18 Jan

Canada Housing Market BMO’s 2.99% Mortgage No BOC Rate Change


Posted by: Gerry Gillan

Flaherty keeping wary eye on housing market

 Finance Minister Jim Flaherty says he stands ready to intervene in the housing market again, just as a mortgage price war breaks out among Canada’s major banks.

 Flaherty said Tuesday that he’s watching the market closely, although he has no plans to tighten the market again at this point.

 His comments came on the same day that the Bank of Canada projected that the debt burden on households will continue to rise – a troubling sign that means stretched consumers are vulnerable to shocks in this climate of heightened economic uncertainty.

 Flaherty said he’s in close contact with the big banks, most of whom are now offering 2.99% fixed-rate mortgages – the lowest ever.

 Click here for the full Globe and Mail article.

 Is a 2.99% mortgage too good to be true?

 Bank of Montreal made headlines with the 2.99% five-year fixed-rate mortgage it unveiled last week.

Most of the other big banks have followed suit, but before signing on the dotted line you should read the fine print. These mortgages have restrictions that you won’t find on other products.

“It’s the lowest rate available but I would only recommend it to people who are very sure of their circumstances for the next five years,” said Kerri-Lynn McAllister of RateHub.ca, a website that compares mortgage rates. “You may want to look at a slightly higher rate that offers all the flexibility of a standard mortgage.”

BMO says this mortgage offers Canadians a way to be mortgage-free faster because it offers a great rate and a shorter amortization. But it differs from a typical mortgage in several ways.

 Click here for the full article in The Star.

 No BoC Rate Change for 16th Straight Month

 Canada’s key interest rate will begin 2012 exactly where it’s been since September 2010 – unchanged at 1.00%.

 This is the longest stretch on record (16 months) without a Bank of Canada rate change.

 Economists didn’t expect the BOC to move rates at this meeting. Instead, they were looking for any change of language in the Bank’s official statement. As usual, there were a handful of conspicuous statements in that release.

 Click here for BOC highlights from CanadianMortgageTrends.com.

 CIBC class action attracts hundreds of inquiries

 Lawyers spearheading twin class-action suits against CIBC over “vague prepayment terms” have fielded interest from hundreds of the bank’s mortgage clients – that as a case management judge in BC gets assigned to the legal action.

“There have been hundreds of inquiries about these cases to our office and that of our co-counsel in Ontario,” Kieran Bridge, a Vancouver lawyer with the Construction Law Group, told MortgageBrokerNews.ca, pointing to borrowers who paid out CIBC mortgages from April 2005 onward.

 FirstLine clients are among those concerned that they may have been adversely affected by the lender’s prepayment policy.

A Case Management Judge has also been assigned, what Bridge calls a key, mandatory step in moving class actions forward in British Columbia. “We applied in November for a judge to be appointed, in order to move the case ahead, and are pleased this has happened,” he said.

The twin lawsuits were filed in BC and Ontario last October, alleging some CIBC mortgage borrowers have been unfairly penalized by unclear prepayment terms giving rise to two substantive complaints.

 Click here to read more from MortgageBrokerNews.ca.

 We had a recession back in 2008-09, but you might not have known it by the way people kept spending and borrowing.

 Rob Carrick’s top 10 money tips

 Now, the economy is growing modestly, and yet a recent national poll has suggested that 70% of Canadians believe the country is in recession.

 This is progress. You’re much more likely to have your financial priorities straight if you’re worried right now about the future.

 Click here for 10 money rules to prepare you for any tough times ahead from the Globe and Mail.

 Canada ranks near bottom on Economist’s ‘Misery Index’

 Canadians rank relatively low on The Economist magazine’s Misery Index released this week, which is a good thing.

 Canada stands at number 70, out of 92 countries measured on a combination of unemployment and inflation.

 The jobless rate in Canada is now at 7.5%, high but nowhere near as high as other countries, while inflation is running at 2.9%.

 Macedonia, whose unemployment rate tops 30%, and Venezuela, where inflation is rampant, top the list.

 Click here to read more from the Globe and Mail.

12 Jan

Recession Or Not? No Rate Hikes In Sight!


Posted by: Gerry Gillan

Canadians think we’re in a recession, but economists don’t

 A surprising majority of Canadians – 70% of them – say the country is in the middle of an economic recession, even though economists will tell you Canada hasn’t been in one since 2009, and is nowhere close.

 The results, from a new online survey sponsored by the Economic Club of Canada and conducted by Pollara Strategic Insights, highlight a growing disconnect between how financial professionals quantify and measure the health of the economy, and how Canadians feel about their every day prospects.

 Michael Marzolini, chairman of Pollara, called the results the most pessimistic in 16 years.

 “Canadians are more self-centred. They believe themselves under siege,” he said at a breakfast presentation hosted by the Economic Club in Toronto that included top economists from Canada’s Big Five banks.

 Click here for more details from the Financial Post.

 No BoC rate hike until Q1 2013: poll

 A deteriorating European economy and weak global growth will keep the Bank of Canada from raising rates for at least another year, though an interest rate cut looks highly unlikely, according to a Reuters survey.

