Home Economics: Prepare for higher rates now; Canadians more financially literate than they think

Homebuyers should start preparing now for higher interest rates, why you're likely more financially literate than you think and Canadian bank investors get an early Christmas present from OSFI.

Why homebuyers should prepare for higher interest rates now   Prominent Bay Street economist Benjamin Tal wants homebuyers to start preparing now for higher interest rates. The CIBC deputy chief economist said if the market is correct and the Bank of Canada starts its “aggressive” hiking campaign in early 2022, then “there is a risk of getting into the [housing] market at today’s rates.” Tal cautioned buyers against taking on massive mortgages if they won’t be able to handle the payments when rates are higher.  Canadians more financially literate than they think   A recent poll found Canadians are underestimating their understanding of financial topics such as savings, debt, investing and insurance. Canada Life Assurance Co. said there was a big disconnect between how confident Canadians felt about their financial literacy and how well they scored on a financial quiz. The poll also found that while younger Canadians averaged the lowest scores on the quiz, they expressed the most interest in learning more about prudent money management.  Canadian bank investors hungry for dividend hikes   Canadian bank investors received an early Christmas present from the country’s banking watchdog. The Office of the Superintendent of Financial Institutions lifted its pandemic-era ban on dividend hikes and share buybacks effective Thursday. Manulife was first out of the gate – announcing a supplementary dividend of five cents per share scheduled for Dec. 20 and revealing a plan to repurchase up to 39 million shares.  Compulsive shoppers should ask themselves 'why' they're buying   If you developed a compulsive shopping habit during the COVID-19 pandemic, one expert says you need to figure out the true root of the problem. B.C.-based co-founder of The Trauma of Money, Chantel Chapman, says many people tend to overspend unconsciously to soothe feelings of pain or discomfort – a behaviour that can become a habit if not tackled quickly.Grocery bills continue to get more expensive  A United Nations index tracking prices of pantry staples from vegetable oil to wheat rose three per cent in October to a fresh decade high. Not only does that have some families fretting about how they’re going to put food on the table, but it heaps pressure on central banks to reconcile their stances that high inflation will be temporary. A number of factors have been bolstering food prices including labour shortages, rising shipping costs and bad weather. The energy crisis in some regions has also forced some greenhouses to turn off the lights.  

Tip Jar $250  

That’s the amount of extra money a homeowner would owe per monthly payment on a $450,000 mortgage if interest rates rose by 100 basis points

- Benjamin Tal, deputy senior economist, CIBC World Markets