23 May

OECD Calling For Higher Rates – Wellbeing of Canadians – Mortgage Flexibility


Posted by: Gerry Gillan

Canada ranks high in housing, safety and life satisfaction, OECD says

By any measure – health, education, housing or income – Canadians are far better off than residents of the developing world.

 But they’re also better off than many of the planet’s richest countries, according to the Organization for Economic Co-operation and Development’s latest quality-of-life assessment, released yesterday.

 In a comparison of 11 wellbeing indicators in 36 countries, Canada placed sixth, behind top-ranking Australia and third-place US. Norway, Sweden and Denmark also finished ahead of Canada. (The country ranked second in 2011, but the OECD’s Better Life Index has changed slightly since its inaugural year.)

 The OECD’s thinking on well being has been evolving. Better known for its emphasis on countries’ gross domestic product, income and employment rates, the Paris-based organization began nearly a decade ago creating a quality-of-life barometer that would take a broader look at what makes people healthy and happy. It quickly found out that money isn’t everything, noted Anthony Gooch, the organization’s Director of Public Affairs and Communication.

 Click here for the full Globe and Mail article.

  Mortgage brokers warn about new refinancing rules


The brokers are concerned about a number of the potential rules, but the one that worries them most outlines what banks would have to do when a consumer wants to renew or refinance their mortgage.

 The proposed rules suggest that banks recheck areas such as employment status, current income and the current value of the home for renewals and refinancing.

 “This would be a significant, significant change,” says Jim Murphy, the head of the Canadian Association of Accredited Mortgage Professionals (CAAMP).

 Click here for complete details in the Globe and Mail.

 OECD urges Canada to raise rates

 An influential international body is urging Canada’s central bank to raise interest rates in the fall, and continue doing so through 2013 to cool housing prices and contain inflation.

 The Paris-based Organization for Economic Co-operation and Development’s prescription for monetary policy will stoke the already hot debate about whether the Bank of Canada’s interest rate stance is inflating a housing bubble.

 Governor Mark Carney and other officials say the days of ultra-cheap money are coming to an end, although they so far have declined to be more specific. The OECD, a high-powered economic research group backed by contributions from its 34 rich country members, offers a scenario: An increase in the benchmark rate of a quarter of a percentage point in the autumn, and similar increases each quarter through to the end of next year, leaving the benchmark overnight target at 2.25%.

 That still would be low by historical standards, yet, according to the OECD, likely a big enough increase to cause prospective homeowners to think twice before buying at current inflated prices. But the OECD’s recommendation comes with a risk.

 Click here for more in the Globe and Mail.

 What is mortgage flexibility worth?

 Fortunately, most folks don’t need a souped-up mortgage. They just need the right combination of options at a low rate.

 In the quest for cost savings, things like refinance flexibility and prepayment privileges are often sacrificed for a cheaper rate. This is especially common when people can’t quantify how much a mortgage feature could save them.

 But mathematically speaking, it is possible to estimate the benefit of mortgage flexibility. You can then decide if it’s worth paying for. It just takes some reasonable assumptions and a bit of light math.

 In that spirit, the Globe and Mail offers some general estimates of what different mortgage features are “worth” – how much extra a “typical” borrower should be willing to pay for a feature, in the form of a higher interest rate.

 Click here for the full Globe and Mail article.

4 Apr

Rate Hike Worries – Self Employed Applications


Posted by: Gerry Gillan

Interest rate hike worries 4-in-10 homeowners

 Four-in-10 Canadians would be unsure about whether they could afford their homes if their mortgage rate went up by as little as two percentage points, according to a new study from the Bank of Montreal.

 The survey, compiled for BMO by Leger Marketing, found 43% believe an increase – to 5% from 3%, for example – would either hamper their ability to pay or leave them on unsure footing.

 The survey was conducted February 21st to 23rd – two weeks before BMO sparked a round of special rate reductions among Canadian banks. The survey’s results were announced a day before the five-year special rate ended last Wednesday.

 BMO’s special dropped the five-year rate by half a percentage point to 2.99% from 3.49% and other banks followed.

 Click here for the Canadian Business article.

