Bank of Canada maintains overnight rate
Yet again, the Bank of Canada has opted to keep the target for the overnight rate steady at ½ percent-meaning variable rate mortgages won't be moving any time soon.
The Bank attributed it's move (or lack thereof) to weaker-than-expected global economic growth and uncertainty surrounding China's transition to a slower growth path (which is putting downward pressure on energy prices). The US economy, on the other hand, is continuing to pick up steam-which is good news for Canadian exports.
Canada's economy has rebounded from the recession we were experiencing earlier this year. Non-resource sectors are benefiting from previous monetary policy actions and depreciation of the Canadian dollar, the Bank says. Households are continuing to spend at a moderate pace. Lower prices for oil and other commodities, however, are dampening business investments and exports in the resource sector.
It's these lower oil and commodity prices that are causing the Bank to revise its economic growth forecast for 2016 and 2017. Now, the Bank projects real GDP will grow by just 1% in 2015 before firming to about 2% in 2016 and 2.5% in 2017. The Bank is now saying the Canadian economy will return to full capacity by mid-2017.
If you have any questions about your variable rate mortgage-or even your fixed-rate mortgage-please don't hesitate to reach out to me. If you want to read the Bank of Canada's announcement in its entirety, you can read it here:
http://www.bankofcanada.ca/2015/10/fad-press-release-2015-10-21/
Wednesday, October 21, 2015
Wednesday, October 7, 2015
Will a Down Payment Make a Good Wedding Gift?
How many toasters does one couple need? The answer is probably one.
If you have a close friend or family member who is tying the knot, you
may be unsure what to get them. Nowadays, couples have been renting a
home together for a few years prior to getting married. They already
have toasters and other appliances so when it comes to setting up their
registry people are choosing a different path: a down payment for their
first home. Many families and cultures already do this, so don't worry.
It’s likely that you can’t pay for your friend’s dream house
altogether, but you can get them one step closer to home ownership. This
is called crowdsourcing or crowdfunding, and it’s becoming a less
costly way to get newlyweds into their first home faster than before.
Gifting a Down Payment:
If your friends haven’t registered anywhere and are thinking of it, talk to them about how crowdsourcing can help bring them closer to home ownership. Many wedding guests are eager to give monetary gifts, and there are many websites that can make it easy for them to accept digital gifts. Whether it’s a cheque or a payment made VIA website that gets deposited directly in to a savings account dedicated towards a down payment, this route is far more beneficial than your average gift of china and silverware.
For those getting hitched:
Sites like Hatch My House, Feather the Nest, and Down Payment Dreams make it easy for you to create your down payment registry. Most wedding gift down payment sites operate through PayPal and are fast and simple to set up. You can allow your guests to contribute any amount they’d like, or you can set a suggested amount for each guest.
It’s important to keep in mind that your older relatives may not be so keen or understand how to use the Internet to send you a wedding present, and some people simply like the idea of giving personal gifts. Either way, remain positive and appreciative of any and all gifts coming to you for your wedding!
There are fees involved with any crowdsourcing you will do but these fees are pretty standard (5-8% of what you raise), but this will still leave you with an ample down payment for your dream home. There are ways around them, like doing it the old fashioned way with cash, or by having a friend manage it with a special bank account.
The CMHC has restrictions that apply when you are gifted a down payment, but we can discuss what this means in more detail. For more information, Contact Andrea Meynell.
(Northwood Mortgage)
Gifting A __________________
Down Payment
Gifting a Down Payment:
If your friends haven’t registered anywhere and are thinking of it, talk to them about how crowdsourcing can help bring them closer to home ownership. Many wedding guests are eager to give monetary gifts, and there are many websites that can make it easy for them to accept digital gifts. Whether it’s a cheque or a payment made VIA website that gets deposited directly in to a savings account dedicated towards a down payment, this route is far more beneficial than your average gift of china and silverware.
