The Bank of Canada has not moved in months.

Your mortgage rate just went up anyway. Most people are confused by this. They watch the BoC announcements, see the rate hold steady, and assume their mortgage costs will too. That is not how fixed rates work.

Fixed mortgage rates are not set by the Bank of Canada. They are set by bond yields. And bond yields do not wait for central bank meetings. Here is the chain reaction most people miss. A war breaks out in the Middle East. The Strait of Hormuz closes. Global oil prices spike. Energy costs rise across the economy.

Now here is the part that catches people off guard. Inflation does not need to arrive for rates to move. The 𝘳𝘪𝘴𝘬 of inflation is enough. Bond investors see higher energy prices and start pricing in future inflation. They demand higher yields to compensate.

Lenders see those yields rise and adjust their fixed mortgage rates accordingly.In the past three weeks alone, fixed rates climbed by half a percent. The five-year fixed went from around 4% to 4.95%. And the Bank of Canada did nothing. That is the disconnect most homeowners do not understand.

Variable rates follow the Bank of Canada. Fixed rates follow bond markets. Bond markets follow global risk.

Right now, 1.4 million Canadians are renewing their mortgages this year. Many of them locked in at rates from 2021. They are walking into renewals expecting stability and finding something very different. Here is what most people miss. You do not need to wait for the Bank of Canada to act. The market already moved. And if uncertainty continues, it could move again.

If your renewal is coming up, now is the time to lock in a rate hold. Not when the letter arrives. Now. The homeowners who understand this are not reacting to rate announcements. They are watching the forces that drive them.

Ryan Erikson 250-893-0116

ryan@modernmortgagegroup.ca

Why are the Big Bank economists varying so much in their interest rate forecasts moving forward?

TD thinks the Bank of Canada rate will stay at 2.25% though 2027.
RBC thinks is reaches 3.25%

They can’t both be right and you still need to make a mortgage decision today. So how do you make a decision when the experts disagree?

You’re not betting on what rates will do rather, you’re choosing “How much uncertainty you can afford?”

Here are the 3 questions I ask every mortgage client:

1.Can you afford a payment if your mortgage rate rises 1.5% at renewal?
-If yes, you have flexibility. If the answer is no, you need certainty.

2. Is there a likely event in the next 3 years that changes your property?
-Renovation, Sale, Refinance, Family Change. If yes, a short term or variable rate make sense. If the answer is no, lock in more certainty.

3. How do you sleep at night?
-some people are okay with payment fluctuation (ie. Variable Rate) while others lose sleep over a $200/month change in their payment. This is an important consideration when choosing rates.

Bottom Line:

If you value certainty, take a fixed rate.
If you think your situation changes significantly in 3 years (ie. you might sell your home in the next 1-3 years,” take the shorter term. This gives you flexibility without having to pay a massive penalty to break it.

• Ryan Erikson

Refinancing Your Mortgage in 2026.

Refinancing your mortgage can be a smart financial move for many reasons, and as your trusted mortgage advisor, I’ve seen how much it can benefit homeowners!

Ideally, refinancing is done at the end of your mortgage term to avoid penalties, but the timing can vary depending on your goals. For some, it’s about unlocking the equity in their home to fund renovations or cover big expenses like college tuition. For others, it’s an opportunity to consolidate debt, lower their interest rate, or change up their mortgage product.

Let’s take a closer look at some of the ways refinancing your mortgage can help!

• Get a Better Rate:  The Bank of Canada once again held the policy rate steady at 2.25% to start off 2026. Now is a great time to consider refinancing for a better rate and lower overall mortgage payments! Having access to multiple different lenders provides me the the opportunity to shop for the best rates and terms for your mortgage.
• Consolidate Debt: When it comes to renewal season and considering a refinance, this is a great time to review your existing debt and determine whether or not you want to consolidate it onto your mortgage. In most cases, the interest rate on your mortgage is less than you would be charged with credit card companies or other forms of financing you may have. Plus, having all your debt consolidated into a single payment can keep you on track!
• Unlock Your Home Equity: Do you have projects around the house you’ve been dying to get started on? Need funds for a large purchase such as a new vehicle or post-secondary education? When you are looking to renew your mortgage, it is a great opportunity to consider refinancing in order to take advantage of the home equity you have built up to help with these larger changes in your life!
• Change Your Mortgage Product: Are you unhappy with your existing mortgage product? If you have a variable-rate or adjustable-rate mortgage, you may be considering locking it in at the lower rates. Alternatively, you may want to switch your current fixed-rate mortgage to a variable option. You can also utilize your refinance to take advantage of a different payment or amortization schedule to help pay off your mortgage faster!

No matter your plans or situation, please don’t hesitate to reach out to me today!

