Published: March 23, 2020 • Last updated: March 27, 2020 at 8:46 am
The impact of Covid-19 on Canadians’ personal finances is profound and will be long lasting. All the things which give us pleasure and a raison d’être have become secondary to ensuring we are properly coping and surviving in a drastically changing world. Covid-19 is having a profound impact on our our way of life, and is affecting your financial health too.
The news is evolving so rapidly, there is a risk that much of what I write here is not current by the time you read it. I am trying to share information, as opposed to being the final word on all such matters. You owe it to yourself to be extremely aware and vigilant about everything going on right now.
I am also relying quite extensively on information shared by respected colleagues and experts in their field. I will properly acknowledge their names as we go along.
Have you have suffered a loss of employment income in Canada?
You need to immediately determine what government assistance is available to you. Anyone looking to apply for EI benefits, can visit the Employment Insurance website.Do not give up on your claim if you feel it is taking too long or if you feel someone is citing some bureaucratic reason why you are not entitled.
Is there relief for mortgage payments in Canada?
If you have a mortgage, you may be entitled to some payment relief. Every lender has their own policies in this regard. It is best you contact them directly. As mortgage industry maven Ron Butler says, “its a program that mortgage lenders adjudicate themselves based on criteria they develop internally. “
Industry colleague Steve Futyer provided this excellent graphic :
Is there relief for property tax payments in Canada?
You should check with your local municipality. For example the City of Toronto. is to give residents a 60-day grace period on property tax, water and solid waste bills.
Is there relief for tenants to pay no rent in Canada?
If you are a tenant, I am sure you are feeling the pinch too. There are people petitioning for rent payment relief but nothing has been formalized. But remember, if a homeowner defers a mortgage payment, the lender will still get the money in due course.
But if a tenant is forgiven a rent payment, then the landlord will be out that money forever. I am concerned if rent payments are forgiven that the economic impact would be profound and very negative.And if it is a pure deferral, that means the money will have to be repaid in the future. Which will be easier said than done.
Last week the government of France announced a suspension of all rent payments and utility bills during the crisis, but that is not Canada.
Is there relief for Canadian Student Loans?
If you have student loans, the Federal government announced a six-month grace period on Canadian student loans. This is an interest-free, moratorium on Canada Student Loan payments for all individuals who are in the process of repaying their loans. This initiative to take effect March 30. You can also contact Canada Student Loans about a temporary student loan revision of terms.
Is there relief for utility bills and credit cards in Canada?
Yes, every day more and more announcements are being made. In fact, Royal Bank is apparently offering six-month deferrals on credit card payments,. But once that period ends the minimum payment would include all accrued interest from the deferred payments. As they say, there is no free lunch!You all need to understand, so far no one is saying you are forgiven anything! You are being allowed to DEFER payments of various bills.#MortgagePaymentDeferral Click To Tweet
For a discussion on other bills and coping strategies, let’s check in with the folks at Hoyes, Michalos. The following eleven points are from their most recent newsletter.
We know there is stress and anxiety in not knowing if you will be able to keep paying your bills. You may already be out of work or may be worried about the long term impact on your employer and job.
Here are some tips and information that can help you take control of your finances right now:
- The Canadian Government has waived the one-week waiting period for EI sickness benefits for those quarantined due to COVID-19. Application information can be found here:
- In the coming months, the Canadian Government plans to temporarily boost the Canada Child Benefit to help parents cover the cost of child care or other impacts of having to stay home.
- For workers who do not qualify for Employment Insurance and have to stay home due to COVID-19, the Government also plans to offer an emergency care benefit.
- A list of relief benefits for individuals announced March 18, 2020 can be found here https://www.canada.ca/en/department-finance/economic-response-plan.html#individual
- We suggest you cut back on all non-essential expenses as soon as you can. While online buying may be tempting to avoid stores, keep an eye on your boredom spending.
- If you are working, keep up with your bills and debt payments. If you are worried about down the road, make at least your minimum payments to avoid late charges, penalties, and potential negative hits to your credit.
- If you are out of work or expect to be, you may need to prioritize payments. You will want to focus on high priorities like your rent and utilities. You may even want to prioritize your cell phone bill and internet bill if you are self-quarantining at home to ensure you have access to both information and the ability to contact friends and family.
- Some lenders have begun to offer deferral options for mortgages and other credit products to avoid having their customers default. Contact your lender to see if you qualify.
- Take advantage of other deferral or hardship provisions.
