Fixed vs. Variable Mortgages with Rob Carrick

[00:00:00] Welcome to The Canadian Real Estate Investor, where hosts Daniel Foch and Nick Hill navigate the market and provide the tools and insights to build your real estate portfolio. In today's episode, we're going to tackle the burning question on every Canadian homeowner's mind, especially with a record number of mortgages set to renew in 2025 and 2026.

[00:00:25] Fixed or variable rate mortgage. With interest rates at a crucial turning point and market uncertainty at levels not seen since 2008, maybe even the 1990s, your mortgage decision has literally never been more important. And today it's not just you and I talking about it, Dan. We are joined by a special guest who needs no introduction, even though we're going to give him a nice juicy one.

[00:00:51] That is Mr. Rob Carrick, one of Canada's most respected voices in personal finance. This is his first time appearing on the show, but he has been mentioned dozens of times as we've referenced his articles. And surprisingly, despite the market turbulence, his outlook might not be exactly what you expect. Plus, we're going to start off the show by breaking down the Bank of Canada's rates recently,

[00:01:17] basically all the big banks' predictions as to where those rates will be. We're going to kind of decode the bond market and its wild swings. We'll give you the tools and the knowledge so you can go and make the best decision possible for your mortgage, whether it's up this year or next. Dan, why don't we start off with how fixed versus variable mortgages are priced?

[00:01:42] Sure. Yeah, that would be a great place to start. I think one of the big key deciding factors in your mortgage decision is what rate you're going to pay. And so now more than ever, it matters to understand how these mortgages are priced. So you have fixed rate mortgages, which are priced primarily by Government of Canada bond yields. Banks typically use the five-year GOC bond yield as a benchmark and add a spread for profit.

[00:02:11] Bond yields are influenced by market forces. So basically the demand for Government of Canada bonds, as well as economic conditions and investor sentiment. The Bank of Canada has indirect influence through monetary policy and kind of like their language and their pressers, to be honest with you. But market forces play a larger role in pricing of bonds and the rates that come from them. Variable rate mortgages, on the other hand, are directly tied to the Bank of Canada's overnight lending rate.

[00:02:40] Banks set their prime rate based on the BOC's rate plus a spread. And variable mortgage rates typically move in lockstep with BOC rate changes. And so because we've seen this, according to CMHC data, we went through this period basically where the majority of buyers were using fixed rate mortgages. And a lot of them were using fixed rate mortgages from a three to a five-year period.

[00:03:06] And fewer and fewer were using variables, you know, coming off that period in 2021 to 2022 where the majority of borrowers were using variable rate mortgages. During that period of time, the Bank of Canada obviously could have a huge impact on demand. If the majority of your borrowers are directly impacted by what the Bank of Canada does, then if they do something, then the market responds to that. Now, all of a sudden, the majority of rates are maybe not suddenly. It was a kind of a gradual shift.

[00:03:34] But we've gotten to the point where basically the majority of mortgages being taken today are coming from mortgages that are priced based on the government of Canada's five-year bond yield. And so rate cuts have limited immediate impact on monthly payments for fixed rate holders. And housing demand remains constrained until these fixed terms expire. And a lot of these folks can either renew at higher rates or lower rates and kind of understand the financial future, let's call it, for the next five years. Hmm.

[00:04:01] There's a growing interest in variable rate mortgages as rates are becoming more competitive. And again, the pricing of those is improving and increased adoption of variable products could make Bank of Canada policy more effective in reviving the housing market moving forward. The market is becoming a little bit more responsive to Bank of Canada rate changes as more borrowers choose those variable rates.

[00:04:22] The last piece that I'll get into here, and then you can give us some of the key risk scenarios for those variable rate mortgages in 2025, Nick, is the impact of the stress test on buying power. So there's sort of this threshold at 5.25% where so the stress test requires borrowers to qualify either at the contract rate plus 2%. So if your mortgage was 4%, you would qualify at 6% or 5.25%, whichever is higher of those things.

[00:04:49] And so right now we're in a rate environment where, you know, if you're getting rates in the high threes or fours, you're still qualifying well above that 5.25%. Once mortgage rates drop below where they're stress tested at 5.25%, so, you know, if you're at a 3% mortgage and you're at 3 plus 2, you would be actually stress tested at 5.25 rather than 5%. Changes in rates become less impactful on buying power.

[00:05:16] And it's not to say that I necessarily think rates will get that low, but people smarter than me and a lot of the banks are forecasting that rates will end up that low. And so it's important to note that there is limited like that, that 3% rate is kind of the lowest downside where rates rate cuts are still adding more buying power to the market rate drops from 5% to 4% only increased buying power by approximately like 3% and 4%. And the stress test kind of continues to act as a ceiling on the maximum borrowing capacity in that regard.