Bank of Canada Holds Policy Rate Steady

Today, the Bank of Canada once again held the policy rate steady at 2.25%. This is the bottom of the Bank’s estimate of the neutral overnight rate, where monetary policy is neither expansionary nor contractionary. With inflation hovering just above 2% and core inflation falling to 2.5%, the Governing Council sees the current overnight rate as appropriate, “conditional on the economy evolving broadly in line with the outlook published today. Inflation was 2.1% in 2025, and the Bank expects inflation to stay close to the 2% target over the projection period, with trade-related cost pressures offset by excess supply.”

According to the press release, “Economic growth is projected to be modest in the near term as population growth slows and Canada adjusts to US protectionism. In the projection, consumer spending holds up, and business investment gradually strengthens, with fiscal policy providing some support. The Bank projects growth of 1.1% in 2026 and 1.5% in 2027, broadly in line with the October projection. A key source of uncertainty is the upcoming review of the Canada-US-Mexico Agreement.”

In the United States, economic growth is supported by strong consumption and a surge in AI investment. The Fed stood pat today, but is expected to cut rates three times in the second half of this year. The US Federal Reserve is likely to cut its policy rate by 25 bps to 3.5%-3.75% as President Trump lobbies Chair Jay Powell for more dramatic rate cuts.

Data released yesterday showed that US consumer confidence plummeted in January to the lowest level in 12 years on more pessimistic views from Americans worried about the nation’s economy, inflation and a weakening labour market.

The Conference Board gauge decreased to 84.5 from an upwardly revised 94.2 last month, data released Tuesday showed. The figure was the lowest since May 2014 and fell short of all estimates in a Bloomberg survey of economists.

Bottom Line

The Bank of Canada has shown its willingness to bolster the Canadian economy amid unprecedented trade uncertainty. At the same time, Canada is working hard to establish alternative trade partners. Even the vast Chinese market cannot replace the US in terms of proximity and cost-effectiveness, given the high transport costs. China has stepped up its purchases of Canadian oil to record levels. There is no single market the size of the US market to replace exports of steel and aluminum.

“Employment weakened in the first half of 2025 as sectors hit hard by U.S. tariffs cut production and jobs,” Macklem said. “In recent months, overall employment has risen, led by hiring in services like health care, and slowing population growth is reducing the number of new entrants into the labour market.”

US tariffs have had a significant negative impact on Canadian exports. While the push for trade diversification is welcome, export growth is expected to be modest over the next two years.

“This restructuring, including more diversified trade and a more integrated internal market, will support some recovery in our productive capacity,” Macklem said. “But it will take some time.”

As outlined in its Monetary Policy Report (MPR), the top risk to the outlook is the CUSMA review. The bank highlights that Canada currently has an effective US tariff rate of 5.8%, thanks to the exemptions under the North American trade pact. It warned that an unfavourable outcome to negotiations could make Canadian exports less competitive.

“Faced with weaker demand, exporters would reduce production, investment and hiring,” the report said. “This would spill over into the broader economy, weighing on sectors such as services and putting Canadian GDP on a lower path.”

“Government spending on infrastructure is projected to rise, mainly reflecting commitments in provincial budgets,” the report said. “Additional federal capital transfers will also bolster infrastructure investment.”

In this environment, market-driven interest rates have risen. The 5-year bond yield is once again attempting to break through 3%. The 2-year bond at 2.67% is well above the overnight rate, and the Canadian dollar is rising. Lenders have recently increased fixed mortgage rates, which will be more popular if people generally expect rates to rise.

The key to the outlook is the continuation of CUSMA. We will likely suffer several more months of uncertainty before we know the fate of the trade agreement. In the meantime, PM Carney will continue to encourage trade deals in non-US countries.

Published by Dr. Sherry Cooper

Closing Costs – The Real Numbers You Need to Budget For.

Buying a home is one of the most exciting ventures in life! To ensure it goes smoothly, you need to have a proper budget in place to protect your financial security and help you make the best decision for your future location. However, the cost of the home is not the only cost that you need to budget for! The temptation will always be to start looking at the very top of your budget but fees, such as mandatory closing costs, can easily put you over the top. Knowing the real numbers will make it that much easier to stay within your budget and maintain your financial comfort.

Closing costs are a one-time fee associated with the sale of a home and are separate from the mortgage insurance and down payment. Typically, these costs range from 1.5-4% of the purchase price, depending on your location. This means, for an $800,000 home, you would be looking to budget around $22,000 on average.

