Premiere Mortgage Centre NewsWrap

Why Mark Carney’s speaking to more than you and your neighbour

2010-12-20T05:49:00.000-08:00

Mark Carney rarely speaks without a clear purpose.

So when he warned ominously that Canadians have too much debt and need to change their behaviour, who was he talking to?

You and your neighbour? Not really.

Imagine you’re shopping for a house in Vancouver – the country’s most overheated real estate market. The average house price is $660,000. You figure out what cash you have available for a down payment, look at your monthly disposable income, shop around for the best interest rate, and then you figure out what you can afford.

Maybe you plunk down $165,000, and take out a 25-year mortgage for the rest at an annual interest rate of 4 per cent. Your monthly payment would be $2,612.

It’s doubtful you’d look to the central bank Governor for sage advice. Your father, maybe, but not Uncle Mark.

Idiot Sales Techniques

2010-11-19T06:03:00.000-08:00

We've all seen them - the idiot sales people with the repetitive yet non-informative sales pitch, wasting our time while trying to be your best friend.

No one in their right mind does business with them so why are they still around?

Here's a little humor to spice up your Friday!

Taming a Line of Credit

2010-11-05T10:09:00.000-07:00

In September 2010, Anya met with her banker to collapse her home equity credit line (HELOC) and roll it into a refinanced fixed low-rate mortgage.

She explained she wasn’t getting ahead because it was too easy to dip into the credit line. “But, you’ll be thankful for it when it comes time to renovate,” the bank responded.

Frustrated that they were encouraging her to carry revolving credit, Anya contacted an independent mortgage broker who consolidated her credit line and secured a low-interest, fixed-rate five-year mortgage resulting in savings of over $6,000. She’ll be mortgage-free in ten years.

First home likely to be lofty affair

2010-11-03T09:11:00.000-07:00

The dream of home ownership is no longer pie-in-the sky, it's just up in the air. Literally.

The crux of a Re/Max Ontario-Atlantic Canada report released this week reveals Canadians have stopped dreaming of "white picket fences" and are now focused on "funky loft apartments."

But even the real estate company had to admit in its press release that this desire to live in condominiums is principally being driven by the fact that's all many people can afford the first time they dip their toes into the housing market.

House price or interest rate: Which is more important?

2010-10-20T08:21:00.000-07:00

Two housing market shifts encourage potential homebuyers to call real estate agents: drops in housing prices and low interest rates. But deciding which factor is more important than the other can make a difference in monthly payments, the ability to move if your home value drops and HOA fees.

Monthly payment

Let's say you started the home search process when interest rates were 7 per cent. You saw a one-bedroom condo for sale for $100,000. You calculated your 30-year monthly mortgage payment on $80,000 – the amount you are mortgaging after a 20-per-cent down payment and your closing costs. Your monthly payment would be $532. You decide you don't like this payment and rate, so you wait six months and the interest rate drops to 5 per cent. However, a condo in the neighborhood you want now averages $120,000. You put down 20 per cent plus closing costs, and you are left with a mortgage amount of $96,000. Your monthly payment on a 30-year mortgage is $515. Your payment dropped by $17.

But does a payment drop financially make up for the higher down payment? Factoring in that your down payment was $4,000 more, you still save about $5 to $6 per month - around $2,100 of savings over the course of 30 years. If real estate prices never rose in your perspective neighbourhood from the $100,000 price point you started your search with - and you snagged a 5-per-cent interest rate - your mortgage would be $430. However, the volatility of housing prices and interest rates cannot be accurately predicted to move in your favour.

Down payment

Regardless of your interest rate on a lower-priced home, you can get into a home with less money. In the example of the condo that rose from $100,000 to $120,000, your monthly payment dropped. But would the lower payment help you if you didn't have an extra $4,000 for a larger down payment? The down payment amount difference could eliminate the possibility of buying the home you want, or knocking you out of the buyer's market altogether if you can't find a cheaper neighbourhood.

Plus, the extra $4,000 can affect your ability to pay for unexpected home repairs, your emergency savings and ability to afford to furnish your new home.

Mortgage rates remain home buyer friendly

2010-10-19T06:09:00.000-07:00

Each month, homebuilders receive a two-page Canadian Housing Industry Economic Update authored by Dr. Peter Andersen, consulting economist to the Canadian Home Builders’ Association. This internal newsletter tells it like it is, for better or worse. This month, the news was all for the better.

Speaking directly to homebuilders, Andersen writes, “we remain positive for the housing market outlook in Canada. Mortgage interest rates are not going up sharply anytime soon and the next recession is unlikely until mid-decade at the earliest.”

Gap narrows between variable and fixed mortgages

2010-10-15T06:33:00.001-07:00

Just as you'll be recovering from the long weekend and Thanksgiving dinner, the Bank of Canada will be gearing up for its interest rate announcement on Oct. 19. However, economists are not expecting rates to rise, so holders of variable rate mortgages can rest easy, for now.