[00:05:44] Who this really matters to is it's less for investors, I would say, and more for your first time home buyers and any buyer who's sort of near their maximum affordability because they're most affected by those limitations. But as investors, we often count on those buyers to keep prices where we want them to be if we want to see prices grow on our real estate investments. And right now that's limiting the ability for the market to recover.

[00:06:08] So, you know, a little bit of a spoiler, but I think Rob seemed to be more inclined to favor the variable rate, Nick, which surprised me. And I would say I'm personally, I'm more in favor of the fixed in today's environment. But, you know, should somebody be choosing a variable rate mortgage, what would really be the key risk scenarios that they might want to think about? Yeah, it's a great question. And I was surprised to hear Rob just come out and say that as well.

[00:06:34] So make sure you stick around for that second part of the podcast here where we bring Rob on and he provides his insights as to why the variable is not only just popular kind of in the mainstream again, but why he's an advocate for it right now. And then as a mortgage broker, I've seen more and more people go back or even consider the variable than I have in the last little while. But, you know, the variable does have risks that the fixed doesn't.

[00:07:00] And let's go through a few of them that could even be more potential risk scenarios, right? Okay, well, first things first, this trade war, right? We don't know if it's happening. It is one day. It isn't the next day. It's an ever unfolding story here, but the potential of U.S. tariffs could force the Bank of Canada to cut rates more aggressively than planned. And that would increase market volatility, you know, going back to maybe a 2008 level or even an 80s or 90s recession level.

[00:07:28] And bond yields are showing significant fluctuations, creating an unpredictable rate environment, right? We were just talking to Rob. He's like, yeah, you know, bond yields are up this morning. They were down a couple of days ago. They're all over the place.

[00:07:39] And all of that leads to recessionary concerns where if we have this, finally, if we ever get to this recession that we are maybe going to admit we're in or not, an economic slowdown could again lead to more rapid rate cuts, which of course, rate cuts benefit variable rate holders initially anyways.

[00:08:00] Now, recessions typically bring job losses and income uncertainty, which again increases the risk for a variable rate holder, right? If you are a variable rate holder and the Bank of Canada is lowering rates, okay, we'll pay. Let's celebrate, right? I'm paying less. But what if you're the same person that loses their job or takes a bit of a salary cut because we are in a recession, right? So it's a bit of a double-edged sword depending on your situation. Now, there's a lot of rate cut forecasting going on, but it's all uncertain.

[00:08:31] We are going to get to the predictions of the big six banks and where they see rates are going. But again, none of this is written in stone. And we know that because it has changed quite a bit over the last year or two as the banks kind of try to keep up with the general economy. So markets are pricing in two more quarter points by the Bank of Canada. But of course, external shocks to the system could very much alter this path.

[00:08:57] Now, the expected policy rate of 2.5% by July 2025 depends on stable economic conditions. Who knows if we are going to have those in July of this year. And the big six banks are forecasting more aggressive cuts, two to two and a quarter by year end. So what can you do if you're trying to mitigate risk in a variable strategy? Well, you can consider locking into a fix and actually just not using the variable at all. And they are pretty competitive right now.

[00:09:27] Build financial buffers to handle potential payment increases. So instead of that rainy day fund or what I love hearing now is people have a sunny day fund, which I actually think is way cooler. Maybe you've got a mortgage day fund where, you know, you can go put a lump sum payment down or you can switch over or possibly even break it or something like that. You know, get to a know and understand that product.

[00:09:50] And of course, stay within comfortable affordability ratios, regardless of what you think or what you read or hear or listen to of where those rates are going. Now, quickly, Dan, I'm just going to go over some fixed rate mortgage benefits specifically for investors. So cash flow predictability would be the number one, right? Fixed monthly payments. Those allow for precise budgeting and financial planning, which is something that I know a lot of investors want.

[00:10:19] Yeah, I think, you know, it's so important. Like, you simply can't model out your investment if you don't know how much principal you're paying over five years. You know, like if it's a moving target, sure, yeah, you might really benefit like the scenarios you outlined. Probably a lot more downside scenarios, which means rates going down for variable. Like, you probably could win with the variable move right now.

[00:10:43] But all of that being said, it just makes it very, very difficult to model your numbers and say, oh, I know I'm going to pay down this much principal by the end of my five-year term. With a fixed rate, you can do that. With a variable, you very much cannot do that. So that's the biggest issue with it from my perspective. 100%, man. And how many times, like it must be in the hundreds at this point, have we had conversations with investors that bought, you know, high leverage on a variable, got into an asset.