Here are a few closing costs to keep an eye out for:

• Land Transfer Tax: This is calculated as a percentage of the purchase price of your home, with the amount varying in each province. Some cities, such as Toronto, also have a municipal LTT.
• Legal Fees and Disbursements: You can expect to incur a minimum of $500 (plus GST/HST) on legal fees for the preparation and recording of official documents around your purchase.
• Title Insurance: Most lenders require title insurance to protect against losses in the event of a property ownership dispute. This is purchased through your lawyer/notary and is typically $300 or more.
• PST on CMHC Insurance: Though CMHC insurance itself is financed through the mortgage, PST on the insurance is typically paid at the lawyers and sometimes deducted from your advance.
• Home Inspection Fee: A home inspection is highly recommended as a condition of your Offer to Purchase to prevent any future surprises. This can cost around $500.
• Appraisal Fee: An appraisal is performed to certify the lender of the resale value of the home in the case you default on the mortgage. The cost is usually $400 – $600 but is typically covered by the lender.
• Property Insurance: Property insurance covers the cost of replacing your home and its contents, and must be in place on closing day. This is paid in monthly or annual premiums.
• Prepaid Utility Bills: You may need to reimburse the previous owner of your property for prepaid costs such as property taxes, utilities, and so forth.
• Property Taxes: Property taxes are due on an annual basis and are calculated as a percentage of the home value and vary by municipality. You also may need to reimburse the previous property owner if he/she has already paid property taxes for the full year.

Knowledge is power and understanding the hidden costs associated with purchasing a home can help you create a realistic budget and ensure you remain within your financial means. Contact a DLC Mortgage Expert if you have any questions about your current purchase process or if you are looking to buy a new home now or in the future!

Pyblished by my Marketing Team.

Bank of Canada Lowers Policy Rate to 2.5%

Today, the Bank of Canada lowered the overnight policy rate by 25 bps to 2.5% as was widely expected. Following yesterday’s better-than-expected inflation report, the Bank believes that underlying inflation was 2.5% year-over-year.

Through the recent period of tariff turmoil, the Governing Council has closely monitored the risks and uncertainties facing the Canadian economy. Three developments triggered the Bank’s rate cut. Canada’s labour market softened further. Upward pressure on underlying inflation has diminished, and there is less upside to risk to future inflation with the removal of most retaliatory tariffs by Canada.

Considerable uncertainty remains. However, with a weaker economy and less upside risk to inflation, the Governing Council deemed that a reduction in the policy rate was appropriate to better balance the risks going forward.

“The Bank will continue to assess the risks, look over a shorter horizon than usual, and be ready to respond to new information.”

Today’s press release suggests that the global economy has slowed in response to trade disputes. In the US, business investment has been substantial, primarily driven by expenditures on Artificial Intelligence. However, consumers are cautious, and employment gains have slowed. It is nearly a certainty that the Federal Reserve will lower its overnight policy rate this afternoon.

“Growth in the euro area has moderated as US tariffs affect trade. China’s economy held up in the first half of the year, but growth appears to be softening as investment weakens. Global oil prices are close to their levels assumed in the July Monetary Policy Report (MPR). Financial conditions have continued to ease, with higher equity prices and lower bond yields. Canada’s exchange rate has been stable relative to the US dollar.”

Canada’s economy contracted in the second quarter, posting a growth rate of -1.6%. Exports fell by 27% in Q2 following a surge in exports in advance of tariffs in Q1. Business investment also fell in Q2. “In the months ahead, slow population growth and the weakness in the labour market will likely weigh on household spending.”

Employment has declined in the past two months. “Job losses have largely been concentrated in trade-sensitive sectors, while employment growth in the rest of the economy has slowed, reflecting weak hiring intentions. The unemployment rate has moved up since March, hitting 7.1% in August, and wage growth has continued to ease.”

Bottom Line

The Bank of Canada was pretty tight-lipped about future rate cuts, but given the current trajectory, we expect another rate cut when they meet again this fall. The next BoC decision date is October 29, and the central bank wraps up the year on December 10. We expect at least one more rate cut this year, ending the year with a policy rate of 2.0%-2.25%. This should help boost interest-sensitive spending, most particularly housing, where there is considerable pent-up demand.

The Bank will move cautiously, but with the Fed cutting rates again later this year, this gives the BoC cover. While some have questioned the Bank’s easing in the face of 3% core inflation, other inflation measures suggest that underlying inflation is roughly 2.5%. The economic and labour market slowdown bodes well for another rate cut.

Traders in overnight swaps continue to price in another cut from the central bank this cycle, and put the odds at about a coin flip that they’ll ease again in October.

The central bank’s communications suggest that while it has resumed monetary easing to support the ailing economy, it is leery of cutting interest rates too quickly, given the potential inflation risks posed by the surge in global protectionism and tariffs.

Published by Dr. Sherry Cooper.

Buying your first Home? Check out this great  article on the benefits of the First Home Savings Account (FHSA) which may allow you to save of to 40,000.00 on a tax-free basis towards purchasing a home in Canada. It also looks into 5 other ways of growing your wealth Tax-free in Canada.

There are a number of ways you may defer tax in Canada; however, there are few ways to grow your wealth tax-free in Canada. This article highlights and explores six ways to do so – four ways for all Canadians and two ways for Canadian business owners.

Principal Residence Exemption

Possibly one of the most coveted tax benefits for Canadian residents, the Principal Residence Exemption (PRE) provides for tax-free growth on the value of one real property, which for many Canadians is their principal home.

