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What I will cover

1. The relationship between interest rates and inflation 01

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2. The window of opportunity this creates
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3. How to choose a mortgage today
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4. 5 Strategies to inflation proof your mortgage

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The Relationship Between Interest Rates and Inflation

In 1991, the Government of Canada adopted an inflation

control target. The goal is to use interest rates and other
monetary policies to maintain a 2% mid-point and keep it
between 1% to 3% over the long-term.

The bank raises and lowers its policy interest rate as

appropriate to manage the CPI over 6 to 8 quarters.

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Inflation Control Target

The BOC has done a

pretty decent job of
keeping CPI within the
band.

Now let’s look at the

Bank of Canada
interest rate changes…

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Bank of Canada Interest Rate Changes

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Do you see a pattern here?

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 The Bank of Canada Uses the Overnight Rate Like a Gas Pedal & Brake

Economy slows down, and the Bank of Canada lowers rates to stimulate growth.
Economy speeds up and the Bank of Canada raises rates to slow down growth.

Think of the policy rate as a brake or gas pedal depending upon what the BOC needs.

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Given We Have Seen…

1. Fuel prices increase by 50% this year

2. Food costs increase by 9.7% this year

3. BOC rate increase by 2.0% this year

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Will this make the economy
go faster or slower?

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70% of Economists Believe We Will Enter a Recession in 2023

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The Bond Market is Pricing in a Half Point Rate Cut

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 If this is true, what sort of
opportunities and challenges
does this create?

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Challenges

● Interest rates will rise in the short term

● Sellers will find a smaller pool of buyers

● Rents will continue to rise

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However, every challenge has
an opportunity baked right in
...

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Opportunities

● There will be a window of opportunity

for savvy buyers

● Lock in the current property

appreciation

● Variable and shorter rate terms may

make a lot of sense

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5 Ways To Inflation Proof Your Mortgage

1. Change your payment

2. Capture your price appreciation

3. Roll your debt into your mortgage

4. Take a variable with a static payment

5. Switch to no payment mortgage

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#1
★ Re-amortize your loan
Change Your
Payment ★ Stop accelerated payments

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 Example Re-Amortizing Your Mortgage

CURRENT NEW RE-AMORTIZATION

MORTGAGE MORTGAGE
*Reduced
$400,000 $325,000
BALANCE (at the time of set- (current owing after years of monthly
up) payment)
mortgage
AMORTIZATION 22 years 30 years payment of
$315/month
INTEREST RATE
(remember we aren’t 3% 3%
changing this)

MONTHLY PAYMENT $1,681 $1,366

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 Example Stopping Accelerated Payments

ACCELERATED NON-ACCELERATED PAYMENTS

PAYMENTS
*Reduced
MORTGAGE BALANCE $400 000 $400 000 monthly
INTEREST RATE mortgage
(remember we aren’t changing 3% 3%
this) payment of
$132/month
BI-WEEKLY PAYMENT $841 $775

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How do you Contact your lender and
adjust your ask to re-amortize your
mortgage.
payment?
*Depending upon you lender I may
be able to help

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#2 ★ Set up/Increase your HELOC
Capture Your ★ Refinance to 80% of the
Appreciation current market value

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 Example Setting Up a HELOC

TODAY 10% Decline

PROPERTY VALUE $800,000 $720,000 *You can

access
80% LOAN TO VALUE $640,000 $576,000
$64,000
CURRENT MORTGAGE $400,000 $400,000
more equity
today

MAXIMUM HELOC $240,000 $176,000

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 1. If you have a HELOC
ask to increase limit
2. Your current lender
How do set up may be able to put a
HELOC behind
a HELOC? current mortgage
3. Put a HELOC in
second behind your
current mortgage
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#3
Roll Your Debt ★ Refinance to lower your
Into Your monthly payments

Mortgages

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 Example Refinancing To Lower Payments
CURRENT
NEW MORTGAGE
MORTGAGE

MORTGAGE BALANCE $400 000 $400 000

INTEREST RATE NOTE: This slide

(remember we aren’t changing 3% 3% needs to be
this)
updated!!

BI-WEEKLY PAYMENT $631 $582

MONTHLY PAYMENTS

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 1. Must have a
mortgage balance
less than 80% of the
How do roll in current value
my debts? 2. Important to get the
appraisal early
3. Ensure it improves
cash flow

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#4
Take a ★ Variable rate qualifies for more
variable with a 10% more mortgage
★ Advantages of variable rate
static
with a static payment
payment

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 Example Fixed vs Variable Qualifying

FIXED RATE VARIABLE RATE

QUALIFYING AMOUNT $500,000 $550,000

CONTRACT RATE
5.29% 4.3%
*Variable rate
QUALIFYING RATE 7.29% 6.3% with a static
payment

MORTGAGE PAYMENT $2,743 $2,741*

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#5 ★ Mortgage interest is
Switch To A capitalized
No Payment ★ There is no monthly payment
Mortgage

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 Example No Payment Mortgage

CURRENT
NON-ACCELERATED PAYMENTS
MORTGAGE

MORTGAGE BALANCE $400 000 $400 000

INTEREST RATE 4% 6.2%

MONTHLY PAYMENT $2,104 $0

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5 Ways To Inflation Proof Your Mortgage

1. Change your payment

2. Capture your price appreciation

3. Roll your debt into your mortgage

4. Take a variable with a static payment

5. Switch to no payment mortgage

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Thank You!
Want to Discuss Your Mortgage?
Scott Peckford
555.111.2345
scott@brxmortgage.com

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