Bank of Canada’s Move
Tiff Macklem, the Bank of Canada governor, is becoming as well-known as a rockstar. We hang on to his every word, look for clues in the commentary, and hope our economy is heading towards a recovery. Why? Because for so many, our financial livelihood depends on it.
The Bank of Canada did exactly what we expected -for the fourth consecutive rate announcement, the bank rate unchanged at 5%. However, in the commentary, Tiff Macklem made a key point. “If the economy evolves broadly in line with the projection published, I expect future discussions will be about how long we maintain the policy rate at five percent,” Macklem said.
Inflation and Economic Realities
Inflation is tamer and has decelerated but has not yet hit the desired 2% target. Shelter costs are still high for renters and homeowners, healthcare costs continue to climb, and even areas such as car maintenance remain stubbornly high.
The job market has proven more resilient than anyone initially thought. Yet, the private sector has been scaling back on hiring for the past three months. Our productivity levels are low, and without meaningful business investment in Canada, further job losses could be on the horizon. No one worries about paying their bills or debt levels when they have a job or money coming in, but things can quickly spiral out of control should the situation change.
We are still determining if our economy is heading toward a soft landing or a mild recession. And, while we focus on our current economic landscape, external wildcards are also worth considering, such as, escalations in the Middle East, mounting tension between China and Taiwan, and the risk to trade pending the outcome of the upcoming US election.
Anticipated Rate Cut: A Spring Surprise?
Despite all this, there are still expectations for a rate cut in the spring, anywhere from 100 to 150 basis points. Will this materialize? Maybe. However, timing the real estate, stock, currency, and interest rate markets is a mug’s game.
Guiding Clients Through Economic Uncertainty
A far more prudent approach is to help your clients succeed and empower them to take control of what they can, even in an environment where they feel they have no control.
Now is the time to meet with your clients to discuss their readiness to move forward as the economy does.
It is ok to ask if their balance sheet has improved along with the economy. If needed, advise clients to pause discretionary spending on significant purchases they can’t afford. Inflation is coming down as rates have gone higher, supply chains for now are flowing, and demand is more balanced, but it is still going to take time.
Helping clients explore all their options to fund their lifestyle should be on the table. These include a home equity line of credit (HELOC), the CHIP Reverse Mortgage, downsizing their home, or taking money out of their investment portfolio. It is always a good time to ensure your client’s savings and investments align with their risk tolerance, time horizon and asset allocation.
Remind clients that they don’t have to prop up the economy single-handedly; if they can afford to spend, it is ok to spend. Our economy needs that. You can provide guidance, insight, and direction to help your clients make the most out of their financial situation.
With HomeEquity Bank your client has many flexible options to help them get the most out of the equity in their home. Find out how much your client may qualify for and arrange a Reverse Mortgage solution tailored to their unique needs by using the reverse mortgage calculator.
To learn more about empowering your clients with the CHIP Reverse Mortgage during economic uncertainty, please contact your HomeEquity Bank Business Development Associate (BDA) or Business Development Manager (BDM).
Chief Financial Commentator