"We think the Bank of Canada is done for this year. We think it's going to keep its rate at 1% . . . but it will start to think of gradually raising rates again late in the first quarter of next year and continue through the rest of the year," says Robert Hogue, senior economist at RBC Economics in Toronto. "We're looking at a 125-basis-point (a 1.25-percentage-point increase over the) next year."

The perennial debate over whether to take a fixed-or a variable-rate mortgage has increased as the gap between the two rates is narrower than it has been in the past.

Risky type? Try a variable mortgage

2010-10-13T05:17:00.000-07:00

"We think the Bank of Canada is done for this year. We think it's going to keep its rate at 1 per cent . . . but it will start to think of gradually raising rates again late in the first quarter of next year and continue through the rest of the year," says Robert Hogue, senior economist at RBC Economics in Toronto. "We're looking at a 125-basis-point (a 1.25-percentage-point increase over the) next year."

TD’s Repeat Home Buyers Report

2010-10-08T06:42:00.001-07:00

TD recently surveyed 1,000 home owners for its Repeat Home Buyers Report. Below are nine mortgage-related findings from that report with our perspective tossed in…

1 in 5 repeat home buyers have owned more than five homes.

Mortgage Considerations: People move a lot over their lifetime, sometimes unexpectedly. Having the ability to port a mortgage without a penalty can therefore be a money-saver. Fortunately, most prime mortgages are portable nowadays. Just make sure you understand your lender’s porting restrictions.
49% plan to upgrade when they buy their next home.

Mortgage Considerations: If you’re thinking of buying a more expensive property sometime during your mortgage term, be sure your lender has a policy of offering fully discounted rates on ports & increases. People who port and increase sometimes get stuck with subpar discounts (like 1.25% off posted 5-year fixed rates) because the lender knows the client can’t break without a penalty.
21% plan to take the maximum mortgage they’ll qualify for.

Mortgage Considerations: This increases to 28% for buyers under 40. There are few things more stressful than worrying about making your mortgage payment. So keep your blood pressure low…and your gross debt service ratio under 32%.
72% plan to stick with their current lender when they buy a new home.

Mortgage Considerations: The top reasons for switching lenders were: better rates (60% cited this reason), better customer service (33%), and better mortgage terms (28%). If you love your lender’s rates and service, that’s groovy. But don’t make the mistake of not shopping around. If you’re buying a new house, you’ll need to apply all over again anyway. See if there’s a mortgage elsewhere that’ll save you a few tenths of a percent and offer more flexibility.
60% aren’t familiar with their portability or assumability options.

Mortgage Considerations: “Porting” lets you avoid a mortgage penalty if you move. “Assumability” lets you: a) offer a low mortgage rate as an incentive to buyers of your home; and/or, b) avoid a penalty if you’re selling and need to break your mortgage. Here’s a related story from the Post.
Just 1 in 3 port their mortgage when buying a new home.

Mortgage Considerations: If you have a mortgage and buy a new home, always ask your mortgage advisor if porting will save you money.
Only 8% of home sellers offer an assumption as a selling feature of their home.

Mortgage Considerations: This may be due to:
1) sellers not realizing they can offer an assumption
2) down-trending rates that have made assumptions less attractive; or,
3) sellers porting their mortgage to their new property (most people with great terms keep their mortgage when they buy a new property).
84% plan to sell their current property before purchasing another one.

Mortgage Considerations: If you want to buy a new property before you sell your old one, get prequalified to ensure you can debt service both homes if needed.
Two-thirds will choose accelerated payments for their next mortgage.

Mortgage Considerations: If you can afford the equivalent of one extra payment a year, accelerated bi-weekly payments can shave up to four years off a 25-year mortgage.

____________________________________________________

About the TD Canada Trust Home Buyers Report:

Results for the TD Canada Trust Home Buyers Report were collected through a custom online survey conducted by Environics Research Group. A total of 1,000 completed surveys were collected from August 12 to 27, 2010. All participants either purchased a home that was not their first home within the past 24 months, or intend to purchase a home that is not their first home within the next 24 months. (Source: TD)

canadianmortgagetrends.com

Carney hikes rates, cites uncertainty

2010-09-08T11:21:00.000-07:00

Bank of Canada Governor Mark Carney raised his benchmark interest rate for the third straight time Wednesday, but left himself room to pause at his next scheduled decision by saying that while borrowing conditions in Canada remain “exceptionally stimulative,” the overall economic climate is fraught with “unusual uncertainty.”

In the statements on his decision to lift the overnight rate by another quarter of a percentage point to 1 per cent, Mr. Carney reiterated - arguably more strongly than in the past - that future moves will depend on developments around the world and, in turn, how they are affecting Canada’s export-heavy economy.

“Any further reduction in monetary stimulus would need to be carefully considered in light of the unusual uncertainty surrounding the outlook,” the central bank said, tweaking language in the all-important last line of the statement, which in the two previous versions referred to “considerable” uncertainty.

