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If you could pass on your knowledge to a family member or friend, what do you think is the most important thing to pass on? 

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If you could pass on your knowledge to a family member or friend, what do you think is the most important thing to pass on? 

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If I could pass on a piece of information onto someone, I would choose my friend’s parents. We are all quite close and they have rented their whole lives, but the dad really wants to buy his own house. He does not have a very steady job and the hours are always differing. They also do not have a very consistent lifestyle because they live paycheque to paycheque. If I were to pass on any information that I have learned from this assignment it would be from Video #4 because the speaker talked about if you do not have a consistent lifestyle or steady job then you could choose to have a variable mortgage rate. I would tell them to look into a variable mortgage rate and see if they think it would fit their life style.

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Provide a real-life example of how this topic is relevant or interesting for you? 

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Provide a real-life example of how this topic is relevant or interesting for you? 

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This topic is relevant to me because I would like to buy a house hopefully within the next five years. It has always been a lifelong dream of mine to own my own house. As I have gotten older, I noticed that the prices of houses have become extremely high. My parents bought their first house for $67,000 and today the cheapest houses are roughly $400,000+. I always wish inflation did not happen because I would be able to buy a house if they still sold for the prices they use to. Now because of inflation I need to save at least $30,000-$40,000 to buy a house.

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What did you learn about your topic that surprised you the most? 

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What did you learn about your topic that surprised you the most? 

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After making this padlet wall I learned that over the past few months, from April to July 2020, the average interest rate for a mortgage was the lowest. It was a buyer’s prime time to purchase a house during the week of July 20, 2020 because the interest rate had reached it lowest of 1.85%.

I also learned that it's not the value of the house that increases due to inflation; it is the decrease in the worth of our money. Money is worth less now than it use to and money today is worth more than it will be tomorrow. I always wondered how old houses could sell for so much money because I knew the house was not worth the money it was being sold for. I often see old houses being sold for more than a new build and wondered how that could be. But after this assignment I learned that it's not the value that has changed, it is the worth of our dollar that has decreased.

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This image represents Canada’s average interest rates from the months of March 30 to July 20, 2020. If we look, we see that the highest interest rate for a five-year variable mortgage was 2.39% from April 13-27, 2020. From that point on the interest rates, on average, began to decrease and reached the lowest rate of 1.85% during the week of July 20, 2020.

I chose this image because it represents the interest rates in Canada dropping from the months of April to July of 2020. I found it interesting that as an average the interest rates were continually dropping. After watching the videos, we learned that when interest rates drop it means the economy is dropping as well. This means that from April to July the economy decreased.

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In Image #1 it shows inflation rates in Canada over a nine-year period. In 2011 we see Canada had the highest inflation rate which was between 3-4% and the lowest rate in 2013 with a rate below 1%.

I chose this photo because it highlights where the averages rates should be: 1-3%. This allows the viewer to see where the rates were the highest and lowest and when the inflation rates fell below or above the average percentages.

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In this video we are introduced to what mortgage rates are. What makes them go up? What makes them go down? We learn about how our credit scores, how much money we have for a down payment, along with what type of property we are getting affects the rate we get. When we buy houses, we get the lowest rates rather than if we were buying a business because it's less risky to the investor. Same as if we have more money to put down, if we have more money for a down payment than the bank thinks its less risky to invest with us.

I liked this video because it was a simple breakdown of all the components that go into a mortgage rate. It is short and to the point so the audience can stay focused and learn the topic at hand. I like that this video mentioned credit scores because nothing I have looked at thus far has mentioned anything about credit scores. Credit scores play a role in which types of rates you get because it shows the bank how good you are at keeping up with your payments.

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Video #4 Fixed Mortgage Rate vs Variable 

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Video #4 Fixed Mortgage Rate vs Variable 

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In this video we learn that when the economy goes down interest rates go down and vise versa; when economy goes up interest rates go up. He brings up the question whether an investor should take a fixed interest rate or a variable rate. His opinion on the topic was that if you know you have a stable job and a consistent lifestyle, then you should take a fixed mortgage rate. However, if you are not sure how long you will be at your current job and do not necessarily have a consistent lifestyle then to go for a variable mortgage rate.

I thought this video was interesting because I was not sure when a person would choose a variable mortgage rate. I know people who have rented their whole lives talk about finally buying a house, but their job was not very stable and did not have a consistent lifestyle. Now I know that maybe a variable mortgage rate would be best for them if they ever did decide to buy a house.

