Money123: Negotiate your way to a cheaper mortgage

How to get the best mortgage rate from your lender

With the spring housing market kicking off, would-be homebuyers will have to balance the price of their home with the rate they’ll be paying on their mortgage. And experts say it’s one of the best times of year for buyers and existing owners to negotiate that rate down.

The ability to negotiate a mortgage rate is so important that the Competition Bureau said this week that Ottawa ought to drop the stress test on uninsured mortgage renewals to give homeowners a leg up when haggling with their existing lender.

All lenders in the market today should be offering “sharp rates” as they try to scoop up their share of the busy spring market, Ratehub.ca co-CEO James Laird says.

“They do fight aggressively with each other to hit their goals for the year,” he tells Global News.

“So consumers should definitely shop around and get a few different lenders competing, and they’ll probably get some pretty strong offers right now.”

Read more for expert tips on how to negotiate the best rate on a mortgage.

Inflation isn’t just cooling, some prices are dropping

Canadians got another dose of good news on the cost-of-living front this week with February figures showing another unexpected decline in the headline inflation figures, down to 2.8 per cent annually last month.

That included significant easing in food inflation amid “broad-based” price cooling across multiple aisles of the grocery store.

But experts also point to outright declines in discretionary and durable goods like clothing, furniture and jewelry amid an economic slowdown that’s forcing retailers to fight harder for consumers’ dollars.

Higher interest rates and the cumulative impact of years of elevated inflation on prices across the household budget means Canadians have less disposable income available, which retail analyst Bruce Winder says is pushing retailers to rely on discounts to get shoppers through the door.

“Retailers realize that they have to really add a big sweetener on price in order for consumers to transact right now,” he says.

Read more on what else is driving costs down, and in what areas of your life you could benefit from price drops.

Cottage country could see values rise

The Canadian housing market did not light up in February, but some segments of the market could see prices heat up later this year.

The Canadian Real Estate Association (CREA) said this week that home sales were “relatively uneventful” last month, giving back some of the gains seen in January and December.

Prices were flat month to month on CREA’s home price index, snapping a streak of five consecutive months of declines.

CREA chair Larry Cerqua argued that the slow February figures and stagnant prices could be a sign that “things are about to pick up” in the housing market this spring.

A separate report from Royal LePage argued that cottage country could be set for a rebound in 2024, projecting five per cent growth in the median sale price year over year.

Royal LePage CEO Phil Soper pointed to rising demand amid sidelined buyers setting up the recreational property market for a big year.

“There’s no place we see across the country that doesn’t have growing demand and therefore some upward pressure on prices,” Soper told Global News.

Read more on which regions can expect the biggest boom in their cottage industries.

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– THE QUESTION –

“I am 58 years old without a pension. I have most of my money in a checking account and small RRSP and TFSA. Is it beneficial to contribute to my RRSP at this point? I don’t foresee being able to retire any time soon.”

— A Money123 reader 

“The keys for contributing to an RRSP are: Can I grow my money in any way as to defer taxes until age 71? Is my tax rate going to be different between today and the time I withdraw the money? A third consideration is when you would need to spend the money.

If you can invest money such that there are no taxes or they are deferred until age 71, then the RRSP is not needed. I choose age 71 because the RRSP then becomes a RRIF and some of the money would need to be withdrawn. The minimum withdrawal is relatively small, so you can actually defer taxes for much longer if you do not need the money. If you are investing all of your money in a TFSA, this is one example that fits the description because the money is tax-free indefinitely. If you invest all of your money in an investment product that produces capital gains and you are deferring these gains indefinitely, this is another example.

For the tax rate factor, if you have a high income at age 58 and expect it to drop later in life, the RRSP will give you a tax savings between today’s tax bracket (which gives you a refund on contributions) and tomorrow’s withdrawal tax rate (which you would pay in the future). If your tax rate will be higher with age, the RRSP will not help much.

In terms of when you would need to spend the money, if the money earmarked for an RRSP will have to be withdrawn soon because you need it for everyday expenses, the tax deferral strategy becomes less effective. The longer the money stays in an RRSP, the more it can compound and the more benefit you can receive. The minimum amount of time to keep money in an RRSP in terms of investment period would be between five and 10 years.”

–  Joe Barbieri, financial consultant, Joe the Investor

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