Unlike those earlier statements, on June 1 and July 20, Wednesday’s decision included no mention of debt problems or belt-tightening in Europe. However, Mr. Carney left little doubt that the sputtering U.S. recovery is now the No. 1 risk to the global and Canadian recoveries, saying in the second paragraph of his statement that the rebound in private demand south of the border is being crimped by stubbornly high joblessness and that ``recent indicators suggest a more a more muted recovery in the near term.’’

As a result, the central bank said, the global bounce-back from the worst downturn since the Depression is ``proceeding but remains uneven, balancing strong activity in emerging market economies’’ (such as China and India, though the central bank didn’t name them) against ``weak growth in some advanced economies.’’

At the same time, the central bank appeared to downplay the effect that the global turmoil is having on Canada, calling the country’s 2-per-cent annual growth rate in the second quarter ``slightly softer’’ than what policy makers had expected, even though their latest forecast in July was for a 3-per-cent pace.

The Canadian recovery will be ``slightly more gradual’’ than the central bank expected in July, but consumer spending and investment have ``evolved largely as anticipated,’’ it said, reflecting the fact Mr. Carney’s forecasts have warned of a slowdown for several months because of factors such as the fading impact of government stimulus and the cooler real-estate market.

In the future, consumption growth will ``remain solid’’ and business investment -- which had a surprisingly strong pickup in the second quarter, Statistics Canada data last week showed -- will ``rise strongly,’’ the central bank said. For now, as the U.S. recovery proceeds in fits and starts, investor demand for safer investments such as bonds is pushing borrowing costs down and helping consumers and companies, the bank noted.

``Financial conditions in Canada have tightened modestly but remain exceptionally stimulative,’’ the central bank said. Policy makers also said dynamics affecting inflation in the country -- which has been tame for months -- are ``essentially unchanged’’ from their July forecast.

All of that suggests Mr. Carney and his deputies are still uncomfortable with an overnight lending rate so far away from what most economists consider ``neutral,’’ or about 3.5 per cent to 4 per cent. Indeed, some analysts interpreted Mr. Carney’s tone on the Canadian economy as a sign he still leans towards raising rates.

``The Bank of Canada clearly retains its tightening bias, and seems generally unfazed by the recent cooling in the Canadian economy,’’ Doug Porter, deputy chief economist at BMO Nesbitt Burns, said in a note to clients. ``It appears that it will take a deeper slowdown in domestic spending (and core inflation) than what we have seen so far to prompt them to stop raising rates.’’

Still, the continuing emphasis on risks from abroad and on the uncertain nature of the global recovery indicate policy makers want to remind investors that the central bank reserves the right to pause at its next decision, on Oct. 19, to spend more time assessing how the situation in Canada and abroad is unfolding. Mr. Carney, who is the only Group of Seven central banker to raise rates this year, would explain such a move in a new forecast the following day.

Other economists, such as Jonathan Basile of Credit Suisse, noted the similarity between the last line of the statement and a comment made by Federal Reserve chairman Ben Bernanke in July as the U.S. turnaround was starting to hit a wall, when he told lawmakers in Washington the outlook was ``unusually uncertain.’’

Mr. Carney took a word ``out of Bernanke’s playbook,’’ Mr. Basile said, and the new wording ``can be interpreted as worse’’ than in past Canadian statements.

Central bankers in Japan and Australia this week indicated that fears about the durability of the U.S. rebound are weighing heavily even on the minds of policy makers whose countries aren’t quite as dependent on the world’s biggest economy. The Reserve Bank of Australia kept a pause in place on Tuesday, despite having the biggest spike in economic growth in the country since 2007, and the Bank of Japan highlighted ``uncertainty’’ about the U.S. in saying that it is prepared to add more stimulus if needed.

Jeremy Torobin, Globe and Mail

Do Higher Interest Rates Cause Lower House Prices?

2010-09-08T06:14:00.001-07:00

I have always enjoyed challenging widely held beliefs, probably because so many of them fall apart upon closer examination. Most recently, my contrarian radar started going off in the summer as talk of a Canadian housing bubble increased from a simmer to a boil. One of the most common justifications used in the argument that our house prices are due for a precipitous fall is that rock bottom interest rates have nowhere to go but up. When rates increase, the argument goes, affordability decreases and prices have to fall or buyers will be priced out of the market. Fair enough. It’s true that when interest rates increase, the cost of borrowing becomes more expensive, and it’s reasonable to assume that our historically low interest rates are more likely to increase than decrease over time. Bubble talkers regularly cite both factors when making their case, and after much repetition, consumers accept the conclusions that are drawn from these assumptions as valid. Far be it for me to let real data get in the way of a good round of group think, but alas, I do enjoy tipping over the apple cart, so here goes.

