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2023 will be a better year for homebuyers, mortgage holders, investors and people sick of greedflation

January 11, 2023 | Posted by: Angela Robinson

The end of interest rate increases

Persistent inflation means we could see a modest rate increase early in the year, but 2023 will be a year where the central bank mostly keeps rates the same. If you have a variable-rate mortgage, line of credit or floating-rate loan, you won’t have to hang on each rate announcement to find out how much more you’ll have to pay. We are near the worst right now.

By the second half of 2023, expect to hear speculation on the timing of rate cuts by the Bank of Canada. Inflation must come down for rates to fall, but the central bank also has to be careful not to push the economy into a deep recession by keeping rates high for too long.

 

The end of greedflation

Inflation caused by supply chain disruptions, war in Ukraine and enthusiastic consumer spending was bad. Then, some businesses made things worse by jamming customers with above-and-beyond price increases – so-called “greedflation.”

Greedflation will fade in 2023 because it can only survive in a free-spending environment where people pay up for what they want regardless of price. The economic consensus is that 2023 will be a year of cutting back on spending.

Bottom line, we won’t be competing with each other to buy goods and services. Some businesses might even have to cut prices to keep customers.

 

The end of the long, dark night for balanced investment portfolios

Soaring interest rate rates hurt bond prices in 2022, which meant sharp declines in the value of exchange-traded funds and mutual funds holding bonds. As financial markets gain confidence that inflation is coming under control, we will see bonds rally in price. That’s good for the bond side of your portfolio.

As for stocks, they will rebound from the declines of 2022 when there’s a sense that inflation is beaten and the economy is stable. The traditional balanced portfolio of 60 per cent stocks and 40 per cent bonds was toxic last year; over the next two years, it could mean double-barrelled performance.

 

Better affordability for homebuyers

House prices are falling, which is painful for recent buyers who thought the equity they had in early 2022 was in the books for good. For young buyers waiting for an opening into the market, the news is far better in two specific ways.

One is obvious – cheaper houses mean lower monthly payments, even with mortgage rates at elevated levels. The other is that new buyers have to save less to build a down payment.

 

Get started on your home buying journey today, call 780 701 3888 or email [email protected]

Full article:https://www.theglobeandmail.com/investing/personal-finance/article-2023-will-be-a-better-year-for-home-buyers-mortgage-holders-investors/

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