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A silver lining to higher interest rates
The Bank of Canada’s interest rate hikes have been causing pain to Canadians with mortgages and other kinds of debt, but there’s some upside for savers.
Shannon Terrell, lead writer and spokesperson at NerdWallet Canada, told Global News this week that when the central bank policy rate rises, “we tend to see higher interest rates on savings products like guaranteed investment certificates (GICs) and high-interest savings accounts (HISAs).”
That’s not always the case, and banks aren’t required to increase rates on their savings accounts in lockstep with the Bank of Canada, however, financial institutions including CIBC and National Bank told Global News that rates had risen on many of their savings products as the Bank of Canada’s key interest rate rose in recent consecutive decisions.
Even so, sticking to your existing financial institution might not be the best strategy if you’re looking to maximize your savings, Terrell notes, as challenger banks and credit unions seek to lure customers away from the Big Six.
“Don’t be afraid to jump ship. You have everything to gain by pursuing the financial products and the accounts that are going to be the best fit for your financial goals and your lifestyle,” she said.
Read more on how to make the most of your savings.
Grocery shoppers changing stores amid high prices
Persistent food inflation has more shoppers changing where they buy their groceries, new data from Statistics Canada showed this week.
More Canadians are shopping at general merchandise stores — think Walmart or Dollarama — than before COVID-19, the report revealed.
During the pandemic years, food sales at general merchandise stores increased from 21.6 per cent in early 2021 to 25.9 per cent in late 2022.
The pandemic era also coincided with surging inflation that has yet to wane at the grocery store — prices for food bought from grocers were still up 9.1 per cent in June, according to StatCan.
While purchases at food and beverage stores have decreased overall, the country’s largest grocers continue to post profits.
Read more on how soaring food prices are changing the way Canadians shop.
Spotify pumps up prices
Sorry, music lovers — you may soon be paying more for the privilege of hearing Taylor Swift ad-free.
Spotify announced this week it’s raising prices for its subscription plans across several countries, including Canada.
The move will result in a $1 price increase for a number of plans, including the premium individual plan, which will increase to $10.99 a month; the family plan jumps to $16.99 and the student plan will be $5.99. Spotify’s duo plan has increased by $2 to $14.99 a month.
The price increases come at a time when streaming services, both audio and video, are under rising investor pressure to boost profitability after years of prioritizing user growth.
Read more about Spotify’s hopes that the beat goes on.
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– THE QUESTION –
“Common to many retired people today who are ‘property rich and cash poor,’ is there a way to get cash out of the value of my home? I’ve heard that reverse mortgages are scary, but are there other ways or a ‘non-scary reverse mortgage concept’ that would allow me to use my equity in the house now and still be able to live in my home? What are the pitfalls and pros? I asked my bank, which told me that I could take a loan out, but I’d need the qualifying income to be able to repay the loan each month, which of course I don’t have.”
— A Money123 reader
“Many retirees want to access their home equity before they are ready to sell their homes. Using home equity allows homeowners to stay in their homes, living independently or with support as needed. My retired clients are using their home equity in a variety of ways, from managing their investments (when stock markets are down, it can make more sense to use home equity rather than pull assets out of the market) to enhancing their lifestyle and even to providing their beneficiaries with early inheritances (which can help them enter the real estate market).
The best available choices are the reverse mortgage you’ve heard of or a home equity line of credit.
A reverse mortgage allows homeowners (age 55+) to access up to 55 per cent of their home equity, tax-free, without making a monthly mortgage payment. You can choose between a lump sum or monthly payments to supplement your income, or a combination. The reverse mortgage rates are higher than a traditional mortgage or home equity line of credit. Still, many homeowners are happy to pay more for the convenience of not making any payments.
A mortgage with a home equity line of credit can work like a reverse mortgage, though it requires more administration. Here you’ll find the rates are lower, and similar to the reverse mortgage, you can take out a lump sum and supplement your monthly income (by drawing down the line of credit) if you wish. The monthly mortgage payment can be made from the home equity line of credit, so you’ll see your debt grow over time. This type of mortgage is available for retirees, based on your home equity, with select lenders.
You’ll want to consult with a mortgage broker to have them compare these options to help you choose the best solution for your needs.”
– Nicole Hayes, mortgage broker, BC Mortgage Experts
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