[00:11:12] It was cash flowing for a hot second. And, you know, now it's not because variable rates went up. Like, that is probably the most common story I've heard from newer investors over the past few years. Even the static payment variable, like where your payment doesn't change. It's like, okay, well, now you're just basically paying an interest-only mortgage, which means you're getting no principal, which completely defeats the purpose of real estate investing, from my perspective, which is to have your principal paid down by rental income.

[00:11:42] Exactly, exactly, man. So, again, cash flow predictability is like the number one benefit of a fixed rate mortgage. You know, it just makes it easier to calculate potential returns on those investment properties, especially if you're out there trying to solicit capital from other sources, right? If your numbers aren't even lining up or your numbers are changing on a weekly or monthly basis for variables that you can't control, eh, don't love that.

[00:12:11] Stable payments help also maintain a reliable debt service coverage ratio, one of the most important metrics in real estate investing. You know, risk management benefits, it's easier to underwrite. Simplified cash flow on multi-year investment strategy, you can actually model it out over the course of your mortgage term and get your amortization schedule and line that up. And, you know, it just has overall protection against that rate volatility.

[00:12:35] As investors, I think a lot of us like to take risk, but take risks that you can control. Don't allow those risks to just be in the general economies or the Bank of Canada's hands to – that would have a drastic effect on your portfolio. And one last piece on the portfolio is, you know, sometimes fixed gives you the ability to scale an investment portfolio a little easier.

[00:13:01] Again, with those fixed costs, it reduces complexity in managing multiple investment properties. If you've got 20 investment properties and they're all different rates, man, that sounds like a bit of a nightmare. They're all variable rates switching all the time. That's an accounting nightmare that I do not want to deal with. It just gives you more long-term ROI calculations for investment planning, which you and your potential partners are going to want to know and see. Yeah, absolutely.

[00:13:31] I guess I will quickly go through a couple of headlines and then we'll – And we'll get to Rob. We'll jump in. Yeah, we'll jump. We'll do a little bit of an intro for Rob and then we'll jump into that interview here. So this headline reads, Fixed vs. Variable. Why Variable Rate Mortgages Are Making a Comeback. And I'm just going to quickly summarize this article here. After the Bank of Canada's latest rate reduction, five-year variable rate mortgages are now on par with their fixed rate counterparts. Raising the question is now the time to go variable. With expected Bank of Canada rate cuts, variable rate mortgages look more appealing.

[00:14:00] But borrowers face a tradeoff between potential savings and increased risk for market volatility that possible trade tensions could also happen with the U.S. According to Ron Butler of Butler Mortgages, bond market volatility has reached levels not seen since the 2008 crisis. The five-year bond yield dropped from 3.85% to 2.64% between April and last week, leading to variable rates matching fixed for the first time since November after six Bank of Canada rate cuts. Give me the next article here, Nick.

[00:14:30] Yeah, great segue. This one's from Canadian Mortgage Trends. And it is about rate cuts. Market experts forecast two more quarter point rate cuts from the Bank of Canada. A majority of influential economists and analysts predicted the Bank of Canada will lower its policy rate to 2.5% before pausing. Now, according to the Bank of Canada's latest quarterly market participants survey, which polled 28 influential financial market participants.

[00:14:59] I never got a call for that, Dan. Did you? Were you one of those? I never get that call. Pulled 28 influential financial market participants. Most respondents expect the Bank of Canada to implement two more quarter point cuts, bringing the policy rate down to 2.5% by July. That forecast is lower than Q3, with half the respondents expecting to trend down, only 11% expecting it to rise.

[00:15:26] Bank of Canada is projected to hold rates at 2.5% until Q1 of 2027 and then raise to 2.75. Man, these are some bold predictions. I love how we're talking 2027. If I've learned anything over the last few years of this, predictions have a very high likelihood of not being correct.

[00:15:48] So with that being said, Dan, why don't you tell me some of the BOC policy rate forecasts from the big sink banks here in Canada. That's BMO, CIBC, National Bank, RBC, Scotiabank, and TD. Yeah, so BMO thinks that the rate by end of 25 will be 2.5%. This is the overnight rate. CIBC and National and TD think it'll be 2.25%.

[00:16:16] RBC thinks it'll be 2% and Scotia is on the high end there thinking it'll be 3%. So RBC on the low end, Scotia on the high end. So really just between 2 and 3, which is pretty much where most people want the rate to be anyways, right? Yeah, and I mean, again, that would leave your prime a little bit higher than that. And then right now you're seeing variables priced at like prime minus 90 bips.