  2012 federal budget highlights

  The budget came down last week with positive news for our industry, as Finance Minister Jim Flaherty did not announce any changes to down payment requirements or maximum amortizations.

 Click here to read the 2012 federal budget highlights from Canada.com.

Stated income just as good as T4: experts

It’s not that you’re a second-class citizen when applying for a mortgage if you don’t have a T4 slip. But the banks may start taking a closer look at your finances.

 Stated-income customers, or the self-employed, who don’t come to their bank officer with something as simple as a government tax form with their income on it seem to be in crosshairs of the industry.

 One bank insider said financial institutions have not been dealing with people’s declared income “because nobody believes it. They look at their behaviour and put more weight on that. They look at how you transfer money, pay your bills and generally how you conduct your life.”

 The source said any changes could “become a bigger deal for them.”

 Click here for more from the Financial Post.

 Collateral mortgages: Why banks like them

 If you’re buying a house and are shopping for a mortgage this spring you may come across something called a collateral mortgage. This home financing tool has been around for a while, but mainly in the background.

 Now it’s going mainstream with both TD Canada Trust and ING Direct abandoning the conventional mortgage in favour of this type of financing exclusively. Other big banks make collateral mortgages available, but for now offer both kinds.

 Many consumers hunting for a mortgage would be hard pressed to explain the difference between the two, but here it is: With a conventional mortgage, you and your lender agree on how much you can borrow, the length of the term and the interest rate. As an example, say the house you’re buying is worth $200,000. With 20% down you would borrow $160,000. You might select a fixed-rate, five-year term, which this week is between 3% and 4%.

 With a collateral mortgage, you still have an agreed interest rate and term, but the bank registers a charge of up to 125% the value of your home, provided you have at least 20% equity in it. In this example the charge would be $200,000 plus up to another $50,000. That’s because a collateral agreement assumes you’ll want to borrow more in the future and so makes this extra amount available now. As long as you maintain 20% equity in your home, you borrow up to 80% of its value.

 Click here to read more from The Star.

14 Mar

Penalties May Be Tax Deductible – Latest On Boc


Posted by: Gerry Gillan

BMO 2.99% Possibly Not So Attractive

 Brokers may ultimately have to thank RBC for shooting holes in BMO’s 2.99% – the biggest of Canada’s big banks running ads critical of the no-frills mortgage.

 “What good is a low rate mortgage without the frills?” asks an RBC full-pager running in a national daily. “Switch to RBC Royal Bank and get a 2.99% fixed-rate mortgage with all the frills.”

 Aside from that last bit – the plug for RBC’s four-year fixed – the message amplifies the one mortgage brokers have struggled to get out to consumers.

 They’ve used it to retain clients looking for BMO’s same rock-bottom rate, but unaware of the even lower prepayment privileges and the restrictive 25-year amortization.

 Click here to read more from MortgageBrokerNews.ca.

 BoC turning hawkish? What the analysts say

 The Bank of Canada kept its benchmark interest rate at a record low last Thursday, but surprised with slightly cheerier commentary that has economists wondering whether the central bank has brightened up enough to entertain a rate hike sooner rather than later.

 Mark Carney, Governor of the Bank of Canada, highlighted an improving near-term outlook in pretty much every category of concern in his January rate decision, including the European credit crisis, the US economic recovery, global financial markets and the health of the Canadian economy.

 “The heightened uncertainty around the global economic outlook has decreased in the weeks since the Bank released its January monetary policy report (MPR),” the bank said in a release explaining its rate decision. “Recent developments suggest that the outlook for the Canadian economy is marginally improved from the January MPR.”

 Carney said the economy will likely grow faster than forecast in the first quarter due to temporary factors, but underlying momentum still points to an expected year of middling growth.

 Click here for full details from the Financial Post.

 Flaherty says no ‘draconian’ measures coming in budget

The coming 2012 federal budget won’t include any “draconian” measures because Canada is in a better fiscal position than many other nations, Finance Minister Jim Flaherty said.

 Flaherty was speaking to reporters in Ottawa after meeting with economists to solicit their opinions on a number of economic issues ahead of the budget.

 He gave scant details about the 2012 federal budget, due to be released on March 29th.

