Some Canadians have amassed significant savings since the onset of the COVID-19 pandemic. From eating at home to avoiding travel, households are estimated to have saved over 170 billion dollars in excess of cash. What to do with this extra money?
For many homeowners, it is time to think about their top financial priorities. Are you focusing on paying off your mortgage or speeding up your investment for retirement?
“There is no right or wrong answer,” says Dan Hallett, vice president of research at HighView Financial Group, an investment consulting firm. On the one hand, interest rates are at an all-time low of about two percent, which means that now is a good time to accelerate home payments. But stocks rallied rapidly and stock markets surpassed their pre-pandemic levels significantly, so expanding your investment portfolio might not be such a bad idea either.
Everyone’s financial situation is different, but now is a good time to start paying off your mortgage, Hallett says. “If your mortgage is too big and it looks like it will take some time to pay off, you might want to invest here given the low interest rates.”
Meanwhile, future returns on financial assets, which typically hover in the five or six percent range, could be lower in the coming years, he says.
“The future income will be decent, but it will certainly be more modest.”