Over the past thirty years, increases in Canadian mortgage rates have not tended to trigger a decrease in houses prices. In fact, more often than not the reverse is true. Before I get into the numbers, let me start by citing my sources. I took the average five-year residential mortgage lending rate (from Statistics Canada) and compared it to the average selling price of a Canadian home (provided in a report by the Canadian Real Estate Association), on a month-by-month basis from January, 1980, up to June, 2010. I used the five-year fixed-mortgage rate because it is by far the most common term chosen by Canadians, and I went back to 1980 because that was as far back as the CREA stats went. The only tweak I made to the data was to compare interest rate changes to house prices two months hence, because I reasoned that higher rates would immediately impact offers to purchase, which take about two months to become transactions. Here is what I found:

Over this period, totaling 365 months, there were 156 instances where the five-year residential mortgage rate increased over the prior month, and in 97 of these cases, house prices increased two months later. That means that 62% of the time, increasing mortgage rates corresponded with higher pricing. I also wondered what happened to average prices when rates rose precipitously, so I looked at cases where month-over-month rate increases were greater than 5% (this happened in only 22 of the 365 months observed). To my surprise, in 13 of those 22 months there was still an increase in average house prices two months hence. So, even in cases where rates rose dramatically, the odds were still better than 50% that they coincided with rising house prices. While I will concede that this ‘back-of-the-envelope’ analysis is a tad simplistic, I think a trend established using thirty years of data is compelling.

So how do we explain this counter-intuitive result? Well for starters, interest rates and house prices do not exist in a vacuum and both are influenced by the overall strength or weakness of our broader economy. Rising interest rates generally occur in a healthy economic environment where future price inflation is expected, making them a by-product of positive economic momentum. While it certainly is true that higher rates increase borrowing costs, this generally happens in periods with rising incomes, higher levels of employment and increasing consumer confidence. To take our contrarian thinking to its logical conclusion, we should all be rooting for higher interest rates. Seriously. Rock bottom rates are sustained when concern over inflation is replaced by fears of disinflation and outright deflation. Higher rates, on the other hand, are a sign of increasing confidence in our future economic prospects.

One last point. While I think the bubblers have misread the short-term relationship between rising interest rates and house prices, I am not altogether bullish about the immediate direction of house prices. We have seen substantial price appreciation in the last few years, and despite our recent positive economic momentum, we are far from out of the woods. Our average income levels, arguably the most important predictors of the future of house prices, have not kept pace with the rising cost of real estate and the two measures must trend in the same direction over the long-term (with either prices falling or incomes rising to restore their equilibrium at some point). For that reason, I think house prices may well soften over the short-term, but not to a bubble-bursting degree. While the debate rages on, I hope that my analysis of the immediate relationship between rate increases and house prices gives you a different perspective when deciding which camp you’re in.

David Larock is an independent mortgage planner and industry insider specializing in helping clients purchase, refinance or renew their mortgages. David's posts appear weekly on this blog (movesmartly.com) and on his own blog (integratedmortgageplanners.com/blog).

Atlantic Canada housing activity forecast to rise

2010-09-01T05:46:00.000-07:00

So far in 2010, Mathieu Fournier's small Moncton home building company has matched last year's 12 homes and the president of Alltrim Inc. says the fall is looking up.

'The fall is looking quite promising,' says Mathieu Fournier, president of Alltrim Inc.

"My numbers are the same, if not better," said Fournier, whose company focuses on single family homes.

"The fall is looking quite promising," he said. "The winter is coming and usually there's a mad dash in the fall and it slows down in the winter."

Alltrim Inc.'s numbers and outlook for 2010 fall in line with the Canada Mortgage and Housing Corp.'s forecast for the city in its third-quarter 2010 Housing Market Outlook, released Tuesday.

The national housing agency predicts that the Hub City will see 1,080 housing starts by the end of 2010, versus the 973 starts in 2009, while Saint John builders are expected to have started putting up 670 housing units in 2010, a small increase over the 659 last year; the organization did not review Fredericton, choosing to evaluate New Brunswick cities that are census metropolitan areas according to Statistics Canada.

Sales of existing homes through the Multiple Listing Service are expected to drop by the end of 2010 in New Brunswick to 6,750 from 7,000 in 2009.

The president of the company behind Saint John's largest residential project says that overall, the city's housing market is "quite healthy."

John Rocca's Rocca Group has an interest in the Harbourfront Residences at Three Sisters, through the Ellerdale Group (of which he is also president) developing the 81-unit condominium.

"In terms of condos, this is definitely the largest, probably the largest in the province," he said.

The real estate arm of the Rocca Group, which specializes in apartments and condominiums, put up 70 units in 2008, 52 units last year and this year started the 81 units that should be complete by next summer, with a second 61-unit phase of the condominium dependent on market demand, Rocca said.

Across Atlantic Canada, housing activity is forecast to rise close to seven per cent in 2010 compared to 2009, with the economy showing moderate growth overall.

Single-housing starts across the region are expected to grow nine per cent in 2010 as the economy builds momentum and low vacancy rates and demographic trends related to an aging population should mean multiple starts rise close to five per cent by the end of the year.

