20 Apr

Are you in the “Gig Economy” and trying to get a mortgage approval?

General

Posted by: Frank Fik

WHAT IS THE GIG ECONOMY?

A gig, by definition, is a temporary job. The gig economy is characterized by people working as independent contractors or freelancers­ or in short-term contracts, possibly for more than one employer.

It’s a shift from the traditional trend of the employer-employee relationship towards one defined by independent workers and self-management. Think on-demand, small bites of work; think Upwork, Fiverr, Uber, Etsy, Airbnb, and TaskRabbit.

It’s where we see workers trading the security and benefits of being an employee for the flexibility of being self-employed or working on demand. These days, where there are labour shortages in many industries, gig workers are finding it easier than ever to pick up work. A recent Statistics Canada report highlights a particular uptick in digital platform employment, which connects customers and service providers through a digital platform.

What is a Gig Worker?

A gig worker can be anyone at any age. It might be someone supplementing another job or working part-time. It could be an entrepreneur who enjoys the flexibility of self-employment. Perhaps it’s someone doing what they need to do to provide for their family.

Gig workers also blur the lines of traditional roles. Students and stay-at-home moms are dipping their toes into gig economy jobs, earning on the side because they don’t have to commit to full-time jobs. They can drop off their kids at school and pick up some fares as a driver with a ride-share service like Uber.

HOW DOES GIG WORK AFFECT MORTGAGE ELIGIBILITY?

Most mortgage lenders want to see a history of consistent income with a likelihood of the same in the future. Consistent employment is the best way to demonstrate that, especially when applying for a mortgage. Good credit scores and a clean credit history can also be important, but showing a consistent and steady income is one of the most significant factors in securing a mortgage.

Gig work doesn’t provide a single, steady paycheque from the same employer, which most A lenders prefer when evaluating a mortgage deal. That doesn’t mean a gig worker can’t qualify for a mortgage. Using a mortgage broker and looking at alternative lenders are great options for people with less traditional sources of income.

Published by Bridgewater Bank

11 Apr

Residential Market Commentary – BoC expected to stay on the sidelines

General

Posted by: Frank Fik

The Canadian economy seems to be ganging-up on the Bank of Canada as it tries to wrestle inflation back to 2.0%.

The latest employment numbers, once again, came in well above expectations.  Statistics Canada reports 35,000 jobs were created in March, nearly triple what had been forecast.  As a result of the on-going demand from workers, wage increases have also caught up to inflation.  Wages are up 5.3% from a year ago.

“A lot of employers say they’ve been having trouble finding workers, and what do you do? You bid up your offer and that tends to drive wages up,” said Pedro Antunes, chief economist with the Conference Board of Canada in an interview with the CBC.

It’s good news for workers, but it makes things harder for the central bank which has been trying to avoid outsized wage growth because it is seen as a driver of inflation.  Wages tend to be “stickie”, in that they only go up, unlike prices for commodities and services which can decline based on supply and demand.

“I don’t necessarily think that’s bad news, but … we’re in this kind of bizarre world where sometimes the good news is not so good news for the Bank of Canada,” said Antunes.

This follows stronger than expected January GDP numbers.  The economy grew 0.5% for the month, defying the BoC’s efforts to slow things down.  However, the Bank is expected to continue its rate-hike pause at this week’s setting, as it waits for last year’s rapid series of increases to work their way through the economy.

Published by First National Financial LP

3 Apr

Residential Market Commentary – GDP’s double-edged sword

General

Posted by: Frank Fik

The latest numbers from Statistics Canada show the country’s economy continues to chug along despite very deliberate efforts to slow it down.

Gross Domestic Product (GDP), which measures the total value of all goods and services produced by the economy, rose by 0.5% in January.  Early indications are it was up by another 0.3% in February.  The first quarter of this year is on track to see GDP grow at an annualized rate of 2.5%.  The Bank of Canada had forecast growth of about 0.5%.

The unexpected resilience of the Canadian economy is buoying hopes for a, so-called, “soft landing” as the BoC works to bring inflation down.  There have been numerous forecasts that say the central bank’s rate hiking policy will push Canada into recession and unemployment will rise.  Some of those predictions are softening and the fear of significant job loses is fading.  But analysts still expect there will be an economic slowdown and, perhaps, a mild recession later this year as the effects of the Bank’s rate hikes work their way through the overall economy.

The BoC has paused its rate increases, for the time being.  But it has made it clear more hikes will come if they are deemed necessary.  The Bank’s trend-setting policy rate is now 4.5% and inflation has dropped to 5.2%.  The Bank expects it to fall to 3.0% later this year.  Target is 2.0%.

If economic growth remains stronger than expected and high inflation persists the BoC could be forced into the tough position of having to raise interest rates at the risk of pushing the country into a real recession.  In others words, a “hard landing”.

For now, the Bank is expected to leave its rate unchanged at the next setting on April 12th.

Published by First National Financial LP