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Cottage Life

RBC predicts recession could hit early next year. Here’s who will be most affected

Photo by Shutterstock/JHVEPhoto

The Royal Bank of Canada (RBC) has bumped up its recession prediction. Previously, the bank suggested that the Canadian economy might experience a moderate contraction in 2023. But in a report published on October 12, experts are now saying that Canadians should expect the recession to hit in the first quarter of the new year.

The exact date remains vague as experts have difficulty nailing down when a country enters a recession. Most define it as two consecutive quarters of declining gross domestic product. A more obvious sign is a surge in unemployment.

But what does a recession mean for cottage owners? According to Claire Fan, an RBC economist and one of the authors of the report, it could make owning a cottage more expensive.

Canada’s inflation rate remains aggressively high, sitting at seven per cent. This means that demand is still outpacing supply. The Bank of Canada is working to lower inflation to two per cent by raising interest rates. On September 7, the bank raised its policy interest rate to 3.25 per cent.

This makes it more expensive for Canadians to borrow money, including cottage mortgages. Whether a cottager’s mortgage payments will be impacted during the recession depends on the type of mortgage they’ve taken out, Fan says.

“A fixed-rate mortgage would see a much smaller impact from rising interest rates than a variable mortgage,” she says. This is because a fixed-rate mortgage is locked in for a certain number of years at a set interest rate, keeping monthly payments consistent. Whereas the monthly payments for a variable mortgage fluctuate with the Bank of Canada’s interest rates. However, a cottager with a fixed-rate mortgage could see a significant jump in their payments if their contract comes up for renewal when interest rates are still high.

Presently, there are no signs of interest rates going down. RBC says it expects the Bank of Canada to raise its policy interest rate to four per cent before the end of the year as it continues to fight inflation.

The rising interest rates are having a cooling effect on Canada’s real estate market, including cottages. After the cottage real estate boom of 2020 and 2021, high mortgage rates are starting to slow sales.

According to RBC, property resale across Canada has dropped by 36 per cent since February. Despite the drop, cottage prices remain similar to their 2021 levels. But RBC says it expects the nationwide benchmark property price to drop 14 per cent by next spring. This could make it a good time to buy a cottage, if you can qualify for a mortgage.

Besides higher mortgage rates and a slower real estate market, a recession could also make day-to-day purchases more expensive for cottagers. Fan says the high inflation rate is putting price pressure on everyday goods, such as food and gas. If it costs $100 in gas to drive to the cottage, owners may reconsider the trip.

Plus, RBC says that between interest and inflation rates, the average household’s purchasing power is expected to decline by $3,000 in 2023. Purchasing power is the amount of goods and services a household can buy based on their income. “If a household buys the same things again next year, how much more would it cost? And if their debt levels stay fixed at where they are today, how much more could they be expected to pay for those liabilities?” Fan says. To calculate this decline in purchasing power, RBC looks at the inflation forecast and the average household’s gross disposable income.

Another recession issue cottage owners need to be aware of is job loss. RBC predicts that the jobless rate will reach seven per cent by the end of 2023. If a cottage owner lost their job, it could make it difficult to afford mortgage payments. However, thanks to an excess of job openings caused by the pandemic, RBC expects job loss to be moderate in 2023 compared to past recessions.

All this to say, the recession won’t be distributed equally, leaving some cottagers unaffected. “This will weigh most heavily on Canadians at the lower end of the wealth spectrum, particularly those whose disposable income has faded alongside pandemic support,” RBC says.

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Mobile Syrup

47 percent of Canadians worried about falling victim to cybercrimes: poll

A new poll conducted for banking institution RBC found there is a low level of awareness about newer cyber threats. For example, only 30 percent of respondents understood pharming, which sees users redirected to fake websites to steal personal credentials.

“As Canadians live more of their life online, cybercrime has also grown year over year and become more sophisticated,” Adam Evans, RBC’s chief information security officer, said in a press release.

The poll found Canadians aged 55 and over are likely to be more concerned about cyber attacks, including unauthorized access to personal information and hacking of social media accounts.

While the results show younger people (particularly in the 18-34 age bracket) are more knowledgeable about most cyber threats, they aren’t more likely to take proactive measures.

The results found only 35 percent of respondents in the younger age group change their passwords regularly. Comparatively, 50 percent of those between 35-54, and 51 percent of those 55 and older, change their password periodically.

Ipsos conducted the survey on behalf of RBC, which includes the responses of 1,500 Canadians.

Image credit: Shutterstock

Source: RBC

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Cottage Life

RBC forecasts historic real estate market correction, including cottages

Photo by Shutterstock/Mitch Hutchinson

The Royal Bank of Canada is forecasting a “historic correction” to Canada’s real estate market after two frenzied years of buying, and cottage country will feel the impact.

In its latest housing report, RBC assistant chief economist Robert Hogue says that the bank expects home sales to fall 23 per cent this year and 15 per cent next year, eventually culminating in a 42 per cent drop from the start of 2021. That’s a larger decline than any of the past four national downturns (-33 per cent in 1981–1982, -33 per cent in 1989–1990, -38 per cent in 2008–2009, and -20 per cent in 2016–2018). Along with the drop in sales, the national benchmark price will fall 12 per cent by the second quarter of 2023.