Nationally, housing starts should moderate in the second half of the year to total 184,900 in 2010, while in 2011, housing starts should decline to 176,900.

Overall for Canada, 463,800 Multiple Listing Service sales are expected in 2010, followed by 456,000 in 2011.

Canada Mortgage and Housing Corp.'s Atlantic Canada economist, Alex MacDonald, says the New Brunswick housing market has performed "quite well" so far in 2010, but that things will slow down during the second half of the year.

This month, Statistics Canada unemployment insurance numbers for Saint John and Moncton showed increases in the number of beneficiaries: the Port City counted 2,460 people on EI in June 2010 versus the same month last year - up about 26 per cent - while Moncton's total number on unemployment insurance rose by nearly five per cent.

MacDonald said employment outlook factors into his organization's forecast for 2011, which he said should see marginally positive growth.

"The biggest concerns going forward, as they are everywhere else, is what's going to be the income growth and the job creation?"

In 2011, Canada Mortgage and Housing Corp. expects housing starts to be down in New Brunswick by 50 from forecast 2010 numbers to 3,650, while Multiple Listing Service sales are expected to further decline year-over-year to 6,675.

nbbusinessjournal.com

Don MacVicar - Interview with Verico Mortgage Magazine

2010-08-31T10:50:00.001-07:00

Think Your Listing Is Tough?

2010-08-24T06:30:00.000-07:00

Seven Must-Have Real Estate Contract Conditions

2010-08-23T05:17:00.001-07:00

August 23, 2010

When you formally make an offer on a home you want to buy, you'll fill out a lot of paperwork specifying the terms of your offer. Aside from such obvious things as the address and purchase price of the property on which you're making an offer, there are some items you should be sure to include in your real estate purchase contract.

1. Finance Terms

If you are like most people and you won't be able to buy the home without obtaining a mortgage, your purchase offer should state that your offer is contingent upon obtaining financing at a specified interest rate. If you know you can't afford the monthly payment on the house if the interest rate is higher than 6 per cent, don't put 6.5 per cent in your offer. If you do that and you are only able to obtain financing at 6.5 per cent, the seller will get to keep your earnest money deposit when you have to back out of the offer.

If you need to obtain a certain type of loan in order to complete the deal, you should also specify this in your contract. If you are paying all cash for the property, you should state this as well because it makes your offer more attractive to sellers. Why? If you don't have to get a mortgage, the deal is more likely to go through and closing is more likely to happen on time.

2. Seller Assist

If you want the seller to pay part or all of your closing costs, you must ask for it in your offer. The offer should state the amount of closing costs you are requesting as a dollar amount (e.g., $6,000) or as a percentage of the home's purchase price (e.g., 3 per cent).

3. Who Pays Specific Closing Costs

The agreement should specify whether the buyer or seller will pay for each of the common fees associated with the home purchase, such as escrow fees, title search fees, title insurance, notary fees, recording fees, transfer tax and so on. Your real estate agent can advise you as to whether it is the buyer or seller who customarily pays each of these fees in your area.

4. Home Inspection

Unless you are buying a tear-down, you should include a home inspection contingency in your offer. This clause allows you to walk away from the deal if a home inspection reveals significant and/or expensive-to-repair flaws in the structure's condition. For example, if the home inspection reveals that the home needs a new roof at a cost of $15,000, the home inspection contingency would give you the option to walk away from the deal.

5. Fixtures and Appliances

If you want the refrigerator, dishwasher, stove, oven, washing machine or any other fixtures and appliances, do not rely on a verbal agreement with the seller and do not assume anything. Specify in the contract any fixtures and appliances that are to be included in the purchase.

6. Closing Date

How much time do you need to complete the purchase transaction? Common time frames are 30 days, 45 days and 60 days. Issues that can affect this time frame might include the seller's need to find a new home, the remaining term on your lease if you are currently renting, the amount of time you have to relocate if you are moving from a job, and so on. Occasionally, the buyer or seller might want a closing as short as two weeks, but it's difficult to remove all the contingencies and obtain all the necessary paperwork and funding in such a short time period.

7. Sale of Existing Home

If you are an existing homeowner and you will need the funds from the sale of that home to buy the home you are making an offer on, you should make your purchase offer contingent upon the sale of your current home. You should also provide a reasonable time frame for you to sell your home, such as 30 or 60 days. The seller of the property you're interested in is not going to want to take his property off the market indefinitely while you search for a buyer.

There are many other things that go into a thorough real estate contract, but for the most part, you shouldn't have to worry about them. Real estate agents will commonly use standardized, fill-in-the-blank forms that cover all the bases, including the ones described in this article.

If you want to familiarize yourself with the details of the purchase agreement form you're likely to use before you write your offer, ask your real estate agent for a sample agreement, or search online for the standard form that is common in your locality.

The Bottom Line

Even though these forms are common and standardized and a good real estate agent would not let you leave anything important out of your contract, it is still a good idea to educate yourself about the key components of a real estate purchase agreement.