For those getting hitched:
Sites like Hatch My House, Feather the Nest, and Down Payment Dreams make it easy for you to create your down payment registry. Most wedding gift down payment sites operate through PayPal and are fast and simple to set up. You can allow your guests to contribute any amount they’d like, or you can set a suggested amount for each guest.
It’s important to keep in mind that your older relatives may not be so keen or understand how to use the Internet to send you a wedding present, and some people simply like the idea of giving personal gifts. Either way, remain positive and appreciative of any and all gifts coming to you for your wedding!
There are fees involved with any crowdsourcing you will do but these fees are pretty standard (5-8% of what you raise), but this will still leave you with an ample down payment for your dream home. There are ways around them, like doing it the old fashioned way with cash, or by having a friend manage it with a special bank account.
The CMHC has restrictions that apply when you are gifted a down payment, but we can discuss what this means in more detail. For more information, Contact Andrea Meynell.
(Northwood Mortgage)
Wednesday, September 30, 2015
What is a Starter Home?
If you’re looking to purchase your first home but aren’t looking to
buy a five-bedroom palace, you could benefit from a starter home.
A starter home is a smaller dwelling (like a two-bedroom house or condo) that is better suited to newlyweds and people just starting out. It is ideal for young people who are purchasing their first home because the smaller size of the home makes it less expensive to buy than a house with a many storeys, front and backyard, and two-car garage.
The term “starter home” comes from the period following the Second World War where younger couples were looking to purchase a home to live in for a few years before they became parents and needed to move to somewhere that could accommodate their growing family. Additionally, people found it was cheaper to buy a small home than continue to rent their current apartment.
In today’s economic climate, people often stay in their starter homes for over 10 years. Families are getting smaller – generally 1-2 children – and people want to remain in bigger cities close to where they work. By staying in your starter home for many years, you are also able to save more money for your nest egg. The more capital you put away in the present, the better prepared you are for the future.
If you’re looking for a starter home there are some factors you should consider before you purchase:
(Northwood Mortgage Lic.#10349)
A starter home is a smaller dwelling (like a two-bedroom house or condo) that is better suited to newlyweds and people just starting out. It is ideal for young people who are purchasing their first home because the smaller size of the home makes it less expensive to buy than a house with a many storeys, front and backyard, and two-car garage.
| What is a starter home? |
The term “starter home” comes from the period following the Second World War where younger couples were looking to purchase a home to live in for a few years before they became parents and needed to move to somewhere that could accommodate their growing family. Additionally, people found it was cheaper to buy a small home than continue to rent their current apartment.
In today’s economic climate, people often stay in their starter homes for over 10 years. Families are getting smaller – generally 1-2 children – and people want to remain in bigger cities close to where they work. By staying in your starter home for many years, you are also able to save more money for your nest egg. The more capital you put away in the present, the better prepared you are for the future.
If you’re looking for a starter home there are some factors you should consider before you purchase:
- Work with a broker Being a first-time homebuyer can be tough. Where do you look for funding? How much down payment do you need? What are closing costs? A mortgage broker can not only answer all
- Consider the kids You may not have children now, but do you plan on having kids in the future? How many kids are you planning to have? A starter home can probably accommodate one or two new additions to your family, but eventually babies become children and children become teenagers who want their own rooms. If you plan on staying in your starter home for a long time, make sure you have enough space for your kids to grow up.
- Condo vs. house In Southern Ontario, condos are quickly becoming the norm for housing. In fact, many first-time buyers prefer to have a condo as a starter home instead of a house because you don’t have to worry about maintenance and there are amenities in the building like gyms and laundry rooms. You do, however, have to pay condo fees, which may not adhere to your budget.
those questions, but also help you find the best package to suit your needs.
(Northwood Mortgage Lic.#10349)
Thursday, September 24, 2015
What will today's spending mean for the future?
I sometimes wonder what the future will bring for young people trying
to establish themselves in the GTA. In some cases, their parents are
taking the hit to keep them afloat, borrowing or working longer to
support their children.
The delays getting into the workforce, or in moving up for many of these young people, also mean their life long earnings are likely to be less.