The drop in sales and prices is a result of rising inflation caused by COVID-19 and Russia’s invasion of Ukraine. In May, Canada’s inflation rate reached 7.7 per cent, the largest yearly increase in almost four decades.

To combat rising inflation, the Bank of Canada is raising interest rates, making it more expensive to take out loans, such as mortgages. In July, the Bank of Canada raised its interest rate an entire percentage point to 2.5 per cent. In the RBC report, Hogue says he expects the interest rate to continue rising, reaching 3.25 per cent by October.

Ontario and B.C.’s real estate markets are expected to be hit the hardest, specifically high-priced areas sensitive to interest rates, such as Toronto, Vancouver, and Victoria. Over the next year, RBC predicts that property sales in Ontario and B.C. will fall 38 per cent and 45 per cent respectively, with prices dropping 14 per cent.

The average property price in Ontario has already fallen 7.6 per cent this year, and 4.9 per cent in B.C.

Within these markets, some of the first properties impacted will be cottages. “With consumer spend, what we expect is the consumers to stop purchasing things that are discretionary and keep buying the necessities. That same logic applies to the housing market. If [people] don’t need a cottage, this is probably not really the best time to go out and look for one,” says Claire Fan, an RBC economist.

Out of Canada’s cottage country areas, it’s the markets around Toronto and Vancouver that will experience the greatest changes, Fan says.

“Those markets saw the most uprising in both prices and retail volumes over the course of the pandemic because people were looking for more space,” she says. “But a lot of these markets that saw the biggest price appreciation over the course of the pandemic are the ones that are getting hit the hardest at the moment because larger prices come with pricier mortgages, and those are the most interest-rate sensitive.”

Areas farther away from high-priced urban centres should remain more stable. And Canada’s other provinces won’t be hit as hard as Ontario and B.C. “We project prices to slip less than 3 per cent in Alberta and Saskatchewan, and between 5 per cent and 8 per cent in the majority of other provinces by the first half of 2023,” Hogue says in the report.

While none of this is great news for home or cottage buyers, RBC does expect the real estate market correction to end sometime in the first half of 2023. “We’d argue the unfolding downturn should be seen as a welcome cool-down following a two year-long frenzy that put a huge financial burden on many new homeowners and made ownership dreams harder to achieve,” Hogue says.

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Mobile Syrup

RBC launches new tool to summarize customer savings, rewards, on mobile app

TORONTO, CANADA – October 21, 2019: Royal Bank of Canada (RBC) sign at the base of their downtown Toronto headquarters.

RBC customers using their Vantage offering now have access to a new tool called The Vantage Snapshot.

The tool offers a summary of savings and reward points accrued through RBC Vantage on the mobile app. The program is the bank’s everyday offering that allows customers to earn rewards points and monthly fee rebates.

“The Vantage Snapshot is part of our commitment to continuing to enhance our everyday banking offering while giving our clients the opportunity to receive more value and benefits every day,” Jason Storsley, RBC’s senior vice president of everyday banking, told MobileSyrup.

“By seamlessly integrating the Vantage Snapshot into the RBC Mobile app, we’re able to easily demonstrate the value that our clients receive from their day-to-day banking activities while fostering digital engagement at the same time,” he said.

An example of what the new tool looks like. Image credit: RBC

RBC Vantage launched in April 2021 on select debit accounts. Storsley says account holders need to enroll in the value program within RBC Vantage to earn reward points through their debit purchases. Since its launch, 1 million customers have enrolled in the program.

It’s one of the bank’s investments to improve client relationships, Storsley said. “The innovations that we’ve built, combined with all of our existing assets, truly offer our new and current clients a differentiated and seamless banking experience in the market today.”

The Vantage Snapshot will appear on eligible accounts that have collected $2 in savings or earned points. More information is available on RBC’s website.

Image credit: Shutterstock

Categories
Mobile Syrup

RBC launches new bill splitting feature in its mobile app

TORONTO, CANADA – October 21, 2019: Royal Bank of Canada (RBC) sign at the base of their downtown Toronto headquarters.

RBC has released a new solution to make it easier for customers to split the tab with their dining companions.

Split with Friends allows customers to manage group expenses through the bank’s mobile app. Customers can divide costs between their contacts, request funds, and keep track of who’s paid their share.

Split with Friends requires three steps: enter the amount to divide, select payees, and send requests.

RBC is the only bank in Canada to offer such a feature.

The institution notes the pandemic has changed the way people bank. Since January 2020, RBC mobile users have increased by 23 percent. E-transfers have increased by 74 percent since the onset of the pandemic.

“We’ve all experienced the hassle of splitting bills and sharing expenses on things like group trips and meals. This is another great example of the powerful benefits that clients can access when they bank with RBC,” Sean Amato-Gauci, an executive vice-president at RBC, said in a statement.

RBC’s mobile banking app is available on iOS and Android.

Image credit: Shutterstock

Source: RBC