K and 15 years left on my mortgage. My question is, should I put some or all of this into a lump sum payment for my mortgage (no penalty) or start up an RRSP? I feel behind on my long-term savings plans but the idea of knocking down my mortgage is very appealing. Any help with the decision is much appreciated. Thank you. PS I’m 48 years old if that’s relevant.”

— A Money123 reader 

“What a happy situation! And I love it that you’ve boiled the decision down to two very responsible actions. The thought process involves some math and, possibly, some compromise. Your age is not really relevant, since I expect you intend to live another 40 years and the impact of this decision will ripple through that time frame with relatively little effect.

Comparing the known interest rate on your mortgage (at renewal time) against an unknown rate of return in your RRSP is a bit shaky. But hazarding a guess at five per cent on the mortgage renewal, the $15K paydown will save $750 a year over the remaining term for a simple total of $11,250. This after-tax cash flow might then make its way into your other savings programmes.

If you like to save money, the mortgage paydown might be the best thing to do — especially if you can maintain your regular payments at a level to have the mortgage paid off in 15 years.

If we assume that same five per cent growth rate in the RRSP for 15 years, you would have $31,200 to draw on for future cash flow. Of course, this money comes out as taxable income at some point.

More, now, on the RRSP contribution. My immediate thoughts turn to your employment status and marginal tax bracket. If you are reporting over $60,800 of income, the $15K RRSP contribution will get you a refund of about $4,230 when you file your tax return next year. If you are earning more than $110,800, the refund would be $4,650.

Why not do a bit of both? Make the RRSP contribution, then use the tax refund to paydown the mortgage? It’s likely you could do that without penalty as well.

In the end, though, it may boil down to something very simple — Which one makes you feel happiest? Reducing debt or accumulating investments?”

– Lenore Davis, CFP, R.F.P, financial planner

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