 “The government of Canada is in a relatively good fiscal situation, so we don’t need to be draconian. We’re not the government of the United Kingdom, we’re not in a situation thank goodness like Greece and Portugal and some other countries,” Flaherty said.

 Click here for the CTV News article.

 Your mortgage penalty may be tax deductible

 There’s one piece of good news about mortgage prepayment penalties: The cost of the penalty can be used as a tax deduction if you’re breaking your mortgage to move 40 km or more to be closer to work.

 The Canada Revenue Agency has a provision that allows you to deduct the costs of moving if you’re doing so for a job or for full-time study at a university, college or other type of course at a post-secondary level.

 You can claim other costs associated with selling your old residence as well: advertising, notary or legal fees, real estate commission as well as that dratted mortgage penalty “when the mortgage is paid off before maturity.”

 Keep the receipts and fill out form T1-M Moving Expenses Deduction. For tax purposes, the mortgage penalties get lumped under “other selling costs, specify” on Line 16 of the T1-M form.

 Click here to read more from The Star.



22 Feb

First Time Buyer Tax Break – Home Prices Stable, Harder Qualification – Hottest Investor Market


Posted by: Gerry Gillan

Builders welcome tax credit for first-time homebuyers

 A new BC tax break for first-time buyers of new homes will help stimulate the construction industry and create plenty of new jobs, an industry executive said of Tuesday’s 2012 provincial budget.

 “This is welcome,” Greater Vancouver Home Builders’ Association President and CEO Peter Simpson said of a temporary bonus for first-time homebuyers that will be effective until March 31st, 2013, and is worth up to $10,000.

 “They have a difficult time getting into the market and typically get assistance from the bank of Mom and Dad. So this helps property virgins get on the first rung of homeownership and helps stimulate construction.

 “For every home start, there are approximately three full-time jobs each year.”

 Click here for more from the Vancouver Sun.

 It will be tougher to get a mortgage in future, survey of economists predicts

 The federal government will make it tougher for many homebuyers to get mortgages this year as it grapples with an overheated property market, according to analysts in a Reuters poll, who also ruled out the prospect that prices could suddenly crash.

 Ten of 14 economists and strategists surveyed last week in Reuters’ first poll on the Canadian housing sector answered “yes” when asked if they thought Ottawa would tighten mortgage rules within the next 12 months.

 They expect home prices to climb just 0.1% in the year to December 2012, and the same in 2013. That is down from a 0.9% year-on-year increase in December 2011.

 If Finance Minister Jim Flaherty tightens requirements for government-backed insured mortgages, it would be his fourth intervention in the real estate market since 2008.

 Click here for the full Vancouver Sun story.

Bank report reveals hottest investor markets

 A new report on varying provincial fortunes hints at where to make that next real estate investment. Psst, there’s oil there.

 “Strength in the energy sector has rekindled in-migration and helped firm up the labour market,” writes Economist Robert Kavcic, touching on Alberta in the new edition of the BMO Blue Book. “With the recent growth spurt, measures of cost pressure and capacity constraints are picking up, but remain far from the extremes of the last boom.”

 The guide, which digests employment, manufacturing and other commercial activity stats for each province in order to develop a snapshot of local economies, appears just as bullish on Saskatchewan and, to a lesser extent, Newfoundland & Labrador, which led the country last year with its 3.8% growth in real GDP.

 While acceleration is expected to slow this year as investment levels off and oil production dips, both Alberta and its neighbour to the east are expected to lead this year’s GDP growth with 3.0% and 2.9% increases, respectively.

 Click here to read the Canadian Real Estate Wealth article

Paying off your mortgage early can cost you

 Paying off your mortgage early seems like great financial planning since you’re freeing up money that can be put towards savings.

 But discharging a mortgage early can mean a prepayment penalty because the bank loses money. If you had a two-year term and paid the mortgage in full after 16 months, the bank is out eight months of interest. They charge the difference so they don’t lose out. The closer you are to the end of the mortgage, the smaller the penalty, but it’s money out of your pocket.