[00:16:42] So based on those forecasts, the variable would be the winning case, right? Yeah. I guess maybe we'll quickly introduce Rob here because he has an excellent bio available. Yeah. So I'll do the first half and you can do the second half maybe. And then we'll jump into our interview with Rob Carrick. We usually never do like this much of an intro for our guests. I mean, we do great intros for every one of our guests because they all deserve it because they're all amazing.

[00:17:07] But Rob, I just pulled this right from his Globe and Mail like bio and it was just so funny. He's such a great writer. So I figured, you know what? Let's just read it, have a bit of fun. And then we'll dive right into the interview where he shed some really great insights on where he thinks the market's going, where he thinks fixed and variable going and just some general advice for Canadians that are kind of going through a bit of a tough time right now. So over to you, Dan. Not all journalists get to live their beat, but I do.

[00:17:35] My personal finance column in the Globe and Mail is one regular guy's attempt to make sense of the world of money. I'm married with two 20 something kids and constantly figuring out ways to spend and invest intelligently. I ask the same questions you would and apply my experience and contacts to get answers. I got my start in financial writing back in the 1990s when I covered the Bay Street business scene for the Canadian Press Wire Service. A few years later, I was transferred to CP's Parliamentary Bureau in Ottawa to cover consumer

[00:18:03] affairs and later the Federal Department of Finance. I left CP and joined the Globe and Mail as an investment reporter in 1996. I mentioned to my boss at the time that we didn't do too much personal finance coverage at the Globe. The paper's personal finance column was launched shortly afterwards with me at the wheel. What a trip it's been covering personal finance over the years. I've seen three bull markets for stocks, a couple of recessions and a couple stock market

[00:18:33] crashes, one global financial crisis, the incredible rise of the housing market, soaring personal debt loads and an ever present worry that Canadians aren't saving enough for retirement. Wow, what a sentence that was. I know that there is infinite personal finance content available online these days in print and on TV and radio. Come to me from my experience, my willingness to challenge stale consensus thinking and most

[00:19:00] of all my ability to make you say, after finishing one of my columns, now I understand. Well, we all hope that you understand the difference between fixed and variable a little bit better, what you should be doing if you have a mortgage renewal coming up and just some general insights. Dan, let's bring it over to Rob and get him in here. We are blessed to be joined by someone who has come up on the podcast a number of times for

[00:19:28] the amazing work that they offer to the entire mortgage, real estate and economic space here in Canada. Rob Carrick, thank you so much for joining us today. Before we get into a lot of the hard-hating questions that we have prepared for you, Rob, why don't you tell our listeners who probably recognize your name, tell us a little bit about what you do and maybe why we should be asking you some of these questions.

[00:19:56] I have been writing about business and economics and investing in personal finance for 35 plus years and I've been the global personal finance columnist for about 25 of them. And real estate is one of my number one topics. It's of interest to me and it is a keen interest to global male readers. And that's why I have been covering it like a blanket for a long time. Like a blanket indeed.

[00:20:24] Yeah, you have put out a number of amazing articles that we've used on the podcast. And I always appreciate your little bit of sense of humor. You know, I was doing some research this morning and even one where it was like stick, how to stick handle a mortgage kind of thing. So you got to keep it light, right? You got to keep it. Hey, it's a heavy topic these days. You got to keep it light. And I think that's why you're such a great fit to have on the show here. Rob, I want to dive right into it and hit you with a big question right off the bat here.

[00:20:53] You've obviously been one of the leading voices in the Canadian real estate and the Canadian mortgage space for a while now, decades at this point. And going back those decades, you've seen other periods of economic distress and uncertainty. Are we equivalent to any of those past instances? And if so, what lessons can we take away from that period and apply those lessons to the pickle

[00:21:22] that we've found ourselves in today? Well, for me, the watermark for economic disruption is the 2008-09 global financial crisis. And so far, what we have today isn't even remotely comparable to that. That was chaos. That was people who are in the industry, the financial industry for their whole careers were melting down. And I could hear the fear in their voices when they were talking. Nobody had a clue what was going to happen. Basically, markets were in free fall.

[00:21:50] Nobody understood why. Nobody understood where the bottom was. The economy was infected by all this, much more in the United States than here. But nevertheless, there was a recession. But it was just this rampant uncertainty. So where we are today is not anything close to that. Now, if we were to get a full-blown tariff for, I think we would be seeing a lot of disruption and a lot of pain. I don't want to call it chaos.