Amy Fontinelle, investopedia.com

Canadian home sales drop in July

2010-08-20T05:21:00.001-07:00

Canada's home sales fell in July, with Ontario and British Columbia leading the way lower as the newly introduced harmonized sales tax slowed activity in those provinces.

The Canadian Real Estate Association said Monday a total of 31,536 homes were sold in July, compared with 33,836 in June.

Declines in the country's most expensive markets — British Columbia (down 14.1 per cent) and Ontario (down 8.0 per cent) — accounted for most of the change in national activity.

But the agency said the overall decline was smaller than in the previous two months as July sales in the Prairies and Quebec came in on par with June levels.

Read More...

Mortgages ease a bit

2010-08-17T08:29:00.000-07:00

Two of Canada’s major banks will reduce many of their posted mortgage rates by one-tenth of a percentage point, effective today.

The posted five-year closed mortgage rate, for instance, will fall to 5.49 per cent annually at RBC Royal Bank and BMO Bank of Montreal.

The banks’ six-month convertible mortgage and one-year closed mortgage remain unchanged at 4.55 per cent and 3.3 per cent, respectively.

The Royal, Canada’s largest bank, took the lead in announcing the rate cuts on Monday as it often does. The other Canadian banks tend to follow within a day or two, in response to the same trends on bond markets.

This is the second time RBC has cut its mortgage rates since the beginning of August and follows a report that Canadian home sales were down 6.8 per cent in July from a month earlier.

Its posted rates for mortgages with terms of two to 10 years will range from 3.55 per cent to 6.6 per cent.

Bank of Montreal’s move was similar, with a few variations. For instance, the seven-year fixed mortgage was 6.4 per cent at BMO and 6.45 per cent at Royal.

BMO also offers an 18-year fixed open mortgage, which will have a posted rate of 8.45 per cent, down 0.1 percentage point as of Tuesday. It also has a six-month convertible mortgage and a one-year closed mortgage that were unchanged.

Resale housing prices sizzle in Canada

2010-08-11T06:14:00.000-07:00

Property values are rising faster in the resale housing market than for new homes, a report by Scotia Economics said yesterday.

Over the last decade in Canada, the average cost of a new home grew by slightly more than 50 per cent, while the average price of an existing house rose by more than double, Scotia's Global Real Estate Trends report said.

The report comes at a time when new data from Statistics Canada and the Canada Mortgage and Housing Corp. have bolstered existing forecasts that the real-estate market is slowing.

Interest rates, HST help cool housing sales

2010-08-06T08:20:00.000-07:00

Economists cite a shortage of first-time buyers as one of the key reasons for a sharp drop in housing sales in July, though the HST and rising interest rates also played their part.

It all amounts to bad news for sellers, but good news for buyers for the first time in nearly a decade. The Toronto Real Estate Board yesterday reported sales were down 34% last month from July 2009. New listings also took a hit, dropping to the lowest level for July since 2002.

Despite the lag, total sales for the first seven months of 2010 are still up 12% over the same time period last year. The average price of a house rose 6% from July of 2009 to $420,482 this year, though that is down from the average selling price so far this year of $432,253.

"There's more of a fall-off in first-time buyers, which suggests that affordability has dropped off a bit," said Adrienne Warren, senior economist with Scotiabank, before adding, "compared to what we've seen for most of the past decade, it's more favourable for buyers."

She expects a slower market over the next couple of years after one of the longest housing booms the city has seen in a decade. "I think it improves the longer-term housing market with a bit of cooling off," she said, explaining that prices were rising too quickly, and this kind of dip is healthy for the greater economy.

A survey of Royal LePage employees released yesterday suggests the sudden dip is partly the result of the HST. Almost half of their agents responded that the HST is to blame for the cooling housing market.

"Torontonians, along with other Ontario and British Columbia residents, are confused as to the full impact of this tax," said Phil Soper, chief executive of Royal LePage. "Many of them feel it applies on the entire purchase price of a resale home, which would entirely change the cash necessary to complete a transaction. But is it a primary factor in the decrease in activity? Not by a long shot. [The HST], given that it affects such a small portion of the transaction, is having a much larger impact than it should."

For much of the year, the federal government warned Canadians that interest rates would start rising in the late spring or early summer. Those warnings spurred a lot of people into signing fixed-rate mortgages, said Jason Mercer, senior manager of market analysis for the Toronto Real Estate Board.

The government's new mortgage-lending policies, which require all mortgage recipients to qualify for a five-year, fixed-rate loan even if they opt for a variable rate, also pushed many buyers into the market in the first quarter of 2010.

"What's going to cushion this downturn is the fact that we have a recovering economy as a backdrop," said Pascal Gauthier, senior economist with TD financial group.

House price gains unlikely to continue: National Post

2010-08-05T06:56:00.001-07:00

Canadian home prices rose 1.3% in May, their largest monthly gain since last September, but are unlikely to keep up the pace in months ahead, according to the Teranet-National Bank composite house price index, released Wednesday.

