If you have a sneaking suspicion that everything is more expensive these days, you’re right. Canada’s inflation rate hit an 18-year high in October of last year, sending consumer prices soaring. So much so that the cost of living has increased by nearly 5%, according to Statistics Canada.
Ongoing supply chain issues and demand for everyday consumer goods linger from COVID-related shutdowns and setbacks in 2021. As a result, Canadians are starting to feel the pinch of rising housing, insurance and food prices.
Here is what to expect in 2022 and how to save money in these three areas.
The hot housing market drove prices to new highs in 2021, breaking records in several major cities across the country, including Toronto and Vancouver — already two of the most expensive places to live in Canada.
The 2022 Canadian Housing Market Outlook Report predicts home prices will continue to rise, with RE/MAX Canada estimating the average residential home price increasing by 9.2% nationally this year.
However, the historically low interest rates fuelling the real estate frenzy are expected to rise in the spring. Higher interest rates and home prices may deter some buyers, as Canadians with tight budgets risk becoming house poor. Homebuyers looking to lock in a low mortgage rate should consider getting a mortgage pre-approval before rates rise. Depending on the mortgage lender, pre-approvals typically last anywhere from 60 to 120 days, subject to conditions such as credit score and continued employment.
Renters may also face higher housing costs, as rent freezes come to an end in several provinces. In Ontario, for instance, the government set the guideline on rent increases at 1.2% for 2022. This percentage is the maximum amount a landlord can raise a tenant’s rent in the given year without approval from the Landlord and Tenant Board, as long as they give at least 90 days written notice.
Most auto insurance providers offered rebates in response to the pandemic, lowering premiums for those driving fewer kilometres and providing deferrals, among other relief measures. The Financial Services Regulatory Authority of Ontario (FSRA) estimates that Ontarians have received or are eligible to receive nearly $1 billion in premium relief in response to the COVID-19 crisis.
While the Omicron variant has many Canadians feeling cautiously optimistic about life returning to some semblance of normalcy, as more drivers hit the roads, auto insurance rates will likely creep back up.
For many, working from home has had two unintentional benefits for their car costs: less time behind the wheel (auto insurance rebates) and minimal wear and tear. However, drivers will incur costs with the return of their commutes — not strictly from the sky-high gas prices, either.
Car insurance providers will re-rate policies for increased driving kilometres. And it’s the driver’s responsibility to inform their insurance company of any changes to their driving habits, such as an increase in annual kilometres driven. Omitting facts like this can void your policy. If you’re worried about increasing rates, compare quotes to find cheap auto insurance.
Additional challenges in this area stem from foam to microchips — automotive parts that are in short supply. Not only will the specific parts cost consumers more to acquire, but the wait time for repairs will be longer, too. 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.
Similar issues affect the cost of home insurance. Building material and labour shortages, inflation, and a renovation boom add to the rising cost of homes. Not to mention severe weather events have become more commonplace, causing more than $2.4 billion in insured damage in 2020 alone. More expensive properties equal higher replacement values and, in turn, pricier home and condo insurance premiums. Homeowners can anticipate changes in cost sooner in this sector than in the auto insurance sector, as home insurance is unregulated.
Another essential, food, can’t escape inflation, which means trips to the grocery store and restaurants just got more expensive.
According to Canada’s Food Price Report, an annual forecast of overall food prices, the average family of four will pay $14,767 for food in 2022, an increase of up to $966 from the year before. Overall, the report projects food prices jumping by 5% to 7% this year — the highest increase in 12 years.
The report also anticipates restaurant menu prices increasing by 6% to 8% due to rising commercial rents, food prices, and labour market changes.
Ways to save money on housing, insurance, and food in 2022
Often, the new year is a time for setting goals and resolutions. Unfortunately for many, it also comes with post-holiday bill shock. Make paying down your credit card balance your priority, then consider these money-saving hacks for 2022:
- Compare prices and interest 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.
- 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 to ensure you never miss a deal.
- Make mindful purchases: Don’t enter the grocery store without a list, and stick to it. The same goes for online shopping — only put the items you need in your cart.
- 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.
What are your money-saving shopping tips?