[00:22:20] Chaos is a word I've seen already used about the tariffs. And I think it's a way overstatement, and it just gets people torqued. We know it's going to be a hard blow to the economy. The forecasts I'm seeing are that we could enter a recession. It could be a very severe recession by recent standards. But it's all things we've seen before and we can understand. Businesses will get conservative. They will have to pair staff. They may have to shut facilities. We know how that works, by and large, because we've seen it before. Okay. So going back to the global financial crisis, right?

[00:22:48] I mean, that did not affect Canada nearly as bad as it did the States. So you're right. I think that comparison isn't as strong as some people make it out to be. But we did see other Canadian recessions in the 90s, and we have seen a lot more comparison to that. Now, you were covering the stories back then, as you are today. Are there more similarities back then? And if so, what were people doing back then that they should be doing today?

[00:23:17] Well, I was barely aware of it because I was a young guy just getting into the workforce. But the recession of the early 80s was very sharp and very long and very disruptive. And it took a long time to get out of it. Of course, that was all complicated by inflation that was much higher than it is now. Then there was a recession of the early 90s. I remember as a young economics reporter being on Parliament Hill and talking to the finance minister at the time, Paul Martin, about the unemployment rate being above 10%.

[00:23:46] And when might it go below 10%? And he said, it'll take a while. Of course, now we're in the 6% range, and everybody's up in arms about it. So there's a little context for you. Okay, let's shift gears here. Let's move over to some mortgage questions, which I know you're just dying to answer. Bring it on. Okay, so you've covered this, as I said, the stick handling. But you've covered this quite a number of times over the years as the mortgage market.

[00:24:14] And I'm a mortgage agent, as the mortgage market has been through a ton of volatility, rate hikes, rate cuts, how those are affecting the market overall. Now we're looking at fixed versus variable. Again, that seems to be one of the main questions we're getting. What are some of the most important questions that people should be asking themselves when they're deciding on choosing a fixed versus a variable,

[00:24:44] let's say between today and the next kind of six months? I think the big question is, what is your number one goal? To get the lowest possible borrowing cost or to get a reasonable deal and feel comfortable that I am insulated from everything that's happening in financial markets and politically. My rate is set. It's locked in. See, I'll talk to my lender again in four and a half years or two and a half years, assuming I've got a three or a five-year fixer.

[00:25:10] And I really encourage people to think about the emotional side of it now more than ever. You know how stretched people are, what they are. I'm getting emails from readers asking crazy questions. Should I sell all my investments? Should I buy gold? There's a lot of stress out there. And if you can cross your mortgage off that list of things to worry about, I say you go for it. Oh, that's not the lowest possible borrowing cost? So what? You paid a little extra. You got security. It's worth it. Now, you want the lowest possible borrowing cost?

[00:25:38] You have to look at variable right now, I think. Especially if we get into these tariffs and the Bank of Canada has to start. Cutting rates more aggressively. I think you're going to see many chops in the overnight rate, which is going to flow directly to the prime rate and then to variable rate mortgages. Fixed could drift lower as well. But it's a complicated world. You know, I was just looking at bond yields this morning and they're ticking higher because inflation in the States is a lot stronger than people imagine. So the fixed side is going to be very unpredictable.

[00:26:07] So I guess it's totally subjective to that individual person, right? There's no kind of blanket answer here. No. You know what? I would say to a very savvy, sophisticated, experienced person who has resources to roll with any curves that come, go variable. I mean, I think that is the ultimate smart, shrewd move right now. But I just don't know if a lot of people can handle it. I mean, I don't really foresee rates backing up.

[00:26:35] Like how could you build an economic scenario where interest rates go back up and really hurt people who start with a variable rate mortgage right now? But, you know, people are, it's, I think people are just picking up little pieces of economic intel right now and spinning stories for themselves on what's going to happen and what they should be worrying about. And they're going on the wrong track a lot of the time and they're putting themselves under stress for reasons that aren't always that sound.

[00:27:03] That's why I think the fixed rate mortgage is, it's bulletproof. You're in a bunker for the term of your mortgage. Yeah, I think. And, you know, the five year fixed has historically been just like the go to mortgage. And I think for a while there, everyone hopped on the variable. So many people got burned by it. If we were to see rates escalate again and people were on the fixed, I don't know if anyone would ever choose the variable again if it was like. No, it would be that that would blow it, blow it up completely as a choice.