The PRE may eliminate or reduce a capital gain you realize on the disposition, such as a sale, or on the deemed disposition, such as at death, of a property you own and designate as your principal residence in your personal income tax return. If any capital gain you realize is eliminated by claiming the PRE, this provides for tax-free growth on the value of your principal residence.

For a property to qualify as a principal residence, it must generally meet the following conditions:

• it is a housing unit, which can include a house; an apartment or unit in a duplex, apartment building, or condominium; a cottage; a mobile home; a trailer; or a houseboat; among others,
• you own the property (either solely or jointly with another person),
• the housing unit must be “ordinarily inhabited” in the year by you, your current or former spouse or common-law partner (partner), or any of your children, and
• you designate the property as your principal residence for the year, and no other property has been so designated by you or any member of your family unit for the same year.

If you own multiple properties, such as your family home and cottage, and both properties otherwise meet the criteria noted above for being your principal residence, you may only designate one property per year as your principal residence. Generally, for years where you own more than one property, it may be more advantageous to claim your PRE on the disposition of the property with the higher capital gain per year.

The PRE’s complexity is commonly overlooked, and you should consult with your tax advisor if you own multiple properties and are disposing of your family home or cottage.

Tax-Free Savings Account

The Tax-Free Savings Account (TFSA) is a registered account where you can invest up to certain limits and earn tax-free investment income and growth. Canadian residents aged 18 and older may contribute to a TFSA. Unlike a Registered Retirement Savings Plan (RRSP), TFSA contributions are not tax-deductible. Instead, all investment income and returns earned within a TFSA are tax-free. The annual maximum TFSA contribution limit is $7,000 in 2025 and is indexed to inflation and rounded to the nearest $500 annually. Any unused contribution limit may be carried forward to future years. The accumulated contribution limit since 2009, when the TFSA was introduced, for an individual aged 18 and older at that time, and a Canadian resident since then, is currently $102,000.

There is no deadline for making a TFSA contribution, and withdrawals from your TFSA can be made at any time tax-free. Generally, the withdrawn amount may be re-contributed to your TFSA in the following calendar year unless you have unused TFSA contribution room in the year of withdrawal.

You should confirm your TFSA contribution limit before contributing to your TFSA, as a penalty of 1% per month may apply to any over-contribution made to your TFSA. You may find your TFSA contribution limit details on your CRA My Account on canada.ca or by consulting with your tax advisor.

The flexibility of the TFSA makes it useful for short-term or long-term savings. Typically, when you are younger, you may benefit from using TFSAs for saving for life events such as a new vehicle, vacations, weddings, or as part of a down payment on a first or new home. As you get older, you may benefit from using TFSAs to help fund your retirement or as a strategy to transition your wealth to the next generation tax-free.

First Home Savings Account

The tax-free First Home Savings Account (FHSA) is a registered account that allows Canadian residents aged 18 and older who are qualifying first-time home buyers the ability to invest $40,000 on a tax-free basis toward the purchase of a first home in Canada.

As a first-time home buyer, you may contribute up to $8,000 annually, subject to any available carryforward room, and up to a $40,000 lifetime contribution limit to an FHSA. Like an RRSP, contributions to an FHSA are tax-deductible, but withdrawals to purchase a first home are non-taxable, like a TFSA. An FHSA essentially combines certain tax benefits of an RRSP and a TFSA in one account.

Like RRSP contributions, you are not required to claim the FHSA deduction in the tax year a contribution is made. The amount can be carried forward indefinitely and deducted in a later tax year, which may be beneficial if you expect to be in a higher marginal tax bracket in a future year. Unlike an RRSP, contributions you make within the first 60 days of a subsequent year cannot be deducted against your income in the previous tax year. FHSA contributions are deductible for tax purposes on a calendar-year basis.

The maximum amount of unused FHSA contribution room that can be carried forward to a subsequent year is $8,000, which means that for any year after the year you open an FHSA, the maximum FHSA contribution room may be up to $16,000 ($8,000 carried forward contribution room plus $8,000 current year contribution room).

The FHSA can remain open for up to 15 years or until the end of the year in which you turn 71 years old. The FHSA must be closed by December 31 of the year following the year of the first qualifying withdrawal, and thereafter, you are not permitted to have another FHSA in your lifetime.

Any funds not used toward a home purchase can be transferred to an RRSP or Registered Retirement Income Fund (RRIF) penalty-free and tax-deferred. These transfers do not affect your RRSP contribution room, nor do they reinstate your $40,000 FHSA lifetime contribution limit. Funds transferred to an RRSP or RRIF become subject to the rules applicable to those plans. Funds can also be withdrawn from an FHSA on a taxable basis if not required for a first home purchase.

You are also permitted to transfer funds from an RRSP to an FHSA on a tax-free basis, subject to the FHSA annual and lifetime contribution limits. These transfers are not tax-deductible and do not reinstate your RRSP contribution room. You should consult with your wealth advisor or financial institution to complete any direct transfer between your RRSP and your FHSA plans. You should not withdraw the funds from your RRSP and contribute them to your FHSA yourself, as the withdrawal will be taxable to you.

