Mortgage for Change Blog

The Fed’s Constraint on Canadian Rates

Fri, 23 Sep 2011 23:03:00 GMT

Good market update, worth reading:

One could wax on about how grim the U.S. economy is, but Mark Carney put it succinctly:

“The (U.S.) housing market remains a mess, the consumer is weak, and government actions can be expected to reduce growth…The U.S. economy is close to stall speed…”

That sort of thing puts Canada in a quandary. When the American economy is in the toilet, the Canadian economy is usually on the rim, ready to fall in.

The Fed itself admits that the U.S. is facing "significant downside risks” and 3 out of 4 Canadian exports go to the States.

The mortgage-relevance here pertains to how America’s woes affect Canadian interest rates. To answer that, let’s first have a look at the historical policy rate differences between the two countries…

Continue reading "The Fed’s Constraint on Canadian Rates" »

Financial Update

Thu, 17 Mar 2011 22:36:00 GMT

· TSX -22.14 to 13,524.82 (Reuters) reversed a near 1 percent gain in volatile trading, declining for a third straight session as Japan 's nuclear crisis and clashes in the Middle East weighed on investor sentiment, with strong resource prices cushioning the TSX's fall.

· DOW -242.12 to 11,613.30 Equity markets are being rocked as black-swan events** in the Middle East and Japan weigh heavily on sentiment. The drop was also fuelled by weak U.S. housing data as US housing starts plunged to its lowest level in a year

· Dollar -.80c to 100.83c USD the loonie is trapped in a global rush to the exits from risky assets sparked by the nuclear crisis in Japan

· Oil +-$.80 to $97.98USD per barrel

· Gold +$3.30 to $1396.00 per ounce

· Canadian 5 yr bond yields markets -.10bps to 2.44. The spread (based on the MERIX 5 yr rate published rate of 4.04%) is above the comfort zone at 1.60 as bonds soar in a flight to safety http://www.tmxmoney.com/HttpController?GetPage=BondsAndRates&Language=en .

The rate of return on your bond, can be read through a yield curve, If the increase in bond yield continues to go up, the spread will continue to shrink and this could be a trigger for interest rates to rise. Currently lenders are looking for a spread between 1.35 and 1.55

**One more animal to add to our financial zoo. We have the bull, the bear, the dove, the hawk and now the black swan. Characterized by philosopher Nassim Nicholas Taleb, the black swan theory refers to events that are undirected and not predicted. Based on Mr. Taleb’s criteria, the event is a surprise, has a major impact on society, and is rationalized by hindsight. Past examples include 9/11 and the sub-prime mortgage crisis that tipped off the recent recession.

While not everyone one will agree, many market observers, including noted bear Nouriel Roubini, are describing Japan’s nuclear emergency and political turmoil in North Africa and the Middle East as “black swans” that are adding significant headwinds to financial markets.

Free Mortgage Calculator for your phone

Fri, 04 Mar 2011 05:42:00 GMT

Have current rates and a mortgage calculator at the tip of your fingers wherever you go!

Download and use my personal mortgage app for your BlackBerry or iPhone! Tools include:

Home Affordability and Mortgage Payment Calculators
My personal mortgage rates, up-to-date!

Type the URL below into your phone's web browser. Install the app then enter the activiation code below. (Tip - copy and paste this message into an email that you can send to your phone).

Click Here from your iPhone or BlackBerry : http://www.workingbusinesscard.com/download.php

After you download the app, please enter this activation code:

6410963764

Enjoy!

What 95% of Canadians Don't Know

Thu, 03 Mar 2011 22:40:00 GMT

"Lack of awareness is major obstacle for the mortgage broker channel." This is how the last CAAMP homeowner survey results begin. (Consumer and Industry Perceptions).

Of 2,000 responses, just 5% of Canadians said they have a good understanding of what a mortgage broker does!

To nail this point home, I recently read a finance article published in a Toronto newspaper. The author wrote an entire article about the importance of going the trials and tribulations of personally shopping the banks for a good mortgage. She believes her time was best served and she got the best mortgage by personally visiting BANKS for rates. It seems she didn’t even consider speaking with a mortgage broker.

My take away? It seems that mortgage brokers need to take more responsibility for sharing what we do.

Just yesterday, I attended a professional development session hosted by FICOM. We were told that currently in Canada approximately 33% of first time buyers are using a Mortgage Broker to arrange their financing. Hmm... seems the younger crowd perhaps are more mortgage savvy than their parents?

So, if you are in the know, please tell a friend;

Working with an Accredited Mortgage Professional (AMP) saves you time, hassle and usually lots of money.
A broker shops the banks and lenders to find the best mortgage for you. Banks and lenders offer us their 'best rates' because - if they don't - their competitors will get all the broker mortgage business. (And that's a lot of business!)
For a person with an average credit rating, it costs nothing to use a mortgage broker. Banks and lenders pay a fee to brokers for bringing them new clients.

