Great info from the Bank of Canada – Price Check: Inflation in Canada – Understanding Today’s Inflation Talk

Price Check: Inflation in Canada

Do you ever wonder why some things are way more expensive than they were when you were a kid? It’s a sign of something important in our economy—inflation.

Inflation is a measure of how much prices for goods and services are rising. Lots of factors affect prices—how difficult a product is to find, the cost of labour and the raw materials used to make it, and competition among the places selling it, to name a few. Policies that stimulate economic growth can cause inflation, too: when people have more money, their demand for products and services can rise, and that can pull up prices.

Inflation measures the big picture
To measure inflation every month, Statistics Canada tracks the prices for a long list—what it calls a representative “basket”—of goods and services. The contents of the basket reflect how much Canadians typically buy of each good or service. The prices of these items add up to a measure of average prices, known as the consumer price index, or CPI.

Each one of us has our own experience with inflation, based on what we buy each month. A smoker who drives a car and eats in steakhouses doesn’t face the same inflation as his vegan, non-smoking friend who commutes by bicycle.

Since the CPI is an average measure, it represents the big picture of consumer spending across Canada. It is not the only measure of inflation, but it is the most common one, used by businesses, institutions and governments. For example, the rise in the CPI every year influences the raises many Canadians get in their annual salaries or the increases in their pensions.

If too high or too low, problems arise
The economy works best when inflation is stable and predictable. A company planning its budget for next year makes assumptions about how much the price of its supplies, its rent and its employees’ salaries are going to go up. When these costs rise, companies raise prices as well. High inflation means that prices are climbing quickly and dollars don’t stretch as far. Purchasing power—our ability to buy products and services with the money we have—weakens.

That’s how high and unpredictable inflation hurts an economy: If incomes don’t increase along with the prices of goods, everyone’s purchasing power goes down. People buy less and the economy starts to slow. High inflation can mean that people who have saved for their retirement may find themselves with less money than they expected. Businesses and consumers must spend time and effort trying to protect themselves from the effects of rising costs.

In extreme cases, high inflation is a symptom of an economy that is out of control. For example, Venezuela’s economic troubles have been accompanied by very high inflation rates, more than 2,800 per cent in 2017, according to the International Monetary Fund. At that rate the $2 cup of coffee you picked up on the way to work would cost $58 a year from now. Such very high rates of inflation are what economists call hyperinflation.

So, if high inflation is bad, deflation—where prices are falling—must be good, right? Not necessarily. A drop in some prices can boost demand for those items. But a general, persistent fall in prices is usually a symptom of deep problems in an economy. When people lose their jobs, they spend less. When firms experience diminishing sales, they lower prices. People may postpone major purchases because they think prices will continue to fall. As more money is saved, less money is spent, prices fall further, and economic activity shrinks.

Inflation over time
Canadians usually don’t pay much attention to inflation. That’s because inflation in Canada has been close to 2 per cent per year for the past 25 years or so.

On average, throughout the 1970s, prices increased by about 8 per cent per year. At that rate, it would take only 9 years for prices to double. When inflation is around 2 per cent per year, it takes about 35 years for prices to double.

In 1991, the Government of Canada and the Bank of Canada agreed it would be good for Canadians to have low, stable and predictable inflation. Their agreement made the Bank responsible for bringing inflation down to about 2 per cent and then keeping it within 1 to 3 per cent. The Bank has been successful in keeping inflation close to 2 per cent.

Low, stable and predictable
To achieve the inflation target, the Bank adjusts (raises or lowers) its key policy interest rate. If inflation is above the 2 per cent target, the Bank may raise the policy rate. This prompts banks to increase interest rates on their deposits, loans and mortgages. Higher interest rates encourage saving and discourage borrowing and, in turn, spending. In response, companies increase their prices more slowly or even lower them to encourage demand. This reduces inflation. Lower interest rates work in the opposite way and can help increase inflation if it is too low.

Of course, the Bank doesn’t respond to every movement in inflation or focus on prices that jump around a lot. Nor does it pay attention to one-time changes in price levels, such as those caused by a new sales tax rate. The Bank focuses on price changes that are more widespread and persistent—ones that could push inflation away from the target for a while. This is because any changes the Bank makes to the policy interest rate will take time to affect people’s spending.

The magic of inflation targeting is that it works best when people’s behaviour reinforces the inflation target. If people expect that prices will rise, on average, by about 2 per cent each year, employers and workers are more likely to agree to a 2 per cent wage increase to compensate for the higher cost of living. And since wages affect the cost of producing goods and services, and the cost affects their prices, this cycle helps the Bank keep inflation on target.