For those lucky enough to be near the end of their mortgages and ready to hold a mortgage burning party, they need to keep an eye on the mortgage statement that shows the principal/interest mix if they want to avoid penalties. This is particularly true for those with a variable rate.

 People with variable mortgages pay fixed amounts, but the amount going towards principal and interest fluctuates depending on prime. If the prime rate decreases, more of the payment goes to the principal and less to interest. While decreasing principal is great, you’ll be hit with a penalty if the mortgage ends before the term does because the bank loses interest payments.

 Click here for more in The Star.

 Mortgage fraud on the rise

  Consumer credit company Equifax uncovered roughly $400 million worth of mortgage fraud in Canada last year, an “eye opening” number industry experts estimate represents only a fraction of the cheating taking place in the country’s real estate market.

 Atlanta-based Equifax says many financial institutions are tightening lending and, as a result, deceit in the property market is rising. A report the company released Tuesday says two-thirds of all the fraud it sniffed out last year was related to real estate.

 “Mortgages are the biggest bang for the buck,” said John Russo, Vice President and legal counsel for Equifax Canada Inc. “So when credit gets tougher to get, that leads to more people falsifying documents, giving false pay stubs, inflating their income, kind of fudging things to get a home.”

 The $400 million in mortgage fraud represents only a sliver of the roughly $1 trillion in total residential mortgage credit outstanding at the moment in Canada. But it rose sharply in 2011 from 2010 in dollar terms, increasing 150%, Equifax data suggests.

 Click here to read the full Financial Post article.

1 Feb

No Housing Crash for Canada…CMHC Insurance Limits


Posted by: Gerry Gillan

Bankers and Brokers may be in agreement

 A new survey suggests Canadian bankers may be less concerned about mortgage credit risk than they were two years ago or, indeed, the government is now, given speculation it will again tinker with the country’s mortgage rules.

 While credit risk topped the list of concerns for Canadian bankers participating in the 2010 Banking Banana Skins survey – produced by the Centre for the Study of Financial Innovation in association with PwC – it fell to fifth place in this year’s polling.

 More pressing concerns for Canadian respondents were macro-economic risk, liquidity and regulation, with the availability of capital also moving up ahead of any risk associated with their mortgage and consumer loan portfolios.

 The survey results lend support to brokers and others who continue to challenge the need for additional tightening of mortgage rules.

 Click here for more from MortgageBrokerNews.ca.

 No housing crash for Canada: BMO

 Canada will likely avoid a crash or serious correction in its “somewhat pricey” housing market, with the possible exception of Vancouver, says a new paper from Bank of Montreal.

 The analysis by BMO economists suggests alarms about Canada’s housing market by international observers, from the International Monetary Fund to The Economist magazine, are exaggerated or simplistic.

 “The main takeaway is that the national housing market appears somewhat pricey, but is far removed from a bubble,” said Economists Sherry Cooper and Sal Guatieri in the report released Monday.

 “In our view, the [market] is more like a balloon than a bubble. While bubbles always burst, a balloon often deflates slowly in the absence of a ‘pin’.”

 Click here for the full Globe and Mail article.

 CMHC Insurance Limits: A Wake-up Call for Lenders

 Many have now seen this Financial Post article – CMHC Backing Fewer Loans.

 The gist of it: CMHC is approaching its $600 billion government-imposed limit on issuing mortgage default insurance. That’s happening largely because of lenders’ enormous appetite for something called portfolio insurance (aka, “bulk insurance”).

 No one fully grasps the repercussions yet, but our sense is that the news is not great (at least in the short-to-medium term) for mortgage consumers, smaller lenders and brokers.

 On the other hand, it may be healthy long-term for the housing market. Click here to find out why from CanadianMortgageTrends.com.

 Don’t take an RRSP loan, unless…

 Despite promises of stellar long-term growth and the dangling carrot of big, fat refunds, people are finally figuring out that the only beneficiary of an RRSP loan is the lender, unless…

 1. You’re in the highest tax bracket AND

2. You can pay off the loan within one year AND

3. You’ll still be able to make the current’s year RRSP contribution
    from your cash flow

 Click here to read more from MoneySense.



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.