If you are eligible to contribute to an FHSA and an RRSP, you may consider contributing to an FHSA first, up to the annual contribution room of $8,000. Even if you have no intention of purchasing a home in the future, contributing to an FHSA rather than an RRSP maintains your RRSP room for future use. If you decide not to buy a first home in the future, you may transfer your FHSA contributions plus growth to your RRSP without affecting your RRSP contribution room. Alternatively, if you contribute to your RRSP first, you can only transfer the RRSP contributions to an FHSA up to your available FHSA contribution room, and you do not get that RRSP contribution room back in the future. The FHSA may be the preferred savings vehicle if you are eligible, even if you do not plan on purchasing a first home.

If you do plan on purchasing a first home, you may consider waiting before opening an FHSA since the 15-year time limit begins upon opening the account. Opening your FHSA too early may put you in a position in the future where you are required to close your FHSA before finding your first home. So, if you plan to one day become a homeowner, carefully considering the account’s 15-year time limit should be factored into your home-buying planning.

Permanent Life Insurance

Permanent life insurance is another wealth planning strategy to grow and transfer your wealth tax-free, either personally or corporately.

There are two types of life insurance – term and permanent. Term life insurance provides coverage for a specific period, such as 10, 20, or 30 years, or until a certain age. It offers a tax-free death benefit to your beneficiaries if you pass away during that time. Its purpose is to cover a financial need with a limited duration, such as paying off your home mortgage on your death. Term life insurance can be renewed at regular intervals. However, premiums may increase with each renewal as you age. It can also be converted to permanent life insurance. While term life insurance is initially less expensive, there is usually a cost to waiting to convert it to permanent life insurance. In many cases, it may make sense to purchase permanent life insurance at the outset.

Permanent life insurance provides lifelong coverage and has many uses and benefits, such as:

• Risk mitigation: the death benefit may be used to pay the outstanding mortgage on your home or other properties such as a cottage, the daily living expenses of your surviving spouse and children, and your children’s education costs.
• Estate preservation: the death benefit provides funds for your terminal income tax liabilities, such as those associated with registered plans (e.g., RRSPs and RRIFs) and capital gains taxes, as well as funds for provincial probate fees.
• Estate equalization: beneficiaries of the death benefit may be children who are not active in their parent’s business to equalize them with children who are active in the business and who will receive shares of the corporation on their parents’ death.
• Alternative asset class: permanent life insurance is another way to diversify your investment portfolio. If the life insurance policy is an “exempt” policy and not subject to accrual taxation, the growth within the policy will be tax-deferred. In many policies, there are two unique features – a tax-free death benefit and a tax-free investment account held inside the policy. Both may be paid out as a tax-free death benefit upon your passing.
• Buy-sell funding for shareholders: the death benefit is commonly used to fund buy-sell agreements in corporations’ shareholders’ agreements, which generally provide that the corporation or its shareholders buy the deceased shareholders’ shares from their estate on a tax-efficient basis.
• Capital Dividend Account (CDA): the CDA is a special notional tax account that keeps track of certain tax-free surpluses the corporation realizes over time. Corporate life insurance is paid into the CDA (less the adjusted cost basis of the policy), which may be paid out to shareholders as tax-free dividends. This allows for tax-efficient buy-sell funding for the corporation or its shareholders upon a shareholder’s death, for example.

Lifetime Capital Gains Exemption

In addition to the above four ways to grow your wealth tax-free in Canada, business owners may be able to avail themselves of two additional ways – the first being the Lifetime Capital Gains Exemption (LCGE). The LCGE may help you shelter up to $1,250,000¹ (in 2025, indexed annually) of capital gains from income tax on the disposition of Qualifying Small Business Corporation (QSBC) shares or Qualified Farm or Fishing Property (QFFP). This article will discuss the LCGE for QSBC shares.

Generally, three tests must be met for shares to be QSBC shares:

• Holding period ownership test: you or a person related to you, such as your partner or child, must own the shares of the corporation for at least 24 months prior to sale.
• Holding period asset test: throughout the 24 months prior to sale, the corporation was a Canadian-Controlled Private Corporation (CCPC) and more than 50% of the fair market value (FMV) of its assets were used in an active business carried on primarily (interpreted to mean more than 50%) in Canada.
• Small Business Corporation (SBC) test: at the time of sale, the corporation must be a CCPC and all or substantially all (interpreted to mean at least 90%) of the FMV of the corporation’s assets must be used principally (interpreted to mean more than 50%) in an active business carried on primarily in Canada.

Generally, a CCPC is a corporation that is:

• incorporated in Canada,
• resident in Canada,
• not a public corporation, and
• not controlled by non-residents or public corporations.