Financial Counseling and Planning

Financial Counseling and Planning


  • Ontario Association of Credit Counselling Services (OACCS):  OACCS offers consumers money management, budgeting and credit use services.  This website also offers practical explanations on personal finances and debt problems.
  • Credit Canada:  Credit Canada offers free financial counselling and seminars to help put your finances and bills in order.  Credit Canada welcomes anyone who needs confidential advice about how to handle money and reduce or eliminate debt.
  • ServiceOntario:  This website provide resources and information about government services available to assist Ontarians in dealing with significant life events, such as having a baby, registering a death, managing debt, and getting ready to retire.
  • Prosper Canada:  Prosper Canada helps vulnerable Canadians access financial policies, programs, products and advice they need to build their financial wellbeing.
  • Ontario’s Ministry of Government Consumer Services:  Ontario’s Ministry of Government and Consumer Services website offers an array of consumer protection resources. The Consumer Protection section of the website features information on buying and selling your home, real estate fraud, and a consumer protection toolbox.
  •  Canada’s unbiased, non-profit source for information and tools that help consumers make better decisions when investing and managing their money. Established by the Ontario Securities Commission, the province’s securities regulator, helps people make effective use of financial information.
  • Personal Finance:  This website offers plain language personal financial advice. Part of the Toronto Star, Personal Finance provides daily news updates, analysis, commentary for Canadians interested in learning how to take charge of their financial affairs, blogs, trends and tips. The site also offers how-to articles and DIY tools and calculators to help readers make informed decisions.
  • Consolidated Credit Counseling Services of Canada:  Consolidated Credit is a national charitable non-profit organization that provides debt consolidation and credit counseling services. Alongside consolidating payments, Consolidated Credit’s counselors focus on education and understanding.

Mortgages: A Brief History – Financial Services Commission of Ontario

Mortgages: A Brief History

​Fun facts on how mortgage loans have evolved through the years.

Taking on a mortgage is the most common way Ontarians can get a piece of the housing market – and has been for a long time. The mortgage industry dates back hundreds of years. But while the purpose of these loans has stayed the same, they’ve evolved from a simple repayment plan to a much more complex financial transaction.
Mortgages originated in England when people did not have the resources to purchase land in one transaction. Buyers would get loans directly from the seller – no banks or outside parties were involved. Unlike today, purchasers were not able to live on the land until the entire amount was paid. And, if they failed to keep up with payments, they would forfeit their right to the land as well as any prior payments they made to the seller.
By the 1900s most mortgages involved long-term loans where only monthly interest was paid while the borrower saved towards repayment of the original sum. Major world events, like the Great Depression of the 1920s and the two World Wars however, led to many borrowers being unable to repay even the interest on a property that was often now worth less than their original loan, and many lenders carrying a loan that was not secured by the value of the property.
This resulted in the introduction of long-term fully amortized mortgages that repaid some of the principal and some of the interest each month in a payment that was fixed for upwards of 25 years.
The Canada Mortgage and Housing Corporation (CMHC) was created in 1946 to administer the National Housing Act and today sells mandatory mortgage loan insurance when the buyer is putting less than 20 per cent down on the price of their new home. Mortgage loan insurance compensates lenders when borrowers default on their mortgage loans.
The rise of inflation in the 1970s altered mortgages into the products we know now. As interest rates climbed, lenders and borrowers found themselves locked into fully amortized loans that didn’t reflect interest rate changes. The creation of the partially amortized mortgage, which protects both lenders and borrowers from fluctuations in the market, mean that instead of 20- to 30-year terms, one, three or five-year terms amortized across 20 to 25 years have become a better option. Partially amortized mortgages are now one of the most common mortgage types in Canada.
Making the down payment for a mortgage easier to attain, the Home Buyer’s Plan, which allows Canadians to withdraw money from their Registered Retirement Savings Plans (RRSPs) on a tax-free basis to buy a home, was introduced by the Canadian government in 1992.
On July 1, 2008, under the Mortgage Brokerages, Lenders and Administrators Act, 2006 , the Government of Ontario has required all businesses and individuals who conduct mortgage brokering activities in the province to be licensed with the Financial Services Commission of Ontario (FSCO). Mortgage brokers and agents play a big role in the mortgage process, with 51 per cent of first-time home buyers using their services according to a 2016 CMHC survey. Under the Act, all mortgage brokers and agents need to meet specific education, experience, and suitability requirements with the goal of increased consumer protection, competition and professionalism in the industry.
Mortgages have evolved from repayments that provided protection and benefits only for the landowner, to a system in which both the borrower and the lender can enter into the transaction with confidence.

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Learn about interest growth strategy

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Flexible and Quick Business Loans

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Working with a Broker – The Application

Before we can have a conversation your mortgage broker needs to know about you – your income, assets, liabilities and credit history.  An application is your story and helps us determine your needs and find a mortgage that will be the best for you moving forward.  We have many questions that will guide us and educate you.  Our process is to get to know you, your families needs and help you become the decision maker for your future mortgage.  This is our business and we are committed to our clients now and into the future.  It’s a relationship.

Let’s start the conversation with your application.  Apply Here


Many mortgage loans require an appraisal for the lender to determine the value of the home. The appraisal compares similar properties that have sold within a recent time frame. The cost of an appraisal may vary depending on location and type of appraisal requested.

Mention that you noticed FREE APPRAISAL on this website and you will be reimbursed the cost of your appraisal when you use our services to obtain a mortgage, and your mortgage file closes with us. It’s that easy and we know saving money is a good thing.


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