- For self-employed and small businesses, Revenue Canada has advised they will be providing an extension for tax filing and payments. Investigate what can help you manage your cash flow but realize you will have to catch up eventually.
- Don’t hesitate to talk with other creditors about a deferral. If you don’t ask, you won’t know what they will say.
For up to date information and advice for anyone carrying debt and have concerns, you can stay current at the Hoyes, Michalos website here. It’s written by Doug Hoyes himself, and is called Managing Bill Payments During the Debt Crisis.
What is happening with Mortgage Interest Rates in Canada?
Rob McLister over at RateSpy is as good as it gets for well researched intel on all things mortgage related in Canada. He says “if you are shopping for a brand new mortgage the safest bet is get a rate hold ASAP.”
The reason is that mortgage interest rates are actually going up these days. Especially fixed rates.The news has been all about recent Bank of Canada rate cuts and the major banks cutting their prime lending rate, but the upshot has been mortgage lenders are concerned there is a looming liquidity crisis. #MortgageInterestRates Click To Tweet
Kelly Neuber from Mortgage Intelligence says “Ultimately, it’s the lender’s decision on whether – and how much of – the rate cut will be passed along to the end consumer. Lenders are naturally concerned about liquidity and the potential for an increase in mortgage defaults.”
Here is an article from Steve Huebl at Canadian Mortgage Trends which explains what’s going on. https://www.canadianmortgagetrends.com/2020/03/mortgage-rates-rising/
Is now a good time to have a variable rate mortgage in Canada?
And while the Prime rate has dropped a full percentage point recently, new variable rate mortgages are no longer being offered at deep discounts to Prime.
If you already have a deep discounted variable rate mortgage, you are in great shape. With Prime today at 2.95%, your mortgage interest rate might be around 2%, give or take. But if you are choosing a new mortgage today it will be very hard to find a deep discounted variable rate mortgage. Many lenders have repriced their variable rate mortgages to be around Prime.
And, whereas the banks have all dropped their Prime rate, some monoline lenders, typically a consumer friendly mortgage choice, have not dropped their Prime rate a second time – saying they will decide on April 01. So in this case, the potential savings are not being passed on to their customers.
What type of mortgage rate you choose today still comes down to your own unique risk/reward profile. More than over, you need an expert in your corner.
Susan Thomas, regional manager at Mortgage Intelligence, lightened the mood this week with a graphic explaining the mortgage interest rate outlook:
What about impact of COVID-19 on consumer insolvencies in Canada?
Ross was cited in a recent article on consumer insolvencies, written by Steve Huebl at Canadian Mortgage Trends.
Steve wrote “The rate of Canadians filing for insolvency in January 2020 rose 8.7% compared to the previous month, according to recent data from the Office of the Superintendent of Bankruptcy.
That figure includes both bankruptcies and consumer proposals. Broken down, bankruptcies were down 1.7% while proposals jumped 15.5%. This follows a record year for insolvencies in 2019, which saw a total of 137,178–the second highest number of annual filings in Canada ever, and a 9.5% increase from the previous year.The problem may not necessarily be Canadians taking on more debt, but rather using the credit facilities they already have access to, according to some.#TooManyDebts Click To Tweet
“What I see is a significant number of people who incorporate tapping into available credit as a means to supplement income,” Ross Taylor, a mortgage agent with Concierge Mortgage Group and a licensed insolvency counsellor, told CMT.
“Unfortunately, this beast needs to be fed, as even minimum monthly payments barely make a dent in the balance owing. As time goes by the amount owed becomes overwhelming and there is no logic to continuing.”
Ross adds that the data will only become more bleak in the coming months.
‘Remember that the stats cited in this report are from a period of economic goodness,” he said. “We seem on a collision course with a recession, and when that comes, we will see a further spike in personal insolvencies.’ ”
What is the impact of COVID-19 on Canadian Real Estate?
There seems no doubt that we are approaching a recession, and in fact there is some fear of a pending depression. That’s basically a recession gone very bad. It’s hard to be bullish about anything with such news. Ultimately, it all comes down to how quickly can the world get back to normal. Normal is a strong, healthy real estate market – if anything, it was too healthy and strong right up till a couple of weeks ago.
The home sales process is going through a transition now. Not so many listings and showings as home visits are not prudent during this time of social distancing. This affects potential buyers as well as tradespeople, home inspectors and appraisers. People are adapting. It takes time, and yet all these societal changes are happening really fast.