Tips for Minimizing Costs and Maximizing Value in Your Home

Tue, 15 Jun 2010 23:50:00 GMT

Your Finances:

Debt and credit management

As a homeowner, debt and credit management are essential to your financial health. But if you're like many Canadians, you don't have a plan in place to efficiently monitor and manage your finances from month to month. Often it's because we believe we have a firm grasp on where our money goes with each paycheque, but taking a deeper took can provide some invaluable insights.

Today I'm going to offer you some tips for better debt and credit management. By minimizing both you can maximize how they positively affect your overall financial picture. Let's get started.

Minimizing your personal debt

Determine if you're in the red or black

Minimizing debt means getting to know yourself better, financially. The first thing you want to do is find your net worth. Knowing your net worth is a valuable tool for monitoring your financial progress from year to year, and ensures you're headed in the right direction.

Calculate your net worth annually to see if your wealth is rising or falling.

Calculating it is quite simple too.

You just need to gather information on what you own and what you owe.

In one column list your assets including home equity, cars, valuables, bank accounts and retirement savings.
In another column list all of your liabilities including mortgage, car loans, credit card debt and any other debt.
Next, total the two columns and subtract your liabilities from your assets.

You now know your net worth. Regardless of the amount, or even if it's a negative number, you have a starting point. Record the date on your calculation and go through the same process next year or even in six months. It can be a powerful motivator for reducing debt - a personal budget is a great way to help you achieve your goals.

Know where your money goes

Surprisingly, many people never develop a budget. As long as the bills are paid each month, and they're putting some money into savings, everything seems fine. However, a budget is an essential part of managing your finances.
To see just how important it is, take the first step. Carry a journal and a pen with you at all times for one month to record your expenses. It's easier to manage if you divide the pages into columns and title them with categories such as groceries, mortgage, eating out, entertainment and utilities. Then methodically track everything, no cheating.
Seeing your expenses laid out before you provides you with a thorough understanding of how your cash flows in and out of your pocket. You'll also discover some bad habits you didn't know you had - and get on the road to changing them for the better. Budgeting software such as Quicken makes getting started easy.

Knowing how your money flows can be an eye-opening experience.

Maximizing the benefits of credit

Credit cards used wisely

A credit card can be your ally when it's managed correctly. It can help build a positive credit score, get you out of a pinch, and even earn you rewards. On the other hand, poorly managed credit can be detrimental to your credit score, and cost you more than you imagined.

Knowing how your money flows can be an eye-opening experience.

Keep these tips in mind:

Limit your number of cards. It's easier to keep track of expenses, and reduces the chance of a missed payment.
Transfer credit card debt. It's a good idea to always pay your credit cards in full each month. If you are carrying a balance, a personal line of credit offers a much better interest rate.
Don't spend what you don't have. Use the convenience of a credit card only knowing the money is in the bank.
Be diligent with payments. Never pay the minimum only. Your original purchase could end up costing you twice as much.
Avoid missed or late payments. You could incur additional fees and a black mark on your credit rating.

Understand your credit score

You know from first-hand experience that your credit score plays an important role when purchasing a home. But for many, its contents are not entirely understood.

Canada's two major credit-reporting agencies, Equifax and TransUnion, gather a financial history about you that includes information about your credit and bank accounts, public records that reveal bankruptcies or credit-related court judgments, and any debt that went to a collection agency. It may also include a personal statement from you regarding information in your history.

This information is used to generate a score between 300 and 900 which lenders then use to determine whether or not to extend credit to you. The higher your score the lower your risk.

Check your credit score regularly to ensure accuracy.

You should request a credit report from both credit agencies at least once a year to ensure your information is correct. Visit Equifax.ca and TransUnion.ca to learn more.

Nicole Hayes, AMP
Mortgage Consultant
604-998-8887 X 201.

Strategic Ways to Invest Your Tax Refund

Tue, 11 May 2010 20:48:00 GMT

There are two ways you can look at your tax refund. As "mad money" to blow on indulgences like the latest summer fashions, a must-have gadget or a splashy night on the town. But remember, it's called "mad money" because you'd have to be mad to spend your hard-earned dollars on stuff that immediately loses value. Instead, look at your tax refund as a way to help generate wealth, to help you achieve financial security:

Renovate for resale value. By upgrading your kitchen or bathroom, you can add value to your home.
Consider a revenue property. Start putting money away for a down payment while you research the market. By choosing the right property, the revenue will cover your mortgage payments and you'll end up with substantial equity-which you can use to invest in a second property!
Invest in commodities. As the world economy recovers, demand for commodities like oil and metals is going to grow. Buy stocks, mutual funds or the metals themselves and participate in that growth.
Invest in yourself. Take a course or attend a conference that will help advance your career and increase your earning power.
Make a charitable donation. Not only will you be helping a worthy cause, you'll generate an even bigger tax refund next year.

Rising Rates - Are Big Banks Jumping the Gun?

Mon, 10 May 2010 23:43:00 GMT

We are seeing fixed rates continue to rise this week with the current best 5 year at 4.50% (available for rate hold - quick close specials are slightly lower).

