Should homeowners try to keep mortgage payments low to contend with trade war uncertainty? Erica Alini asks an expert.Fred Lum/the Globe and Mail
A couple of weeks ago, a Globe reader with a mortgage renewing in 2026 reached out to ask for a few pointers. He’s not the only one with questions.
Some 60 per cent of outstanding mortgages in this country are coming up for renewal this year and the next, and a majority of those are bracing for higher payments.
The good news is that both variable and fixed mortgage rates are falling, which will soften the financial shock at renewal for a lot of people.
The falling interest rate trend reflects worries about the state of the economy both at the Bank of Canada, whose rate decisions directly affect variable mortgage rates, and in the bond market, which influences fixed mortgage rates. So lower interest rates are, if you will, a silver-lining of the trade war.
Yet the trade war remains, unquestionably, a dark cloud sitting right atop Canada.
Yes, rates are declining, but the labour market is anemic, many people are worried about job security and those who do lose their jobs might face long spells of unemployment.
That’s what brings me back to the newsletter reader. His family is already weathering some financial turbulence, and his question isn’t about mortgage rates but about what to do with the loan’s amortization at renewal. Here’s a condensed version of what he wrote:
My mortgage renews in September, 2026. When I renewed it in 2023 I kept the lesser amortization (20 years) and at the higher interest rate it took a bite out of my cash flow. At the time I figured I would absorb the extra monthly costs. Then we had to replace our car, my spouse lost her job, and we had our first baby. Should I have structured the 2023 renewal to be for the same payment as I had previously (by extending back to 25 or 30 year amortization), and used the mortgage prepayment option to put any extra cash toward it instead of letting the fixed payment increase? How would you advise approaching the 2026 renewal considering interest rates continue to flux.
I put that question to Frances Hinojosa, a mortgage broker and chief executive officer at Tribe Financial Group in Toronto. Her answer: Extending the amortization will lower monthly payments, but one can still use lump-sum contributions to pay down the mortgage faster.
Through e-mail, Ms. Hinojosa suggests keeping mortgage payments at a comfortable level and setting aside any extra cash flow in a separate account earmarked for one-off contributions.
“With the right structure, you can protect your future cash flow today and still accelerate your mortgage payoff as life and income grow and evolve.”
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Erica’s personal finance reading list
How to choose a mortgage rate in a trade war
We talked about amortizations, but if you’re wondering whether to go fixed or variable on mortgage rates, here’s a handy guide to help you make that decision from Toronto mortgage broker David Larock.
Betting, investing, gaming. What’s the difference?
“On the app of the investment brokerage Robinhood, users can now buy stocks on one tab, ‘bet’ on Oscars outcomes on another and trade crypto on a third,” write the authors of this New York Times opinion piece. In Canada, you can’t place a bet from an investing app (thankfully). But it’s easy enough to hop from a sports-betting app to an investing app on your phone and “bet” on stocks the same way you’d place a wager on the Blue Jays. Here too, the line between betting, gaming and investing is becoming increasingly blurred. (For New York Times subscribers)
Here’s another way to treat investing like a betting game: Buy whenever the U.S. President says so on social media. An interesting look here at how Donald Trump and others in his administration appear to have started a series of stock rallies.
Media callout
If you’ve turned to finfluencers or artificial intelligence for financial advice you later regretted following, journalist Kelsey Rolfe wants to hear from you. She’s working on a story for The Globe about Canadians who rely on social media for advice and what that can mean for their financial picture. To share your story, big or small, . e-mail herChart of the day
New products that caught my eye
Removable wallpaper, peel-and-stick tiles and wireless wall sconces are a sign of the times. The housing crisis is turning more and more young people into long-term renters. The desire to turn a drab rental into a place that feels like home without incurring the ires of the landlord is big business.
But homeowners should pay attention, too. Some of these products, I find, are just a smart twist on the old way of doing things. My latest discovery is Command Picture Hanging Strips. This is how I hang frames in my house right now. I may never go back to nails and a hammer (other than, possibly, for a very heavy picture).
ICYMI
You’ve been named executor of an estate. What if you don’t want the job? Should recently widowed Curtis, 55, draw from RRSPs before tapping into taxable investments?