“The outbreak has shattered seasonality, transforming the spring months, which was normally the time when the housing market was starting to pick up speed, into a period of anxious down time,” Point2 Homes stated in its analysis. “Much of the activity associated with homebuying and home selling is simply on hold, as people and institutions alike are trying to see where the pandemic is headed.”
“There certainly could be long-lasting impacts in terms of shifts in preferences for location and even features of homes,” according to Jim Clayton, director of the Brookfield Centre in Real Estate & Infrastructure at York University’s Schulich School of Business.
“Some people may be more hesitant about being part of a crowd and hence avoid mass/public transit. The work, and learn, from home revolution that many have been calling for over the past decade could become much more of a reality and may change how and where people want to live,” Clayton explained in an interview with Point2 Homes.
But in Toronto and Vancouver, interestingly, we are still seeing activity and people making bully offers to beat out other buyers. This Bloomberg article captures that sentiment well. Hard to say how long that will last but seems like in the city values are holding up.
The Show Must Go On – Appraisals and Real Estate Lawyers
At this time, it is challenging to complete all the normal functions associated with buying and selling a home. Real estate lawyers are essential to the process and The Law Society of Ontario has recently indicated that a lawyer no longer needs to verify clients in person. Alternative means of verification such as a face-to-face communication via video conference will now be permitted.
The appraisal process is transforming too. Some lenders are now accepting virtual inspections – One lender, Magenta has said they will accept appraisals under the following guidelines:
- The appraiser has conducted an interview with the homeowners over the phone or video call
- The homeowners have conducted a live video tour of the property with the appraiser
- Photos are taken by the homeowners and emailed to the appraiser following the video tour
- The appraiser has driven past the property and has conducted a normal exterior inspection
- The written appraisal report includes notes on all appropriate Extraordinary Limiting Conditions and Extraordinary Assumptions
- The appraiser includes details on how the inspection was conducted and lists all sources of information
Standard, full-interior inspections must be completed on vacant properties.
What about investing in the Stock Market with the impact of COVID-19?
Some people have been asking me if now is the time to buy into the stock market. Whether through individual stocks or mutual funds or exchange traded funds. And while it is true that smart money buys when everyone else is selling, I cannot help but feel it is too early to do this. My own view is we are going to see a lot worse before it gets better.
But I am NOT an investment advisor – I am just a guy who has been around for a long time, and I tend to be quite conservative. Talk to the people who are properly trained in this stuff and seek their counsel.
I liked this article from Yahoo Finance on March 23, 2020 which said this stock market has one more giant coronavirus plunge to go. That said, the very next day the stock market surged and had its best day since 1933. The TSX was up 11.96% on March 24, 2020. This was in direct response to massive government stimuli.
In fact, by the end of day March 26th, Morning Brew reported……..
“U.S. markets: Nothing makes sense anymore. On a day when an avalanche of weekly unemployment claims stunned the country, stocks staged their third straight rally. After surging more than 20% since Monday, the Dow is back in a bull market. ”
There will be many more ups and downs along the way. Extreme volatility is a thing. My own view is this is not a time to speculate – day trading is akin to gambling in a casino.
CNN Business’s Anneken Tappe wrote the S&P 500 has fallen nearly 29% since its latest peak on February 19 as investors grappled with what the pandemic would mean for the economy.
My own view is that it will be worse than anyone is predicting at the moment.
“Three conditions need to be met for the market to settle down, according to the BlackRock Investment Institute.
- Visibility on the scale of the outbreak and evidence that infection rates have peaked
- Coordinated and credible policy packages
- Confidence that financial markets are functioning properly.
Progress has been made on #2 and depending on how next week goes, #3 could be in the cards. But the first, and most important point, is still a big question mark. Right now, we are trending in the wrong direction.”
What About Filing Your Income Tax Returns With the Impact of Covid-19?
Most Canadians have until June 01, 2020 to file our income tax return. Normally the deadline was April 30. And if you owe money, you have until September 01, 2020 to pay. No penalties or interest charges prior to September 30.
There are new filing dates for small businesses, trusts and self employed individuals. Check in with CRA online now and then to stay abreast of any further developments.
I can tell you today March 27, that all the clients and family members I know who have filed early have had their tax returns processed very rapidly, and tax refunds providing some much needed boost to their personal bank accounts.
The Wrap on Covid-19 and Your Financial Health
Someone wiser than me wrote recently that perhaps this is Earth’s way of giving us humans a timeout.