[00:27:33] But we have to ask ourselves, what would have to happen in the world and in the economy and in the minds of investors in the Bank of Canada to make interest rates start trending higher? I guess we need a huge eruption of inflation. But if there's tariffs and the economy is struggling, we're going to see inflation in specific areas related to tariffs. But in the broader economy, there's no way the Bank of Canada is going to like drop the bomb of higher interest rates on a struggling economy. It's not going to happen. They're going to have to suck it up with little bits of inflation here and there.

[00:28:03] You mentioned the financial stress that people were feeling. And one of the big themes around the financial stress is renewals for 25 and 26. We know that a massive portion of Canadian mortgages will be renewing this year next. And it seems like the Bank of Canada has done a lot of work to get rates down. The bond market has done a lot of work for rates to come down. And now I think that renewal wall is maybe not as scary as it once was. What are your thoughts on that?

[00:28:33] Generally concerned or do you think the Canadian economy generally needs to be concerned about the massive amount of renewals taking place in 25 and 26? Well, it's hard to find good financial news these days. But these renewers, a tally I've heard is 1.2 million people, are getting lower mortgage rates than they would have four months ago, six months ago, eight months ago, 12 months ago. So rates are – the trend is down for fixed-rate mortgages with lots of little blips up and down.

[00:29:02] You know, I think when there was all these scare stories about the renewal wall, mortgage rates were a lot higher than they were now. They had a five-handle on them. Now we're even starting to see some five-year rates, I guess probably for insured mortgages with very favorable lending characteristics, maybe a little bit below 4%. So we've taken a lot of the pressure off these renewing people. I guess a lot of the concern we need to have about those people is, what's the unemployment rate? What's the job market doing?

[00:29:29] And if the job market is solid and interest rates have come down, then these people – I mean, it can't come as news to them that they're going to be renewing at a higher rate. Hopefully they are going to be making adjustments in their finances. They're going to get raises, that sort of thing. I'm not that worried about it if everything holds together. Okay. You heard it here first, folks. Not that worried about it. That seems to be a pretty good outlook. Yeah. And I think if I'm correct here, I think it's like 1.2 million mortgages this year.

[00:29:57] And I believe 26 has even more than that. I think it's like around 1.5. So, I mean, massive numbers that – you're right. I mean, we – you know, that could be the straw that breaks the camel's back if it's not handled correctly. Now, let's – like, as far as like that mortgage war goes, how do you see the banks and some of the lending institutions reacting to that? Are we going to see this battle of the big banks trying to, you know, get every piece of business they can?

[00:30:24] I can tell you from the mortgage broker side, Rob, that trying to get an A deal done and competing with the bank is next to impossible right now, especially on a renewal. We're just literally – I mean, I've got – I've had probably a dozen people kind of be asking for help with renewals in the last week. Almost every single one of them, I'm like, honestly, just go back to your bank. There's likely no way that we can beat this. I am finding and hearing that the banks are competing hard and they want to keep business. And it's a competitive marketplace out there.

[00:30:52] I just got an email this morning from a pitch from some new mortgage brokerage operation opening using AI to process applications, blah, blah, blah. You know what? Oh, good. Another competitor. The banks are taking note of that and thinking, okay, we don't want to lose customers. Look at TD. Look at all the problems they have. I mean, they just sold their U.S. brokerage division. They've raised all this money to become more competitive in the Canadian market. Well, how are they going to compete? A lot of it will be on the investing side and the asset management side and a lot of it will be acquiring mortgages.

[00:31:19] So, the banks are loaded and ready and they want to keep and they want to grow. So, I mean, if the economy is slowing and they've got to generate growth for shareholders, well, I mean, one way to do it is to steal clients from other places. So, if you are one of those clients that has one of these mortgages coming up in the next 6 to 12 to 18 months kind of thing, right, in that 25, 26, you know, mortgage or cliff renewal, all the rhetoric we've heard about it.

[00:31:49] And you're feeling a bit anxious or you're maybe not fully aware of what you should do. What would your advice be for some of these people that are going into this, you know, feeling anxious and have seen the headlines and are kind of scared about the whole process? Should they be scared? What would you, how would you advise them to strategically navigate or as you so eloquently put it, how should someone stick handle through this? How should they stick handle as well? Let's, you know, let me tell you what I would do.

[00:32:17] What I would do is I would reach out to my lender and maybe a mortgage broker or two to get a variety of opinions. And I would say, here's my renewal. Here's what my mortgage balance is going to be. Tell me, based on current rates, how much my payments are going up. What's an attainable deal for me on rates? And you could do a variable and a fixed scenario. And how much my payments are going up? I need to know. How can I adjust?