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Should I Get 1.99 % Fixed Mortgage Rate vs 2.13 % Variable - Canada Mortgage June 2020

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Video #3 Inflation to Hit Mortgage Rates 

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Video #3 Inflation to Hit Mortgage Rates 

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In this video the speaker talks about how when inflation goes up, mortgage rates go up. He gives the example of when someone buys a house and has a 30-year fixed mortgage, it does not benefit the investor. This is because with a 30-year fixed mortgage the investor is putting money into a 30-year bond with a fixed rate of return that does not account for inflation. Therefore, when inflation goes up it decreases the return to the investor. This means for new investors they increase the rate of return, which then increases the mortgage rates.

I chose this video because I always thought having a fixed mortgage rate was beneficial because you were always getting the same amount back. However, I never thought about inflation and how it could decrease the value of your return. I found this video helpful because now I know to take inflation into account when buying a future house.

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This video talks about inflation and how buying a detached house in Toronto in 2019 costed about 1.14 million dollars. This means that to have a 20% down payment you would need to have saved $229,175 and the monthly payments would be roughly $4,467.30 with a 3.25% mortgage rate. He talked about the asset of the house staying the same but the value of the money that goes down. In 1996 the average price for a detached house in Toronto costed an average of $194,251 where you would have needed $38,850 for a 20% down payment. This would roughly cost 1,201.47 a month with an 8.05% mortgage rate, or $757.29 with a 3.25% rate.

This video showed me that in 23 years the price of the houses went up by about $945,749. That is the price of a house itself. I also realized that the down payment you saved to buy a house in Toronto could fully pay off a house located outside of Toronto. Also, the mortgage rate for 2019 is what one person makes a month with an average full-time job. Very crazy to me.

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Inflation vs Mortgages: How you can use inflation to your advantage

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This presentation is focused on mortgage rates and how inflation and economy affects them. We will explore the meaning of inflation, how it has changed, and how affects mortgage rates today. We will look into the meaning of economy and which type Canada has. With both inflation and economy we will discover their relation to mortgage rates and how they have affected them over time.

Learning Objectives for this presentation:

What is inflation?

Why do houses today cost more than they did in the past?

What is Economy?

What makes mortgage rates fluctuate?

Fixed Mortgage Rate or Variable Mortgage Rate, which is right for you?

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What is economy?

Economy is the production and consumption of goods and services. It refers to everyone who consumes good and services such as individuals/people, companies, and the government. There are different types of economies because it is usually governed by a region's culture, laws, or history. This website tells us there are different types of economies and that we have a Market-based economy. Market-based economies are popular because they allow goods and services to flow freely, according to the supply and demand.

This website helped me to understand the meaning of economy because I thought economy was only the production of goods and services, I did not know there were different types of economies. I was unaware that there were different economies based on culture, laws, or history. I knew different places had different cultures, laws, and history but did not realise it resulted in different types of economies.

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What Is an Economy?

An economy is a complex system of interrelated production, consumption, and exchange activities that ultimately determines how resources are allocated among all the participants. The production, consumption, and distribution of goods and services combine to fulfill the needs of those living and operating within the economy.

An economy may represent a nation, a region, a single industry, or even a family.

Understanding Economies

An economy encompasses all of the activities related to the production, consumption, and trade of goods and services in an entity, whether the entity is a nation or a small town.

No two economies are identical. Each is formed according to its own resources, culture, laws, history, and geography. Each evolves according to the choices and actions of the participants.

These decisions are made through some combination of market transactions and collective or hierarchical decision-making.

Types of Economies

In the modern world, few nations are purely market-based or purely command-based. But most lean toward one or the other of these models.

Market-Based Economies

Market-based or "free market" economies allow people and businesses to freely exchange goods and services according to supply and demand.

The United States is mostly a market economy. Producers determine what's sold and produced, and what prices to charge. If they expect to succeed, they will produce what consumers want and charge what consumers are willing to pay.

Through these decisions, the laws of supply and demand determine prices and total production. If consumer demand for a specific product increases, production tends to increase to satisfy the demand. The increased demand causes prices to rise until consumers balk and cut back on their purchases. Demand for the product will then decline and prices will decline with it.

This constant tug of supply and demand allows a market economy a tendency to naturally balance itself. As the prices in one sector rise with demand, the money and labor needed to fill that demand shift to those places where they're needed.

Command-Based Economies

Command-based economies depend on a central government that controls the production levels, pricing, and distribution of goods.

In such a system, the government owns industries deemed essential on behalf of the consumers who use them. Competition among companies is discouraged or banned. Prices are controlled.

Communism requires a command-based economy. Contemporary examples include Cuba and North Korea.

A command-based economy attempts to supersede the workings of supply and demand.

Mixed Economies

Pure market economies rarely exist in the modern world since there's usually some degree of government intervention or central planning. Even the United States could be considered a mixed economy. It may not mandate production but it has ways to influence it. For example:

In late 2021, President Joe Biden ordered 50 million gallons of oil released from the nation's Strategic Petroleum Reserves with the stated aim of forcing gasoline prices lower by increasing its supply.