 The Reuters poll of 41 economists and strategists released on Tuesday showed the median forecast for the next interest rate hike was pushed back by three months to the first quarter of 2013 from the fourth quarter of 2012 projected in a November poll. The Bank of Canada’s target for the overnight rate – its main policy rate – has been at 1% for more than a year.

 “The longer we spend struggling with slower growth and the longer we go without the Europeans coming to some cohesive policy solution, the worse the economic drag will be,” said David Tulk, Chief Canada Macro Strategist at TD Securities.

 “You get the sense that growth I think is likely to remain lower for longer, just like interest rates.”

 Click here for the full Financial Post article.

 Debt still rising, but Canadians better at paying credit cards: Equifax

 Canadians are paying off more of their credit card debt as they cope with a weaker economy and some restrictions on credit expansion.

 The latest national credit trends report from Equifax Canada, released early Tuesday, says the average credit card debt fell in 2011 by 3.4%.

 Despite that improvement and a reduction in consumer bankruptcies last year, overall debt continues to rise – though much more slowly than before.

 “The only product that has shown a reduction in balances over the course of 2011 are credit cards,” says Nadim Abdo, Vice President of Consulting and Analytical Services for Equifax Canada. “That in large part is due to changes in legislation and some restrictions placed on credit card issuers.”

 Click here to read more from the Globe and Mail.

 The Tradeoff With Big Prepayment Privileges

 Most decent mortgages come with at least 10% lump-sum prepayment privileges.

 Since the average mortgage is about $151,000, that means the typical borrower can prepay at least $15,000 per year in lump sum(s) with no penalty.

 The thing is, most Canadians don’t come close to paying 10% extra on their mortgage over the course of a year. In fact, only 17% of mortgage holders made any lump-sum prepayments at all in 2011. Those who did likely prepaid an average of ~7.8% of their mortgage balance over the course of the year.

 It’s therefore safe to say that most people will never max out their prepayment privileges.

 Click here for the full CanadianMortgageTrends.com article.

 Know your rights when you share a property

 If you buy a home with your spouse or another person this year, you’ll have to decide how to take title together. It can be either as a joint tenancy or tenancy in common. It’s important that you first understand the main difference between these two options before making your decision.

 In a tenancy in common, if one of the owners passes away, they can leave their share of the property to anyone they choose. But, in a joint tenancy, there’s a principle called survivorship. What this means is that if two owners are joint tenants and one dies, their share automatically passes to the surviving joint tenant upon death. They cannot leave it to anyone else in their will.

 There are some tax advantages in holding property as joint tenants as it can reduce estate taxes. David Ramnarine and his common law partner, Meera Ragoo, bought a home together at 840 Eighth Street in Mississauga in September 2007 and took title as joint tenants. David passed away in July 2010. His share of the home automatically transferred to Meera, by the principal of survivorship.

 But, his mother, Joyce Ramnarine, produced an agreement that was apparently signed by David in 2009, where he said that he was holding all of his property in trust for his mother. Joyce claimed that this agreement broke the joint tenancy, since it proved that David never intended to hold the property solely with Meera. Meera claimed that she never was told about the agreement – it was only produced after David passed away and that the signature was a forgery. The agreement was never registered against title to the property.

 Click here to read more in The Star.

 Reverse mortgages hit record high

 Canadians looking for sources of cash in their retirement are tapping into reverse home mortgages in record numbers, according to data released this week.

 The parent company of HomEquity Bank, the country’s sole provider of reverse mortgages, said that in the fourth quarter of 2011 it closed a record number of reverse mortgages worth $67.2 million. That’s up 42% from the fourth quarter of 2010.

 On an annual basis, the value of reverse mortgages reached $239 million last year – a 16% rise over the previous record set in 2010.

 “Since its inception 25 years ago, HOMEQ Corporation has analyzed the demographic wave of Canadian seniors and how our business can address these trends,” Steven Ranson, the company’s President and CEO, said in a release. “Now, the wave is here and we are meeting seniors’ needs for improved cash flow in retirement. This tremendous market demand is fuelling our strong growth in originations, while our disciplined approach to operating the business is resulting in healthy net income growth.”

 Click here for more details in the Globe and Mail.

 RRSP Loans vs Cash Back Mortgages

 The deadline for making a 2011 RRSP contribution is February 29th, 2012.

 Making that contribution can save you anywhere from hundreds in taxes to more than $10,000 depending on your province and tax bracket. Plus, you’ll enjoy the tax-deferred long-term growth of that investment while it sits in your RRSP.

 The challenge for some, however, is not having enough money to make an RRSP contribution. According to Investors Group, 58% of those not investing in an RRSP say it’s because they don’t have the funds.

 One possible solution if you’re cash strapped is an RRSP loan. Another is a cash back mortgage.

 Click here to see CanadianMortgageTrends.com’s list of pros and cons for both options.

 How dangerous are lines of credit?

 The Globe and Mail’s Rob Carrick recently sat down with The Wealthy Barber author David Chilton to discuss the dangers of lines of credit.

 Click here to view the Globe and Mail’s short video interview.