[00:32:42] And then that's my worst case scenario, because I think if we're renewing rates in the next 12 or so months, higher rates on the fixed side, maybe on the on the variable side. Nah. So I'm comfortable with these scenarios. That allows me to prepare. Do I have to do I have to make changes in our household cash flow? Do I have to maybe sell a car? Do I have to give up my TFSA contributions for a short period to keep up? But have a plan. Be ready.

[00:33:12] Don't be surprised when you get the renewal notice and they're telling you what your new payments are. You should know that well in advance how much your new payments are going to be. And you should just be able to glide right into that. It might be painful, but at least you'll be prepared. And there's time to do that preparation.

[00:33:24] In regards to all of that, do you have any general advice for the mortgage consumer, real estate investor, personal finance advice for individuals kind of trying to make the most of this market, but also sort of the economic setup, like where we are heading into a recession potentially, right? Like there's recessionary forces, tariffs, uncertainty, et cetera. Is there any kind of key advice points you can give to people who are listening?

[00:33:51] So the economy was actually, if you take the whole tariff thing off the table, the economy is doing well. It generated a lot of jobs in December and January. So I want people to remember that. It's actually a better economy under all the headlines. But what I would tell people is, you know, if we get a weaker economy or a recession, it's just a passing thing. You know, this isn't the final verdict of what your house is worth if you bought recently.

[00:34:21] You know what? One thing we can all agree on is that as an asset, Canadian houses increase by at least the inflation rate on an average annual basis and they'll probably do a little better than that. So don't worry about it. You know what? I bought, my wife and I bought our first house in Toronto in the early 1990s and it was rubble in the Toronto rousing market. Then there was a massive crash in the late 80s, early 90s. And almost every house we looked at was being sold for less than the previous sale. And what happened?

[00:34:49] The Toronto mark took a few years, but it went off like a rocket. It hasn't really lost any momentum since then. So I would tell people, chillax if your house is going down in value. That's today, tomorrow, a different story. And I would also say there's opportunity in a weak market for the young people who've been hungering to get into the market. This may be your chance. You know what? We're going to have lower mortgage rates.

[00:35:13] We may have stagnant or even slightly lower housing prices, maybe significantly lower housing prices. I did a call a couple of weeks ago when the Bank of Canada cut rates last saying, you know, there are various scenarios where you have a secure job, secure income. You'll be able to take advantage of an economic pullback and the favorable pricing that's going to happen in real estate. There will be an opportunity there for some people. I love to hear that, Rob.

[00:35:39] Let's do a little bit of a deeper dive into that opportunity that you see specifically for maybe that the younger, I don't know, let's say 20 to 40 year olds that maybe have felt ostracized a little bit from even the general economy. But mostly the housing economy, whether they're trying to be a first time homebuyer or in some cases a renter trying to buy their first investment property kind of thing.

[00:36:04] I know that the word opportunity has disappeared for a lot of those people over the last couple of years with the volatility we've seen in the market. You're now seeing that opportunity come back kind of on the horizon. Can you elaborate on that? Where is that opportunity? What should people be doing to capitalize on it? Well, the opportunity will occur if we can get a situation where house prices are stable or declining, interest rates are low and incomes are increasing at least somewhat.

[00:36:34] So that's a lot to ask, but I think it is doable, especially if there is some sort of trade friction that's keeping people on the sidelines with housing. And I think you just have to look at your opportunity to save a bigger down payment as you're waiting for this opportunity to take effect. You can still get reasonably good rates on savings. So you can build your down payment with zero risk because I sure wouldn't be putting in the stock market right now.

[00:37:00] And, you know, I was looking at the most recent Statistics Canada report on the job market. Average wage increases are still above 3%, still nicely above inflation. All we need are house prices to cooperate and for us to keep borrowing costs reasonably low. I mean, usually when you cut mortgage rates or they go down, demand increases for housing. And I think that would be happening if not for the tariff threat.

[00:37:25] So as long as that's lingering over us and there's no reason to believe it's going away anytime soon, we have something to sort of keep housing prices under control. It could be favorable for borrowing costs. I think you need to keep your eye on things. You know, there's certain national markets in Canada that are doing pretty well. But you look at the expensive markets, the Toronto area and Vancouver, they're kind of like they're kind of sort of dead in the water right now.

[00:37:54] And I think that a little adversity could push them down. I know the Toronto condo market's not in great shape. You know, the adversity of the existing owners is the advantage of the wannabe owners. Yeah, that's great. You mentioned other markets in Canada. What markets are you thinking that have some opportunity? Well, Western markets have been really strong. I mean, a lot of money's flowed in there just for sheer affordability.