It is important to note that only individual taxpayers (not corporations) may claim the LCGE. Therefore, if you own shares of a QSBC indirectly through another corporation, commonly known as a “holding corporation” or “Holdco” (Holdco), claiming the LCGE is much more complex. As such, consult with your tax advisor when structuring your business, such as incorporating, purchasing, or reorganizing your share ownership of a QSBC, to ensure your corporation’s shares may qualify for the LCGE upon a future disposition.

For purposes of the latter two QSBC tests above, it is important that business owners keep their operating company (Opco) “pure” to maintain eligibility to claim their available LCGE. Simple “purification” strategies include distributing non-active assets (such as excess cash or investments not actively used in your Opco) in the form of salary or dividends, using non-active assets to pay down current and long-term debts, or purchasing additional active assets.

A more complex purification strategy includes incorporating a Holdco in your corporate structure, which may allow you to transfer non-active assets to your Holdco tax-efficiently. This may be done by paying tax-free intercorporate dividends or undergoing a corporate reorganization to transfer non-active assets from your Opco to your Holdco.

If the capital gain to be realized on your Opco shares is or will be greater than $1,250,000¹, it is also important to consider the potential multiplication of the LCGE well in advance of the disposition of your Opco shares. The disposition of your Opco shares may arise on their gifting, their sale, or on your death. Typically, the LCGE may be multiplied amongst family members, such as your partner, children, and grandchildren who have available LCGE. This may require you to reorganize the share ownership of your Opco so that other shareholders, commonly a family trust settled for the benefit of family members, can own shares of your Opco and provide your family with the ability to access multiple LCGEs upon a future disposition of their shares. The timing of such a reorganization should be well in advance of any disposition of the shares to allow sufficient growth in value to accrue to the shares of your corporation held by other shareholders, such as your family trust, such that other family members may access their LCGE.

Alternative Minimum Tax (AMT) is an alternative way to calculate Canadian income tax when you earn preferentially taxed income in excess of an annual exemption. AMT may also arise when you claim preferential tax deductions to reduce your taxable income, such as the LCGE, and certain credits to reduce your tax liability. If you realize a capital gain that you shelter or partially shelter with your LCGE, you may be susceptible to AMT, depending on your other sources of taxable income, deductions, and credits.

$10,000,000 capital gains exemption for a qualifying business transfer

A second, temporary, way qualifying business owners may grow their wealth tax-free in Canada is by selling their qualifying business to an Employee Ownership Trust (EOT). The sale of your shares of a qualifying corporation to an EOT before 2027 may allow you to shelter up to $10,000,000 of capital gains from income tax on the disposition. Where the qualifying conditions are met, the $10,000,000 capital gains exemption ($10M CGE) may be claimed before claiming your available LCGE on the sale of your shares of a qualifying corporation to an EOT. Only individual taxpayers (not corporations) may claim the $10M CGE. AMT does not apply to capital gains sheltered by the $10M CGE.

The $10M CGE is available on the sale of shares of a qualifying corporation to an EOT in 2024, 2025, and 2026, subject to qualifying conditions. The $10M CGE applies to the business, not to each shareholder. So, where the qualifying conditions are met and multiple individuals dispose of shares of a qualifying corporation to an EOT as part of a qualifying business transfer, each individual may claim a portion of the $10M CGE. However, the total exemption claimed cannot exceed $10,000,000 in aggregate. All individuals must agree on allocating the exemption amongst themselves and jointly file an election with the CRA indicating their allocated eligible amount up to the $10M CGE.

Generally, an EOT is a form of employee ownership where a trust holds shares of a qualifying corporation for the benefit of the corporation’s employees. EOTs may be used to facilitate the purchase of a qualifying business by its employees, without requiring the employees to pay directly to acquire the shares of the corporation. For business owners, the sale of shares of a qualifying business to an EOT provides an additional option for transition planning. However, because an EOT must generally benefit the corporation’s employees, it cannot be used for buy-outs by management or only a few key employees. It may be a limited-time option for business owners who are able to sell their business to its employees before 2027.

The $10M CGE qualifying conditions are complex. There are also disqualifying events that may occur after the sale of your qualifying business to an EOT that may retroactively deny your claim of the $10M CGE, making any capital gain previously exempted taxable. Other disqualifying events may only defer the taxation of your capital gain, making it taxable to the EOT at a future date.

If you can sell your business to its employees before 2027, taking advantage of this structure to transition your business may be beneficial. Consult with your tax advisor well in advance of transitioning your business to review and plan for a tax-efficient and effective sale.

Article written By Wealth Management Taxation, Scotia Capital Inc.

Bank of Canada Holds Rates Steady as Tariff Clouds Linger.

Bank of Canada Holds Rates Steady As Tariff Turmoil Continues

As expected, the Bank of Canada held its benchmark interest rate unchanged at 2.75% at today’s meeting, the third consecutive rate hold since the Bank cut overnight rates seven times in the past year. The Governing Council noted that the unpredictability of the magnitude and duration of tariffs posed downside risks to growth and lifted inflation expectations, warranting caution regarding the continuation of monetary easing.