On an annual basis, prices rose 13.6% and are now 4.2% higher than their pre-recession peak.

Prices have now advanced for 13 straight months, the survey showed.

The yearly gains were strongly influenced by advances in Canada’s major markets, with Vancouver up 17.1% year over year and Toronto up 16%.

In the other four markets surveyed, year-over-year prices gained 7.8% in Calgary, 8.5% in Montreal, 11.4% in Ottawa, and 5.6% in Halifax.

Nevertheless, National Bank senior economist Marc Pinsonneaul said “we do not believe that acceleration . . . will be sustained.”

“The number of existing homes sold has declined in each of the three months ending last June, and it did so to a much larger extent than the number of new listings. This heralds a deceleration in home price inflation, especially since a harmonized sales tax was introduced on July 1 in Ontario and B.C.”

The Teranet survey differs from other national surveys, which have already shown price declines, by focusing solely on price variations in Canada’s six major urban markets and filtering out such factors as a shift in preference to larger homes that can skew average prices.

Variable rate may no longer win

2010-07-29T06:08:00.000-07:00

Not that there are a lot of people buying houses these days, but the answer to the age-old question of whether to go long or short on your mortgage is unclear yet again.

The Bank of Canada’s second quarter-of-a-point rate increase in the past two months is likely not going to do much to boost a real estate market that saw sales drop almost 20% across the country in June from a year ago.

The popular variable-rate product tied to prime that helped people buy a lot more house with more debt is going up too. The prime rate at the major banks, which tracks the Bank of Canada’s rate, is now at 2.75%.

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Credit card debt can take years to pay back

2010-07-26T06:51:00.000-07:00

Will that be cash or charge?

It’s tempting to hand over a credit card to pay for almost everything from groceries to clothes to hair cuts, in some cases to get reward points.

But with credit card use soaring, and the average household debt increasing while interest rates rise, consumers face higher risks and a tougher time repaying their debt.

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Canadians back away from borrowing

2010-07-23T05:27:00.001-07:00

Owe Canada. It’s not our anthem any more.

Crazy borrowings on lines of credit? History. The gotta-buy-now housing market? Toast. Credit card debt? Slowing down, too.

Many months ago, it was fashionable to question how Canada’s profligate borrowers would hold up when interest rates began to rise. Today, after the Bank of Canada raised its trendsetting overnight rate for the second time in the past two months, we're starting to see the answer.

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The Dog Days of Summer

2010-07-22T08:06:00.000-07:00

Those lazy, hazy, crazy days of summer are finally upon us. But is all that "Iazy, hazy" just making you crazy? Are you feeling like you're spinning your wheels?

As a business owner you may find that business slows down this time of year- lots of folks are on vacation- and you wonder where those sales will come from to keep the cash flow healthy. Instead of enjoying this time of year, the inactivity may have you fretting. How to make the most of it, from a business perspective?

Depending on the nature of your business you might want to think about your clients and what you can do for them this time of year Sure, a lot of folks may be on vacation but there are many who are still available for some networking time. or would love an excuse for a day of relaxation in the name of work. Among your clients you'll likely find golfers, tennis players, concert goers... most people have some kind of preferred leisure activity.

Find out what they like to do, and treat them. What about their families? Offering your clients and their families an opportunity to do something fun that involves everyone is a great way to say "thanks for your business".

Here's a few ideas to consider to maximize time with clients in a relaxed way:

· a great big family picnic

· setting up a golf day for- a charity

· an evening at the Tattoo or another event

· a spa day for the ladies (and guys, too!)

· a favourite concert

Yes, it can take some organizing but it doesn't have to be expensive or elaborate and it's well worth the results!

Summer is also the 'halfway" mark through the year. A time to reflect on how you've done with goals, staff projects, and introducing your clients to the new services you have to offer them. It's a great time to get out the checklist and see how you've fared. You need to know if you are getting the job done; the only way to measure that is by doing an analysis of the business to see if sales revenues are meeting the goals you've set. If they aren't where they should be, then the business plan you have implemented may need to be tweaked a bit. Summer can be a good time to do that- you may be less time-crunched, and you still have the second half of the year to implement any changes you may want to make to your strategy; meet once a week at the board table and take an hour or so to see where we've been, where we need to be and how we're getting there.

That way we know where we stand and what we have to do to rock and roll for the rest of the summerl

On a final note, if you're traveling this summer in Canada, the US, or abroad make sure you have your out of country/out of province travel card with you. If you're not sure whether you have travel coverage or not, check with your employee benefits plan administrator. If you do not have coverage for travel, please make sure to get some. It's a small price to pay to protect yourself and your family.

Homeowners are more financially fit

2010-07-21T06:34:00.001-07:00

Homeowners are in the best shape when it comes to financial fitness in Canada. Sixty five per cent of homeowners pay off their credit card balances each month (vs. 48 per cent of non-homeowners). Furthermore, a quarter of those homeowners with mortgages have managed to make a lump sum payment or accelerate their mortgage payments in the past year, according to a survey sponsored by Genworth Financial Mortgage Insurance Company Canada ("Genworth Financial Canada").