[00:38:17] At a certain point, I wonder if they're going to sort of reach that tipping point where it's not quite the bargain it was and maybe the percentage increases will not be what they were. I think Montreal is doing pretty well. I think, you know, more reasonably priced markets still have some activity going. But where it's already very expensive in Toronto and Vancouver and the whole GTA area and all the big cities around Toronto that had such hot real estate markets, they're not that hot right now.

[00:38:45] And, you know, from what I understand, the Toronto condo market is really in trouble. There's a lot of supply. There's not a lot of demand. It's not easy to sell one. I mean, if you wanted to buy a first condo, you're a renter and you want to buy a first condo, I think it's go time now in the Toronto area at least. Yeah. What do you think, Dan? You agree with that? Time to buy condos again? I'm not fully convinced yet, but I think that I think Rob's right.

[00:39:12] There will be a window of opportunity probably over the next couple of years. I think if the stars align, like the reality is it's all, you know, you think about it on a deal by deal basis, right? Like if there's if there's 10,000 condos for sale, if you go and lowball every single one of them, there's a good chance you can buy something well below market value. And I think a lot of people forget that, right? Like you don't have just because the average price isn't down doesn't mean that you can't get a good deal. You're not buying at the average price. You know, you don't have to buy stuff for what it's listed for.

[00:39:40] So, yeah, I would say that I think we're in a we're in a buyer's market, certainly in most metrics and in many markets in Canada. So for sure. Interesting. Yeah. Honestly, Rob, I got a lot from this discussion. You're you're very well spoken and you can get through the info really quickly. I think our audience will benefit a lot from this. So I guess I want to be mindful of your time and just say thanks and really appreciate you coming on the show. You're welcome. Glad to do a great chat.

[00:40:05] Yeah, if anybody wants to if anybody wants to reach out to you or check out your work, where would you like them to find you? I think I'm well represented on Google if you do a Google search. But if you want to email me, rcaric at globalmail.com. And, you know, tons of content out there with various ways to reach me. I do a newsletter that people subscribe to and you can reach me through that. And I answer all civil questions. You have a podcast as well, right? Yeah, I have a podcast.

[00:40:34] It's called Stress Test and it is aimed at Gen Z and millennials. And it's about all things personal finance. Amazing. Yeah, it's Stress Test is great. I'd highly recommend everyone go check that out. And honestly, Rob, all the work you do. One final question before we let you get out of here, Rob. Sure. Where do you see Canada going? Let's just have fun. Not holding you to this. I know this is some crystal ball stuff, but you have, you know, history doesn't repeat itself, but it rhymes.

[00:41:00] And as a man who's been doing this for decades, maybe you can help us with the rhythm here. Where does Canada go in two years? And maybe even we'll stretch it out and have some fun. Where does Canada go in five years? Give us the good, the bad and the ugly. Well, the way things are changing these days, it's hard to know what's going to be happening in the next two hours or five hours, because that's what the news cycle's like these days. But I'll take a crack at it. I think in two years, we'll probably be a little bit bruised by picking ourselves up after these trade frictions

[00:41:29] and confident that we have a better path and more diversified trade, more attention to productivity. We're going to try to generate wealth from the economy down. And I think in five years, a lot of those benefits will be playing out and we'll have a feeling that the Canadian economy is on a better footing than it was and that the shock treatment we got in 2025 actually got us to pay attention to things that we had left alone too long and we finally got serious about it and did something about it and we will be in better shape. Love it.

[00:41:58] Okay, that is a perfect little piece of optimism to end this on. Rob, thanks so much again for joining us today. We'll put all the links to all your amazing work, including your podcast, in the show notes here. And welcome back any time to continue to discuss the ever-evolving, as you say, hour-by-hour news cycle that we're dealing with here. Well, you know what? Let's have a chat if housing gets really interesting and there's a terrafore

[00:42:26] and we're seeing declines that we haven't seen before. Let's have a talk about that. I'd love to get into that with you. Yeah, amazing. Okay, until then, thanks so much, Rob. We'll talk to you soon. The content of this podcast is for educational and informational purposes only. It is not intended as financial, legal, or investment advice. Always consult a qualified professional for advice tailored to your unique circumstances.

[00:42:50] The views expressed are those of the hosts and guests and do not necessarily reflect the opinions of affiliated organizations. Daniel Foch is a real estate broker licensed with Valerie Real Estate Inc. The website is valery.ca, V-A-L-E-R-Y.ca, and a member of the Canadian Real Estate Association, the Ontario Real Estate Association, and the Toronto Real Estate Board. Nick Hill is a mortgage agent and partner at OWL.

[00:43:17] Mortgage license number 10317. Agent license M21004037. Thank you.