Trade negotiations between Canada and the United States are ongoing, and US trade policy remains unpredictable.

While US tariffs are disrupting trade, Canada’s economy is showing some resilience so far. Several surveys suggest consumer and business sentiment is still low, but has improved. In the labour market, we are seeing job losses in the sectors that rely on US trade, but employment is growing in other parts of the economy. The unemployment rate has moved up modestly to 6.9%.

Inflation is close to the BoC’s 2% target, but evidence of underlying inflation pressures continues. “CPI inflation has been pulled down by the elimination of the carbon tax and is just below 2%. However, a range of indicators suggests underlying inflation has increased from around 2% in the second half of last year to roughly 2½% more recently. This largely reflects an increase in prices for goods other than energy. Shelter cost inflation remains the biggest contributor to CPI inflation, but it continues to ease. Surveys indicate businesses’ inflation expectations have fallen back after rising in the first quarter, while consumers’ expectations have not come down”.

The Bank asserted today that there are reasons to think that the recent increase in underlying inflation will gradually unwind. The Canadian dollar has appreciated, which reduces import costs. Growth in unit labour costs has moderated, and the economy is in excess supply. At the same time, tariffs impose new direct costs, which will be gradually passed through to consumers. In the current tariff scenario, upside and downside pressures roughly balance out, so inflation remains close to 2%.

The central bank provided alternative scenarios for the economic outlook. In the de-escalation scenario, lower tariffs improve growth and reduce the direct cost pressures on inflation. In the escalation scenario, higher tariffs weaken the economy and increase direct cost pressures.

So far, the global economic consequences of US trade policy have been less severe than feared. US tariffs have disrupted trade in significant economies, and this is slowing global growth, but by less than many anticipated. While growth in the US economy looks to be moderating, the labour market has remained solid. And in China, lower exports to the United States have largely been replaced with stronger exports to other countries.

In Canada, we experienced robust growth in the first quarter of 2025, primarily due to firms rushing to get ahead of tariffs. In the second quarter, the economy looks to have contracted, as exports to the United States fell sharply—both as payback for the pull-forward and because tariffs are dampening US demand.

The gap between the 2.75% overnight policy rate in Canada and the 4.25-4.50% policy rate in the US is historically wide. Another cause of uncertainty is the fiscal response to today’s economic challenges. The One Big Beautiful Bill has passed, and it will add roughly US$4 trillion to the already burgeoning US federal government’s red ink. This has caused a year-to-date rise in longer-term bond yields, steepening the yield curve.

The slowdown of the housing sector since Trump’s inauguration has been a substantial drain on the economy.  The Monetary Policy Report (MPR) for July states that “growth in residential investment strengthens in the second half of 2025, partially due to an increase in resale activity after the steep decline in the first half of the year. Growth in residential investment is moderate over 2026 and 2027, supported by dissipating trade uncertainty and rising household incomes.”

Bottom Line

We expect the Canadian economy to post a small negative reading (-0.8%) in Q2 and (-0.3%) in Q3, bringing growth for the year to 1.2%. The next Governing Council decision date is September 17, which will give the  Bank time to assess the underlying momentum in inflation and the dampening effect of tariffs on economic activity.

If inflation slows over the next couple of months and the economy slows in Q2 and Q3 as widely expected, the Bank will likely cut rates one more time this year, bringing the overnight rate down to 2.50%, within the neutral range for monetary policy. Bay Street economists have varying views on the rate outlook (see chart above). While the Fed will hold rates steady today, despite the incredible pressure coming from the White House, the Bank of Canada could well cut rates one more time this year.

Published by Dr. Sherry Cooper

Closing Costs – The Real Numbers You Need to Budget For.

Buying a home is one of the most exciting ventures in life! To ensure it goes smoothly, you need to have a proper budget in place to protect your financial security and help you make the best decision for your future location. However, the cost of the home is not the only cost that you need to budget for! The temptation will always be to start looking at the very top of your budget but fees, such as mandatory closing costs, can easily put you over the top. Knowing the real numbers will make it that much easier to stay within your budget and maintain your financial comfort.

Closing costs are a one-time fee associated with the sale of a home and are separate from the mortgage insurance and down payment. Typically, these costs range from 1.5-4% of the purchase price, depending on your location. This means, for an $800,000 home, you would be looking to budget around $22,000 on average.

