Ask the Money Lady,
Dear Money Lady,
My friends and I were discussing the fact that we think there will be an inevitable recession due to the pandemic and we wondered what you thought?
Dear Verna – a Recession You Say !!
I have had many comments from readers who truly believe we will go into a long recession, but I honestly can’t see it Verna. While we have reduced our growth estimates for this year it is believed that we will experience a relatively strong rebound in 2021. The sharp stock market pullbacks have already discounted a large part of this year’s anticipated economic and profit slowdowns. But we must not forget that history has always proven that the economic market, tends to rally tremendously after a crisis. In my opinion a long recession does not seem to be in the cards this time around. Lower interest rates, specifically mortgage rates, seem to be encouraging first time buyers to enter the real estate market again. Pent-up demand is beginning to surface as we witness competitive offers in some of our bigger cities across Canada. We have started to see rates drop down to 2.39% for a 5 year fixed mortgage, (May 27); a massively discounted rate now offered by some of the big Canadian banks to lure in new clients. All the Big 5-Banks have announced lower profits this quarter creating an inner competition between lenders that will enviably benefit the customer. I am the first person to tell you that you should never use your home like an ATM to repeatedly get yourself out of debt, however the current rate environment should not be ignored by those that still have consumer debt, a line of credit or a mortgage. Now is the time to put your debt portfolio in order and capture a lower rate for a longer term. Many lenders are even incentivizing clients to do so by covering appraisal fees, title costs and even partial penalties to win business from rival banks. Prior to COVID-19 all the banks were beginning to increase lending rates and were forced to pull back once the crisis hit. As a lender, I can tell you that the Canadian banks will not keep rates down for long. As we recover and demand increases, so will lending rates. Take advantage of this unique situation now, put your debt portfolio in order and begin to build a plan to reduce it.
Good Luck and Best Wishes,
Written by Christine Ibbotson, Author of “How to Retire Debt Free and Wealthy” Follow on Facebook & Instagram