Today's Financial Update:

TSX -69.85 fell for a second straight day as worries over Europe's fiscal troubles outweighed a brief shot in the arm provided by a more upbeat U.S. Federal Reserve outlook. Spain was hit by a credit rating downgrade, following downgrades to Greece and Portugal on Tuesday
DOW +53.28 to 11,045 after the U.S. Federal Reserve left interest rates unchanged near zero and offered a brighter economic view. The U.S. central bank renewed its promise to keep rates low for an "extended period" and said U.S. consumer and business spending were picking up steam.
Dollar +.86c to 99.13cUS
Oil +$.78 to $83.22US per barrel.
Gold +$9.60 to $1,171.80 USD per ounce
Canadian 5 yr bond yields +.06 to 3.08. The spread is back in the high end of the comfort zone expect rate increases.

http://www.financialpost.com/markets/market-data/money-yields-can_us.html?tmp=yields-can_us

The rate of return on your bond, can be read through a yield curve, If the increase in bond yield continues to go up, the spread will continue to shrink and this could be a trigger for interest rates to rise. Currently lenders are looking for a spread between 1.35 and 1.60

Are Big Banks jumping the gun?

Rob Carrick
The Globe and Mail Published on Thursday, Apr. 29, 2010

Interest rates are rising – we all get that – but it looks like the Big Banks are pushing things a bit with mortgages.

After a pair of increases in the past two weeks, the posted Big Bank five-year fixed mortgage rate now stands at 6.25 per cent. Does that seem high? In fact, it’s just half a percentage point below the average level for the past decade.

We’re supposed to be in the early phase of what could be a long cycle of rate increases. The Bank of Canada hasn’t even started raising its overnight rate, which sets the trend for borrowing costs other than fixed-rate mortgages. The overnight rate could very well start rising June 1 (that’s the central bank’s next rate-setting date), but even then it’s not dead certain that rates will move.

Mortgage rates are linked to bond yields, which have been rising for a while now. But mortgage rates have been moving faster. full story

Smart Rental Tip - Tenant Screening

Tue, 22 Jun 2010 00:19:00 GMT

If you own rental property sometimes it can feel like a shot in the dark to select the right tenant. Here is a great tip that goes a long way towards preventing rental income loss.

A few years ago I found a company called Tenant Verification Service, based right here in the lower mainland. Their service allows you to pull a credit report for potential tenants allowing you to make an informed decision. It costs about $50 and it became and invaluable tool in helping me find great tenants.

Sign up at www.tenantverification.com and you'll be able to screen tenants, helping with the selection process, and giving you great peace of mind. (They also have a great rental application you can download and print.)

If you are considering purchasing a rental property give us a call, we have knowledge and experience in arranging the very best investment financing. You'll also have access to a great network of professionals who specialize in investment real estate.

Bank of Canada Announcement

Sat, 10 Apr 2010 18:39:00 GMT

The Bank of Canada announced Tuesday that it is leaving its key interest rate unchanged, and repeated its commitment to hold the rate steady until the second quarter of 2010, conditional upon inflation.

In its statement the Bank judges that the factors affecting its inflation outlook are "roughly balanced" at this time. "On the upside, the main risks are stronger-than-projected global and domestic demand. On the downside, the main risks are a more protracted global recovery and persistent strength of the Canadian dollar."

The Bank also noted that "the economy grew at an annual rate of 5 per cent in the fourth quarter of 2009, spurred by vigorous domestic spending and further recovery in exports."

Pricing for loans that are typically linked to a lender's prime rate (such as variable-rate mortgages, variable-rate credit cards) is expected to remain unchanged in the wake of today's announcement.

Pricing for fixed-rate mortgages is not directly affected by the Bank's key rate.

Mortgage Blog

Sat, 10 Apr 2010 18:36:00 GMT

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Warning: Ottawa may be planning to make it harder for you to get a mortgage.

Sat, 10 Apr 2010 18:20:00 GMT

Thanks to historically low interest rates and a recovering economy, Canadians are buying homes at a record pace. According to the Canadian Real Estate Association, home resales hit an all-time high in December, up 72% from December 2008! Of course, this is great news for the housing industry and overall economy, but the federal government is sending signals that it would like Canadians to proceed with caution.

The Bank of Canada has already announced that it will likely start raising interest rates by mid 2010. Within a couple of years, mortgage rates could be as much as one or two percentage points higher. What worries the government is that some of today's homebuyers are taking on mortgages they can just barely afford, and when rates start rising, payments may be unmanageable.

To encourage buyers not to get in over their heads, the government is hinting that it may take steps to cool down the housing market, if necessary. Possible actions being discussed include increasing the size of the down payment (currently at 5%) and/or reducing the maximum allowed amortization (currently at 35 years). Both of these steps could potentially cut many home buyers out of the market.

If you're considering buying in the next year, you may want to act sooner rather than later. Buying now means taking advantage of record low interest rates, a manageable down payment and a more flexible amortization. If you wait too long, all of these advantages may be lost and homeownership could suddenly be out of reach.

As your mortgage advisor, I'd be happy to analyze your needs and present you with an affordable plan, whether you're buying for the first time, renewing or refinancing. Please talk to us today before Ottawa closes the door!