Here are a few closing costs to keep an eye out for:

• Land Transfer Tax: This is calculated as a percentage of the purchase price of your home, with the amount varying in each province. Some cities, such as Toronto, also have a municipal LTT.
• Legal Fees and Disbursements: You can expect to incur a minimum of $500 (plus GST/HST) on legal fees for the preparation and recording of official documents around your purchase.
• Title Insurance: Most lenders require title insurance to protect against losses in the event of a property ownership dispute. This is purchased through your lawyer/notary and is typically $300 or more.
• PST on CMHC Insurance: Though CMHC insurance itself is financed through the mortgage, PST on the insurance is typically paid at the lawyers and sometimes deducted from your advance.
• Home Inspection Fee: A home inspection is highly recommended as a condition of your Offer to Purchase to prevent any future surprises. This can cost around $500.
• Appraisal Fee: An appraisal is performed to certify the lender of the resale value of the home in the case you default on the mortgage. The cost is usually $400 – $600 but is typically covered by the lender.
• Property Insurance: Property insurance covers the cost of replacing your home and its contents, and must be in place on closing day. This is paid in monthly or annual premiums.
• Prepaid Utility Bills: You may need to reimburse the previous owner of your property for prepaid costs such as property taxes, utilities, and so forth.
• Property Taxes: Property taxes are due on an annual basis and are calculated as a percentage of the home value and vary by municipality. You also may need to reimburse the previous property owner if he/she has already paid property taxes for the full year.

Knowledge is power and understanding the hidden costs associated with purchasing a home can help you create a realistic budget and ensure you remain within your financial means.

Written by my Marketing Team

Six Home Upgrades That Will Make Spring Even Better.

As the days get longer and your flowers begin to bloom, there’s no better time to transform your house into your dream home. If you want to unlock your home’s full potential, here are six renovations that can boost both your lifestyle and property value.

Kitchen Transformation

Imagine having a kitchen that not only looks beautiful but also fits your lifestyle perfectly. A kitchen transformation can elevate your home, making it a space where you love to spend time. Whether it’s adding more storage, updating your appliances, or replacing your countertops, now is the perfect time to create the kitchen you’ve always dreamed of. In Canada, a mid-sized kitchen renovation typically ranges from $25,000 to $40,000. An investment that enhances your daily life, as well as your home’s appeal. You deserve a space that works for you.

Roof Replacement

Over time, weather and wear can take a toll on your roof, leading to leaks and potential damage. Replacing your roof this spring restores your home’s safety, boosts its curb appeal, and improves overall efficiency. With modern materials and improved insulation, a new roof offers long-term protection from the elements while reducing the likelihood of future issues. In Canada, the cost to replace the roof on a mid-sized home ranges from $10,000 to $20,000, an investment that offers renewed security and peace of mind for years to come.

Backyard Refresh

Why not turn your backyard into a personal oasis this spring? Whether you’re adding a new deck, fresh landscaping, or an outdoor kitchen, even small changes can make a big difference. Depending on the scope of the project, a new deck may cost between$5,400-$15,000, landscaping updates typically range from, $5,000 to $15,000 and an outdoor kitchen typically starts around $10,000. Whatever your budget, a thoughtful backyard makeover can create a welcoming space to relax and enjoy meaningful moments with family and friends throughout the season.

Siding and Paint Renewal

A siding or paint renewal can really bring new life to your home’s exterior. If your paint is fading or your siding is starting to look worn, it’s not just about looks, it can also leave your home more vulnerable to the elements. Updating with fresh paint or modern siding doesn’t just protect your home but also gives it a clean, refreshed look that you’ll love coming home to. On average, the cost of siding replacement for a mid-sized home ranges from $14,000 to $30,000, depending on materials chosen. Similarly, exterior painting typically costs between $3,000 to $9,000. It’s a simple change that makes a significant difference, especially with spring right around the corner.

New Doors and Windows

Sometimes, we don’t realize how old or worn-out doors and windows can affect the look and feel of our home. Updating them can instantly brighten up your space. A new front door, which typically costs around $3,900 for supply and installation, can instantly refresh your entryway. Replacing outdated windows, with an average cost of $15,000 to $35,000, can also improve natural light and energy efficiency. It’s amazing how these simple changes can make your home feel brighter, warmer, and more welcoming.

New Air Conditioner

You might have noticed that your air conditioning unit isn’t performing as well as it used to, and it may be time to start thinking about a replacement. A modern, efficient air conditioner not only keeps your home at the perfect temperature but also ensures you can enjoy hot days without worrying about your system struggling. On average, replacing an air conditioner in a mid-sized Canadian home costs between$3,500 to $8,500, depending on the type of system and installation requirements.

Renovations can be expensive, and it’s common to feel overwhelmed by the long list of updates you’d like to prioritize. With the CHIP Reverse Mortgage by HomeEquity Bank, these dream projects can become a reality. If you’re 55 or older, you can unlock up to 55% of your home’s equity in tax-free cash, with no monthly mortgage payments required, giving you the funds to complete transformative renovations just in time for spring.

Contact your Dominion Lending Centres mortgage expert to learn more about how the CHIP Reverse Mortgage can help fund your renovations without affecting your savings or monthly budget.

*Please note that all the numbers listed above are estimates and have been sourced from numerous websites. These figures are approximate as they may vary depending on different factors including province, time, market conditions, as well as regulations or policies. *

Written by my Marketing Team