In January, the 30-year-old marketing and communications manager was paying about $1,600 per month for the variable rate mortgage she has on her downtown Toronto condo. Now, that monthly payment will be nearly $2,000.
“It’s been a big shock and a big change for me personally,” she told Global News Wednesday, shortly after the central bank’s announcement, which added about $200 to her payments alone.
“I’m also managing the mortgage by myself, so all of these payments come out from my paycheque.”
The key interest rate now sits at 2.5 per cent, a drastic shift from the 0.25 per cent rate seen at the start of the year, as the Bank of Canada tries to tame decades-high inflation that has sent prices skyrocketing.
The bank’s governor Tiff Macklem acknowledged Wednesday that higher interest rates will add to the difficulties that Canadians are already facing with high inflation, but said if inflation becomes entrenched it will be more painful for the economy — and for Canadians — to get it back down.
1:18 Bank of Canada hikes key interest rate by full percentage point in surprise move
Bank of Canada hikes key interest rate by full percentage point in surprise move
That comes as little comfort for Vijh. After being forced to adjust her budget to accommodate previous interest rate hikes earlier this year, she says she’ll once again have to find a new balance.
“Primarily it’s going to be cutting down on my day-to-day costs – dining out, groceries – finding places where I can basically cut costs. I’ll put more money towards my mortgage if I can, as well as through my savings,” she said.
“I’m also reconsidering my travel plans for the rest of the year, because travel is also extremely expensive right now, and I’m not entirely sure I can accommodate that given the mortgage rate increases.”
Wednesday’s one per cent hike — the largest single increase since August of 1998 — surprised most economists who were anticipating a 75 basis point increase in line with the U.S. Federal Reserve.
2:17 Bank of Canada governor on why key interest rate announcement came relatively suddenly
Bank of Canada governor on why key interest rate announcement came relatively suddenly The hike means a typical variable rate mortgage of 2.7 per cent on a home priced at the national average of $711,000 would see monthly payments increase from $2,845 to $3,168 — a difference of nearly $325 per month.
Although Vijh’s mortgage rate is slightly lower at 2.55 per cent, she’s says she’s still feeling the squeeze. She also has 23 years left on her 25-year amortization, leaving her with roughly $384,000 left to pay off.
The rising interest rates this year have already started to cool off Canada’s white-hot housing market, with home prices seeing their first declines in nearly three years. Royal LePage has slashed its annual market outlook to just five per cent growth by the end of 2022, down from a projected 15 per cent earlier this year.
But that still leaves new homeowners like Vijh making increasingly higher mortgage payments on properties that are now starting to dip in value along with the market.
Macklem said Wednesday’s oversized rate hiked reflected “very unusual economic circumstances” of “too high” inflation and increased consumer anxiety, which requires drastic action to reverse.
1:38 Bank of Canada projects ‘soft landing’ approach to addressing inflation
Bank of Canada projects ‘soft landing’ approach to addressing inflation
The Bank of Canada also signalled that interest rates would need to keep rising before the end of the current cycle.
In a note, CIBC senior economist Karyne Charbonneau said the Bank of Canada raising its key rate to a peak of 3.25 per cent is now more likely.
The continued hikes is concerning to Vijh, who says she’s growing increasingly worried about her ability to save for her retirement.
“In January, I was probably able to put a little more toward my RRSP,” she said. “Today, I may have to reconsider how much I’m putting towards retirement and instead put that into my mortgage payments, or save it and put it toward a prepayment for my mortgage.”
Vijh says she wants people of her generation who also bought into the real estate market during the pandemic to keep a close eye on their expenses, particularly as the potential for more interest rate hikes looms.
“I’m sure a lot of them took the opportunity, like I did, to get into their first home in 2020, 2021, and are now being faced with pretty steep increases in their mortgage costs,” she said.
“It’s going to be very important for us to re-examine how we spend and save, and get into these new changes.”
– with files from Global News’ Craig Lord
0:56 Mortgage advice following Bank of Canada’s 1% interest rate increase
Mortgage advice following Bank of Canada’s 1% interest rate increase
Netflix (NFLX) stock slid as much as 9.6% Friday after the company gave a second quarter revenue forecast that missed estimates and announced it would stop reporting quarterly subscriber metrics closely watched by Wall Street.
On Thursday, Netflix guided to second quarter revenue of $9.49 billion, a miss compared to consensus estimates of $9.51 billion.
The company said it will stop reporting quarterly membership numbers starting next year, along with average revenue per member, or ARM.