In 2022 and 2023, the Federal Reserve imposed a series of interest rate increases on the nation's banks. The purpose was to raise interest rates throughout the economy in order to reduce demand for loans and therefore reduce inflation in the costs of goods and services.

In truth, most of the world's developed economies mix market-based and command-based models.

China had a command economy only until 1978, when it began a series of reforms that encouraged private enterprise.

Studying Economies

The study of economies and the factors affecting economies is called economics. The discipline of economics can be broken into two major areas of focus: microeconomics and macroeconomics.

Microeconomics

Microeconomics studies the behavior of individual people and businesses in order to understand why they make the economic decisions they do and how these decisions affect the larger economic system.

Microeconomics studies how a particular value is attached to a product or service. It examines how individuals coordinate and cooperate with each other in business.

Microeconomics tends to focus on economic tendencies, such as how individual choices and actions impact changes in production.

Clearly, principles of psychology and marketing influence microeconomics.

Macroeconomics

As the name implies, macroeconomics studies the big picture.

Macroeconomics includes the study of economy-wide factors such as the effect of rising prices or inflation on the economy. It seeks to track and understand the financial indicators that clarify an economy's success or failure over time, such as gross domestic product (GDP), changes in unemployment, and consumer spending.

In short, macroeconomics studies how the economy as a whole behaves.

Economic Indicators

As noted above, macroeconomics is the study of the big picture and that picture is incomplete without a set of economic indicators. These are some of the most closely-watched of those indicators.

Gross Domestic Product (GDP)

Gross domestic product (GDP) is the total value of all of the completed goods and services produced by an economy during a period of one year.

The gross domestic product of the United States reached $26.5 trillion in 2023.

Unemployment

The Unemployment Report estimates the number of people who are working for pay during a given period. More importantly, the number is tracked over time in order to determine whether unemployment is worsening.

In the U.S., the Bureau of Labor Statistics (BLS) publishes a monthly unemployment report that breaks down how many people are working, the average number of hours they are working, and their average earnings. This is used to produce the unemployment rate.

Inflation (or Deflation)

Inflation in consumer prices is measured and tracked so that problems in the economy can be pinpointed. If the rate of inflation is outpacing the rate of income growth, the economy is in trouble. Inflation can be negative, too; this is called deflation, but it is relatively rare.

The BLS also publishes a key inflation report for the U.S. The Consumer Price Index tracks the costs of goods and services from month to month. It breaks down its report into the vital areas of consumer spending, such as food, energy, and rent costs.

Those numbers determine the rate of inflation.

Balance of Trade

An economy's balance of trade is a comparison of the amount of money that is spent on imports of goods and services and the amount of money it earns on goods and services it exports. It is measured primarily by recording all of the products that pass through the customs office of a country.

A nation achieves a positive balance of trade when it exports more than it imports. It has a negative balance of trade when it buys more than it sells.

Neither is necessarily good or bad. A nation may have a negative balance of trade because foreign businesses are heavily investing in its future. A nation with a positive balance of trade may have protectionist policies in place that could hurt it in the long run.

The U.S. had a balance of trade deficit in 2022 of about $945.3 billion, up from $845 billion the previous year, according to the U.S. Bureau of Economic Analysis.

History of the Concept of Economy

The word economy derives from the Greek term for household management ("oikonomia") and the word is still used in that context.

Economics as an area of study was touched on by philosophers in ancient Greece, notably Aristotle, but the modern study of economics began in 18th-century Europe, particularly in Scotland and France.

Development of Modern Economics

The Scottish philosopher and economist Adam Smith, who in 1776 wrote a landmark book called "The Wealth of Nations," was thought of in his own time as a moral philosopher. He and his contemporaries traced the evolution of economies from prehistoric bartering systems to money-driven and eventually credit-driven economies.

During the 19th century, the development of technology and the growth of international trade created stronger ties among countries, a process that accelerated into the Great Depression and World War II. After 50 years of the Cold War, the late 20th and early 21st centuries have seen a renewed globalization of economies.

What Is Economics?

What Is Macroeconomics vs. Microeconomics?

What Is Economics in Real Life?

The Bottom Line

An economy is a community that is observed by an analysis of its allocation of resources. Every individual and family in the community has a contribution to make. In return, each expects a share of the goods and services provided by other members of the community.

In modern times, the functioning of an economy is analyzed and quantified by economists.

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Economy: What It Is, Types of Economies, Economic Indicators

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An economy is a system of production and consumption activities that determines how resources are allocated among all of its participants. Learn how it works.