Almost half (44 per cent) of homeowners were able to pay all of their bills and save some money in the past year suggesting a strong correlation between homeownership and financial fitness.

"Homeownership is an achievable goal for those who are prepared," said Peter Vukanovich, President and Chief Operating Officer of Genworth Financial Canada. "Homeownership helps people focus on their financial situation and get their fiscal house in order."

The Financial Fitness survey was conducted in conjunction with the Canadian Association of Credit Counselling Services ("CACCS"). Compared to the same survey undertaken in 2007 when the economy was booming, Canadians are even more likely now to say their financial fitness is good (55 per cent vs. 50 per cent).

"A mortgage is easier to manage when people have good personal finance skills," said Henrietta Ross, Chief Executive Officer of CACCS. "But there is room to improve personal finance skills for many Canadians. Our certified Credit Counsellors and qualified Financial Coaches can help people get on track with their financial fitness so they can reach their important life goals, such as homeownership."

Other findings of the survey:

- 49 per cent of homeowners made down payments of 20 per cent or more on
their purchase;
- 13 per cent of homeowners say they are in great financial shape;
- 12 per cent of homeowners said they have requested a credit report in
the past 12 months.

As with regular exercise, there is always room for improvement and even financially fit homeowners can still benefit from further education and understanding of how best to manage their money.

High Marks for Canada's Real Estate

2010-07-15T06:24:00.001-07:00

Canada may no longer be the most transparent housing market in the world, but it’s close, according to a biannual survey of 81 countries.

Canada came in second behind Australia in the 2010 Jones Lang LaSalle Global Transparency index, which measures countries’ legal and regulatory environments, market strength and real estate debt transparency, among other metrics. Canada ranked first in 2008.

“Canada differentiates itself on having a combination of a sound banking system, well-developed commercial real estate lending standards and stable property markets with relatively low vacancy and rental volatility,” the report states.

Taking a message of saving to the streets

2010-07-14T09:47:00.001-07:00

Although Canadians tend to think of themselves as frugal, the truth is that we are not as much a nation of savers as we are consumers. In the first quarter of 2010, the personal savings rate was 2.8 per cent, its lowest level since the third quarter of 2008, according to Statistics Canada.

On Tuesday, Scotiabank launched Let the Saving Begin, a new program that it hopes will encourage Canadians to get back on track with their saving habits.

According to a recent Scotiabank study, 94 per cent of Canadians say they feel better when they have a safety net of savings; however, nearly one-third do not have a plan in place to achieve their savings goals.

“Historically, Canadians have had some of the highest savings rates, more than our brethren in the U.S., but now we’re falling behind,” says Chris Hodgson, group head of Canadian Banking at Scotiabank. “We’re on a mission to encourage Canadians to save more of their hard-earned money and we can help.”

Scotiabank has recruited television personality Valerie Pringle to embark on a cross-country tour as an ambassador for Let the Saving Begin.

“The issue of financial literacy and financial health is enormously important,” Ms. Pringle says. Her goal is to learn about the challenges Canadians face in saving more of their income, as well as to raise awareness of the importance of saving for every stage of life. “Canadians want to save more, but with so many demands on their wallets, they may not always feel it’s possible. It’s about time that we focus our attention on the critical issue of financial health.”

The awareness program will encourage Canadians to focus on three basic principles of saving:

1. Save automatically, because it works. It’s simple and painless to set up an account to automatically siphon off a portion of your income and set it aside for savings. “Canadians have told us that an extra $1,500 in annual savings would make a difference in their financial well-being,” Mr. Hodgson says. “That’s $4 a day. That’s something that’s manageable that could be put away.”

2. Invest for your future, because no one else will. “One of the numbers we’re watching closely is that Canadians don’t feel they have enough to retire on,” Mr. Hodgson says. Canadians need to put in place long-term financial plans and always keep them in sight. The program especially wants to educate young Canadians about saving for their future. If you are a student who has just graduated, it’s time to start thinking about a retirement savings plan. “There’s that immortality issue. They feel they don’t need to put away for retirement at this point,” Mr. Hodgson says. “When you look at the compound effect, it’s fairly significant.”

3. Borrow to get ahead, not fall behind. While taking on debt, such as a mortgage, is an integral part of our lifestyles, it’s important to know what your needs are and not take on too much debt, Mr. Hodgson advises. Through the program, Scotiabank hopes to create a discussion around the responsibility that comes with debt and with instruments such as credit cards and mortgages.

As an incentive to save more automatically, Scotiabank is offering customers a "saving bonus." It will match 10 per cent of your savings up to $150 that you accumulate between July 5, 2010, and Oct. 31, 2011. For more details, see the Let the Saving Begin website.

For more information check out www.premieremortgage.ca