“As we’ve evolved our pricing and plans from a single to multiple tiers with different price points depending on the country, each incremental paid membership has a very different business impact,” the company said.
Netflix reported first quarter earnings that beat across the board on Thursday, with another 9 million-plus subscribers added in the quarter.
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Subscriber additions of 9.3 million beat expectations of 4.8 million and followed the 13 million net additions the streamer added in the fourth quarter. The company added 1.7 million paying users in Q1 2023.
Revenue beat Bloomberg consensus estimates of $9.27 billion to hit $9.37 billion in the quarter, an increase of 14.8% compared to the same period last year as the streamer leaned on revenue initiatives like its crackdown on password-sharing and ad-supported tier, in addition to the recent price hikes on certain subscription plans.
Netflix’s stock has been on a tear in recent months, with shares currently trading near the high end of its 52-week range. Wall Street analysts had warned that high expectations heading into the print could serve as an inherent risk to the stock price.
Earnings per share (EPS) beat estimates in the quarter, with the company reporting EPS of $5.28, well above consensus expectations of $4.52 and nearly double the $2.88 EPS figure it reported in the year-ago period. Netflix guided to second quarter EPS of $4.68, ahead of consensus calls for $4.54.
Profitability metrics also came in strong, with operating margins sitting at 28.1% for the first quarter compared to 21% in the same period last year.
The company previously guided to full-year 2024 operating margins of 24% after the metric grew to 21% from 18% in 2023. Netflix expects margins to tick down slightly in Q2 to 26.6%.
Free cash flow came in at $2.14 billion in the quarter, above consensus calls of $1.9 billion.
Meanwhile, ARM ticked up 1% year over year — matching the fourth quarter results. Wall Street analysts expect ARM to pick up later this year as both the ad-tier impact and price hike effects take hold.
On the ads front, ad-tier memberships increased 65% quarter over quarter after rising nearly 70% sequentially in Q3 2023 and Q4 2023. The ads plan now accounts for over 40% of all Netflix sign-ups in the markets it’s offered in.
Netflix reported first quarter earnings after the bell on Thursday. REUTERS/Dado Ruvic/File Photo (REUTERS / Reuters)
Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.
Oil prices initially spiked on Friday due to unconfirmed reports of an Israeli missile strike on Iran.
Prices briefly reached above $90 per barrel before falling back as Iran denied the attack.
Iranian media reported activating their air defense systems, not an Israeli strike.
Oil prices gave up nearly all of early Friday’s gains after an Iranian official told Reuters that there hadn’t been a missile attack against Iran.
Oil surged by as much as $3 per barrel in Asian trade early on Friday after a U.S. official told ABC News today that Israel launched missile strikes against Iran in the early morning hours today. After briefly spiking to above $90 per barrel early on Friday in Asian trade, Brent fell back to $87.10 per barrel in the morning in Europe.
The news was later confirmed by Iranian media, which said the country’s air defense system took down three drones over the city of Isfahan, according to Al Jazeera. Flights to three cities including Tehran and Isfahan were suspended, Iranian media also reported.
Israel’s retaliation for Iran’s missile strikes last week was seen by most as a guarantee of escalation of the Middle East conflict since Iran had warned Tel Aviv that if it retaliates, so will Tehran in its turn and that retaliation would be on a greater scale than the missile strikes from last week. These developments were naturally seen as strongly bullish for oil prices.
However, hours after unconfirmed reports of an Israeli attack first emerged, Reuters quoted an Iranian official as saying that there was no missile strike carried out against Iran. The explosions that were heard in the large Iranian city of Isfahan were the result of the activation of the air defense systems of Iran, the official told Reuters.
Overall, Iran appears to downplay the event, with most official comments and news reports not mentioning Israel, Reuters notes.
The International Atomic Energy Agency (IAEA) said that “there is no damage to Iran’s nuclear sites,” confirming Iranian reports on the matter.
The Isfahan province is home to Iran’s nuclear site for uranium enrichment.
“Brent briefly soared back above $90 before reversing lower after Iranian media downplayed a retaliatory strike by Israel,” Saxo Bank said in a Friday note.
The $5 a barrel trading range in oil prices over the past week has been driven by traders attempting to “quantify the level of risk premium needed to reflect heightened tensions but with no impact on supply,” the bank said, adding “Expect prices to bid ahead of the weekend.”
At the time of writing Brent was trading at $87.34 and WTI at $83.14.
