This article has been updated from a previous version.
It’s no secret that everyone’s been feeling – what seems like – the never-ending burden of high costs of living. For most of 2023, Canadians were under the strain of high interest rates, and subsequently, high mortgage or rent payments, insurance premiums, and soaring food prices.
Inflation eased from highs of nearly 6% at the beginning of 2023 to the current 3%. The Canadian economy has managed to keep its head above the water and avoid a recession. Heading into 2024, however, economists are predicting either a mild recession or combatting inflation without significant economic damage.
Canadians can expect some respite this year, but it will likely take some time for inflation to reach the targeted 2%. We can expect to spend more money on the same issues that plagued the economic landscape as last year, but in the meantime, here’s how you can prepare and save money in each of these areas.
1. High housing costs
The Bank of Canada started raising its overnight lending rate in March 2022, and continued with eight successive rate hikes. While the full effect of these rate hikes is yet to be reflected in the housing market, it has deterred prospective homebuyers from the market and has widened the unaffordability gap for current homeowners.
National home prices have been on the decline by 3.4% since October. As inflation comes down (an indication that the rate hikes are working), experts are predicting the return of a buyer’s market. That is, sellers have to match the buyers’ bid, and homebuyers waiting on the sidelines may find 2024 to be a favourable time to enter the market.
Interest rates are predicted to see cuts by mid-2024.
Homebuyers looking to lock in a lower mortgage rate should consider comparing mortgage rates before getting a pre-approval. Depending on the lender, mortgage pre-approvals typically last anywhere from 60 to 120 days, subject to conditions such as credit score and continued employment.
While mortgage rates will come down, they won’t return to the lows of 0.25% that homeowners might have purchased in, earlier on in the pandemic.
Homeowners will continue to see a large chunk of their income being spent on mortgage payments. That being said, if your mortgage is coming up for renewal, make sure to compare mortgage rates get the lowest rate available for you.
Last quarter, rental prices in Canada reached a new high, with a 9.9% year-on-year increase. Rate cuts, higher an increase in new building construction, and a buyer's market could slowly bring down high rent prices too. However, rent costs will continue to be prohibitive for many Canadians in large cities such as Toronto and Vancouver.
2. Auto insurance
You can expect to shell out more for your auto insurance this year too. There are a few reasons for that:
Inflation: Inflation has been a major driver of higher insurance premiums. To keep up with inflation, insurers must increase their rates. Last year, the Financial Services Regulatory Authority of Ontario approved rate increases for several insurers, and some of those rate changes will be in effect this year. That means you’ll likely see an increase in your car insurance premium when your policy is up for renewal in 2024.
Auto theft: The rate of auto thefts reached an all-time high over the past year, prompting the auto and insurance industry to term it a “national crisis.” The rising incidence of auto thefts resulted in $1.2 billion in insurance claims, which translates into higher premiums for the customer.
High repair and replacement costs: as per the Transportation Consumer Price Index, the cost of car parts, repairs and maintenance jumped by nearly 6% from November 2022 to 2023. Not only will car parts continue to cost consumers more to acquire, but long wait times for repairs are expected to continue into 2024. Your insurance policy may provide a rental car; however, the bill for service will be bigger since the duration is longer than usual. These expenses can drive prices up across the industry and trickle back down to consumers.
Car insurance providers in Ontario have already started to re-rate policies for increased driving kilometres, among several other factors. And it’s the driver’s responsibility to inform their insurance company of any changes to their driving habits, such increased commute time or frequency and their postal code. Omitting facts like this can void your policy. If you’re worried about increasing rates, compare auto insurance quotes to find your cheapest premium.
Another essential — food — hasn’t escaped inflation, which means trips to the grocery store and restaurants will remain expensive. According to the recent Canada’s Food Price Report a family of four can expect to pay $700 more on their grocery expenses.
The report also anticipates restaurant menu prices increasing by 3% to 5% due to rising commercial rents, food prices, and labour market changes.
“2024 will be a much friendlier year for consumers,” Sylvain Charlebois, the lead researcher on the report said in an interview to CBC news. “We are expecting prices to go up, but in a more modest way.”
Ways to save money on your mortgage, auto insurance, and food in 2024
The new year is a time for setting goals and making resolutions to change old habits. Unfortunately for many, it also comes with post-holiday bill shock. Paying down your credit card balance should be a priority.
You could also consider these money-saving hacks for 2024:
Lean into tech: There is an app for nearly any conceivable task these days, including alerting you to sales when prices drop. Get price alerts for the big-ticket items on your wish list (or for that matter, even daily expenses like groceries) to ensure you never miss a bargain.
Make mindful purchases: Don’t enter the grocery store without a list, and make sure you stick to it. The same goes for online shopping — only put the items you need in your cart. While we encourage the responsible use of credit cards, do consider any cashback offers or rewards that may ease your burden with day-to-day expenses. For instance, you could offset some of grocery bill cost with a card that offers cashback on grocery purchases.
Do your research: Spending more money can sometimes save you money. If an item is of better quality, you may have it for longer and not have to purchase it as often. Research your purchases rather than making quick and often price-related decisions to avoid buyer’s remorse.
Compare insurance prices and mortgage rates: You might already shop around for clothing or popular items, like cellphones, but what about your personal financial products, like car and home insurance, or a mortgage? Comparison shopping is free, lets you see the lowest rates from various providers and lenders, and can help you find the best price for your needs.
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