22 Dec

Realistic and Doable Financial Resolutions…Thinking of Co-habitating?…..No More Discounts On Variable Rates


Posted by: Gerry Gillan

Best Wishes For A Merry Christmas and a

Happy Healthy New Year To All!

Variable rate mortgage discounts disappearing

 The days of getting any sort of discount on a variable-rate mortgage are over – again.

 Those mortgages, tied to prime, have become a mainstay of the housing market. And, why not? While prime has stood at 3% at most major financial institutions, the discount has meant a rate as low as 2.1% at times this year.

 But in the last 10 days, what was left of that discount – it had already been shrinking for weeks – has disappeared at all of the major banks.

 You have to head back to the credit crisis of 2008 to find a similar period where the discount disappeared. At the time, consumers were paying a 100 basis point premium above prime for the privilege of a floating rate.

 Click here to read more in the Financial Post.

 What should your financial goal be for 2012?  Get that debt to zero!

 Canadians are more indebted than ever before, leaving themselves in a vulnerable financial situation.

 The Globe and Mail’s Rob Carrick says that’s exactly why Canadians need to make 2012 the year they pay down their debts. He suggests that those with mega credit lines and big credit card balances forego contributing to their RRSP or TFSA in order to wrestle with their debts – before our low interest rates begin to rise.

 Click here to read the results of a talk Carrick had with readers during an online discussion December 15th about ways to wrestle down debt in 2012.

Financial resolutions that you can keep

 Our New Year’s resolutions tend to focus on health and wealth.

 And while it’s easy to jot them down and share them confidently this holiday season, how many of us will actually arrive at next year’s party svelte with savings in the bank? Apparently, we’ll have a lot more stick-to-itiveness to see our goals to completion if they’re in line with the realities our decade is currently facing.

 As you start to draft your list, and envision how you would like 2012 to look, click here to consider a few suggested goals from the Globe and Mail.

 Ready to co-habit? Call lender, lawyer

 Moving in with a partner, whether you’re married or not, can be a major step for some and a natural progression for others.

 It becomes more complex if your partner already owns a home, and you move in – you’ll have to decide whether to become joint owners of the property and how mortgage and living expenses will be split.

 “The title transfer itself is a pretty basic process – a deed is done from the current owner over to the current owner and the new partner,” says J Alan Hodgson, a barrister and solicitor in Toronto.

But he adds that “there are pretty serious implications that can come up in relation to that type of transfer.”

 If the house has a mortgage, the lender will have an interest in any change in ownership. “Anytime you do a transfer of title… if there is a mortgage on the property [it usually requires] that the bank consent to that transfer,” Hodgson says.

 Click here for the full National Post article.



26 Oct

Is It TIme To Lock Into A Fixed Rate? Protect Yourself From Credit Card Fraud


Posted by: Gerry Gillan

Mark Carney sees more than a year of soft growth

The deteriorating global picture is turning what had been a soft patch for Canada’s export-heavy economy into more than a year of sluggish growth, the Bank of Canada said today in a new quarterly forecast.

 A day after leaving their benchmark interest rate at 1% for a ninth consecutive meeting, Bank of Canada Governor Mark Carney and his officials fleshed out why they believe the economy will perform below its potential until 2013, and why they’re unfazed by hotter-than-expected inflation in recent months.

 Plus, although the central bank sees things improving within two years, policymakers again stressed that a failure to contain the European debt crisis could mean an even bleaker few months ahead.

 “The economic outlook in Canada has weakened, reflecting the substantially downgraded outlook for the global economy,” Carney and his policy team said today in their Monetary Policy Report.

 Click here to read more in the Globe and Mail.

 Is it time to lock into a fixed-rate mortgage?

 It’s one of the most agonizing decisions homeowners make: Do you go fixed or variable? Mortgage, that is.

 The decision could end up costing – or saving – big bucks on what is often the single biggest purchase many will make. Research shows that, in the past, a variable-rate mortgage has been cheaper than a fixed-rate one.

 But today’s market is different from decades past in two big ways.

 “The spread between fixed and variable rates is extremely low by historical standards. Moreover, we can no longer rely on a long-term down-trend in rates,” said Robert McLister, a Vancouver-based mortgage planner and editor of the CanadianMortgageTrends.com blog. “Given all that, the historical advantage of variable is less applicable today.”

