Finance: Three Ways Your Personal Finance Situation Will Change in 2018

There’s a great deal of uncertainty about how our finances will change in 2018. New mortgage rules that kicked in January 1st are threatening to further cool the real estate market, economists are expecting a jump in interest rates this year and investors are weary about how much longer the 10-year bull market can last. Here’s what you should pay closer attention to in 2018.Real Estate Prices The new, stricter mortgage rules will affect not only the volume of sales, but also the purchase price. The Bank of Canada has already noted that 10 percent of Canadians will not qualify for the same amount as did before. The interest rate comparing site RateHub.ca suggests it could result in purchasing power being reduced by up to 21 per cent this year. This means there are fewer people bidding, with less money.TD Bank says this could depress demand by up to 10 per cent and shave up to four per cent off the average price. That’s the national average, so in some areas those declines could be steeper.One unintended consequence of the mortgage rules is many Canadians may find freehold homes less affordable and look to condo ownership as a solution. This could drive condo prices higher as demand rises, especially in places like Toronto.Rents Creep Higher One of the bleakest forecasts is these new mortgage rules will result in higher rents and job losses. This is coming from Will Dunning, the chief economist for Mortgage Professionals Canada. He predicts this year, landlords will hike rents and 50,000 jobs will be lost. That’s because, according to him, things like housing starts will fall, as fewer people are likely to buy. This can impact many areas of the economy, including construction, retail and banking. For condo renters, already saddled with high rent costs, this could be another financial blow.Interest RatesEconomists are expecting the Bank of Canada to raise rates again in 2018. The Bank of Canada says higher rates, are “likely overtime.” TD Economics notes that forecasts continue to point to a hike sooner rather than later. Their long-term forecast is rates will rise another full percentage point by the end of this year. Anyone with a floating rate loan or a variable mortgage should expect money to get more expensive. Our economy seems ready for it too. Canada’s economic growth has been better than expected, and national unemployment is at near-record lows. Add to that, consumer and business confidence is up.Investments Global stock markets hit record highs in 2017 as investors showed confidence with better than expected data and business friendly tax cuts being promised south of the border. The S&P500 was up more than 20 per cent this year. 2018 could be much different, Wall Street heavyweight Morgan Stanley is forecasting volatility in 2018, after a stable and positive 2017. Add to that, Sam Stovall, chief equity strategist at CFRA, says, “One could say that in 2018 investors should expect more for less — more volatility for less return.” CFRA is one of the world’s largest independent investment research firms.In 2018 we have to adjust our expectations about our money and our personal finance, because things are about to change in a big way.Rubina Ahmed-Haq is a journalist and personal finance expert. She is HPG’s Finance Editor. She regularly appears on CBC Radio and TV. She is a contributor on CTV Your Morning and Global Toronto. She has a BA from York University, received her post graduate journalism diploma from Humber College and has completed the CSC. Follow her on Twitter @alwayssavemoney