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Website #4 "What's behind your mortgage rate"

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Website #4 "What's behind your mortgage rate"

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This website discusses how when there is a weak economic growth it leads to lower interest rates and when there is a strong economic growth, interest rates rise. This is because when there is a low demand for money/when the economy is strong, the companies do not need to borrow as much from investors. In conclusion, strong economic growth means there is more demand for money.

This was a helpful website because it talked about the how economic growth affects the mortgage rate. I learned that when the economy is strong is the best time to get a house because you will get a low interest rate. I also learned that it is not going to be a good time to buy a house when the economy is low because you will be paying a higher interest rate. I did not know what caused interest rates to fluctuate but now I know that it is due to the economy.

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Here's what determines the interest rate on your mortgage-and why that rate can go up and down.

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Website #2 Inflation-What Does it Mean for Your Mortgage?

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Website #2 Inflation-What Does it Mean for Your Mortgage?

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What Does it Mean for Your Mortgage?

Inflations is good for the economy to a certain degree because it indicates that the economy is growing; however, too much inflation is not good. This is because if inflation is too high people will no longer be able to afford expensive items such as houses or cars. This will then begin to affect businesses because the consumers will no longer be purchasing their goods or services since the consumers will no longer be able to afford them. To help make sure this does not happen the economy likes to keep the inflation rate roughly at 2-3%. An example given in the website was that one year you might buy something for a dollar but the next year you might buy the same item for $1.02. This is a steady increase in price which consumers will be able to keep up with.

I chose this website because it talks about the average rate of inflation. I did not know much about inflation beforehand and found this website useful because now I am aware of a safe rate of inflation and how it affects the prices of goods and services over time.

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When I was a little girl, inflation was the big economic news of the day. It was the 1970s and inflation was sky high across North America.

Inflation is basically an increase in the price of goods and services. Economists like to keep inflation at about 2-3%. That means something you buy in one year for a dollar will, at least in theory, cost $1.02 a year later.

We want some inflation because it indicates that the economy is growing. But too much, like in the 70s and early 80s, puts a major cramp on the economy. Consumers suddenly can't afford things, especially big-ticket items like houses and cars. Businesses can't afford to buy things either, with consumers shying away from their products or services because of prices and uncertainty.

Meanwhile, over the years, high inflation can erode your savings accounts. In particular, people saving for retirement need to take inflation into account when calculating how much they need to save for their non-working years.

Why talk inflation now? Because interest rates are dead low, and have been for a few years, but The Bank of Canada will raise those rates if inflation starts to climb. That's because raising interest rates, which puts a cap on how much money is circulating in the economy, helps curb inflation.

And that is exactly what happened in the 1980s. After years of out of control inflation, interest rates started to spike in North America. That licked inflation, but also made it incredibly hard for families to pay their mortgages, particularly when rates hit 20%.

One reason the Bank did not raise interest rates this week is inflation has been hovering around 2.2%, which is ideal for economists. The Bank of Canada stated, with its interest rate announcement earlier this week, that inflation is in check, thanks partly to the high state of the Canadian dollar. By keeping interest rates as they are, at least for now, the bank believes it's keeping a fine balance between inflation, money, and the growth of the economy.

What do you truly need to know about inflation? That the economic errors of the past are informing what economists do today. The Bank of Canada can't control the economy with its policies, but it can help things move along smoothly by tinkering with the amount of money in circulation and interest rates. It's not an exact science, but it's one that our government uses to try to make the economy hum along so you and I can live as well as possible.

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Inflation - What Does it Mean for Your Mortgage?

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Inflation is basically an increase in the price of goods and services. Economists like to keep inflation at about 2-3%. That means something you buy in one year for a dollar will, at least in theory, cost $1.02 a year later.

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What is inflation?

Before we begin to discuss how inflation affects mortgage rates, we first need to understand what inflation is. Inflation is the measure of the average increase in prices of goods and services over a period of time. It is the general level of prices where an amount of currency, the amount of money you have, will buy less than it did before. Inflation is usually represented as a percentage which helps show how currency cannot buy as much as it use to; this is known as purchasing power. Inflation negatively affects currency because now the currency buys fewer items. This means that with the current amount of money you have, you will not be able buy as many items you could have in previous times. This begins to impact the cost of living because now you are spending more on things like food, clothes, household items, bills, etc. This loss of purchasing power untimely leads to deceleration in economic growth.

This is a good website to check out if you sometimes find yourself unsure on what the true meaning of inflation is. This website will help summarize what the meaning of inflation is and how to understand its effects on the economy. This is the reason I chose this website.

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Inflation: What It Is, How It Can Be Controlled, and Extreme Examples

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Inflation is a decrease in the purchasing power of money, reflected in a general increase in the prices of goods and services in an economy.