 It can be confusing for homeowners. Both interest and short-term mortgage rates are sitting at rock-bottom lows. But inflation is the wild card here. Statistics Canada reported on Friday that the core inflation rate has climbed to 2.2% – its highest level in nearly three years.

 Click here for the full Globe and Mail article.

 B.C. lawyer tackles CIBC over mortgages

 You just made the largest purchase of your life based on borrowing more than you ever have before. Are you really going to bother reading that 25-page contract with all the rules on your mortgage?

 The answer is usually no. The truth is you should.

 The ambiguity in mortgage contracts has landed more than one consumer in trouble they didn’t anticipate and now it has spawned a class-action lawsuit against one of Canada’s largest banks.

 Kieran Bridge, a Vancouver-based lawyer with the Construction Law Group, has filed a lawsuit against CIBC over what he describes as vague language over early payment of mortgages. The suit was filed in British Columbia and Ontario this month.

 Click here for the full Financial Post article.

 Video: How to protect yourself from credit card fraud

The Globe and Mail’s Rob Carrick takes a look at how you can protect yourself from ATM and credit card fraud.

 Click here to view the Globe and Mail video.




14 Apr

News from Gerry!!


Posted by: Gerry Gillan

Industry News….


BOC ups growth, stands pat on rates


The Bank of Canada boosted its growth forecast Tuesday but threw a curve ball at Bay Street expectations for a July interest-rate hike by warning the “persistent strength” in the loonie could cause even greater headwinds for the economy.

While some analysts still expect the central bank to start raising rates in July after leaving them unchanged on Tuesday at 1%, others said the statement indicated the bank is in no hurry and could wait until the fall at the earliest.

“It will be difficult to pin down when the next hike will be when you have a central bank that takes the currency into account when making its policy decision,” said Avery Shenfeld, Chief Economist at CIBC World Markets. “And we have a currency that’s volatile right now.”

Shenfeld said the central bank would prefer a “softer currency” before it opts to raise rates again. He added that could unfold in July if commodity prices take a breather.

Click here for the full Financial Post article.


Canadians under 35 most intent on buying homes: survey


Canadians younger than 35 are most intent on buying a home over the next two years, according to a survey released Thursday.

But most of those in this age group, which included people 18 to 34, indicated in the Royal Bank of Canada’s annual home-ownership survey that it would be better to wait until next year to make a purchase.

Fifty-five per cent of respondents in this age category said it makes sense to wait until next year before buying a home, compared to 45% of overall respondents who felt this way.

“In a more balanced housing market, it makes sense that younger and first-time homebuyers are waiting to assess all of their options and do their research before buying a home,” said Bernice Dunsby, RBC’s director of home equity. “It’s also important to get expert advice on what you can afford and leave yourself with a little extra wiggle room in your budget so you don’t become house poor, as home maintenance and lifestyle costs can add up.” 

Click here to read more from the Vancouver Sun.

Click here to read more about the RBC poll results.


 Home values continue to rise, according to Royal LePage


The latest Royal LePage House Price Survey showed the average price of a home in Canada increased between 3.5 and 4.3% in the first quarter of 2011, compared to the previous year, as markets continued their post-recession recovery. 

While the rate of year-over-year price appreciation slowed slightly in the first quarter, home values continued the upward climb, which first began late in the second quarter of 2009.

Low interest rates and a recovering economy continued to fuel activity in Canada’s housing markets over the past year, which has led to country-wide increases in average home prices. In the first quarter of 2011, the national average price of a detached bungalow rose 4.3% year-over-year to $341,355, while standard two-storey homes rose 3.5% to $379,388, and standard condominiums rose 4% to $237,919.

“The rate at which Canadian homes are appreciating may well have peaked for the next year or so,” said Phil Soper, President and Chief Executive of Royal LePage Real Estate Services. “We expect house prices will continue to creep up, but most of the excess demand created by the initial drop in interest rates has been satisfied, and affordability continues to erode slowly, allowing the listings supply to catch up. In most markets, lower single digit percentage increases are more likely for the balance of the year.”