Where will that take us in the future? Debt is cheaper now, will it stay that way? The economy is not an easy thing to manage at the best of times, but when people are living longer and living life differently (borrowing and not saving for retirement, not leaving much for the children because it is being spent now) can old theories really be the grounds for making political decisions that will rebuild Canada for the future?
I think there are pieces that are not being put into the equation, and I am not sure I like where it is leading us. I REALLY hope I am wrong, but I fear it will only exacerbate the growing rich/poor divide.
"You can't take it with you," so maybe this is the ME generation going out with a bang. Like those who deny global warming, they are leaving it to the next generation to sort out. After all, they have had the best ride in the history of humankind, so why change now and why should not having enough money saved change the way they live. So raise a glass and CHEERS.
Source of the idea:
http://business.financialpost.com/personal-finance/debt/canadian-seniors-ramp-up-debt-to-soak-up-glitzier-lifestyle
The delays getting into the workforce, or in moving up for many of these young people, also mean their life long earnings are likely to be less.
Where will that take us in the future? Debt is cheaper now, will it stay that way? The economy is not an easy thing to manage at the best of times, but when people are living longer and living life differently (borrowing and not saving for retirement, not leaving much for the children because it is being spent now) can old theories really be the grounds for making political decisions that will rebuild Canada for the future?
I think there are pieces that are not being put into the equation, and I am not sure I like where it is leading us. I REALLY hope I am wrong, but I fear it will only exacerbate the growing rich/poor divide.
"You can't take it with you," so maybe this is the ME generation going out with a bang. Like those who deny global warming, they are leaving it to the next generation to sort out. After all, they have had the best ride in the history of humankind, so why change now and why should not having enough money saved change the way they live. So raise a glass and CHEERS.
Source of the idea:
http://business.financialpost.com/personal-finance/debt/canadian-seniors-ramp-up-debt-to-soak-up-glitzier-lifestyle
Wednesday, August 26, 2015
August Financial Commentary
So much has happened.
The media covered the Bank of Canada rate drop pretty thoroughly and the rather interesting (read perhaps political) failure by the chief of the Bank to use the "R" word, recession. A pretty standard definition of this term is "a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters."
In the Bank's press release it said, "Real GDP is now projected to have contracted modestly in the first half of the year, resulting in higher excess capacity and additional downward pressure on inflation." I italicized the "first half of the year" to point out that this in fact equals 2 quarters.
There has been a great deal of news since then, here are a few items of note:
China's market's have people watching and guessing about what it all REALLY means, but the bottom line for Canada right NOW is they are buying fewer of our resources and it hurts our overall economy.
Harper has declared that if re-elected he will increase the First Time home buyer RSP withdrawal limit from $25,0000 to $35,000. This is great for people who make enough to have contributed this much to their RSPs and who can pay it back on top of the cost of home ownership over the next 15 years. So this helps a small percentage of well to do buyers.
The Bank of Canada still says high personal debt, whether student loans, mortgages, car loans, credit card, or other forms debt is the biggest threat to our long term economic success and yet BMO comes out with an article about "GOOD DEBT." Good debt in this case is student and home loans, Student debt is only good if t leads to better jobs and more income, so until that is proven it is hard say it is "good" because having a large student loan and working minimum wage for years on end is not good debt for many. I think people need to be smart about debt, and do their best to use it wisely, and what that looks like for each person is a bit different, but everyone should have a plan to get OUT of debt.
Real estate values are dropping in some parts of the country which can cause problems for some, but in the short term is fine of you are planning to stay in the home.
Harper government hints at toughening up some aspect of mortgage lending before the election was called, and banks are tightening their lending practices. After the election we will see what becomes of the mortgage market.
While I do not have all the data to hand, my sense is that there will continue to be bumps in the road, but that overall the economy will tick along with no big ups or downs, we have no room for big growth because we did not fall as far as the US, and while our economy is tied to many markets there are no real signs that anything crazy is happening on the upside that should lift us significantly higher. The global situation will force the Bank of Canada to keep rates low for the foreseeable future and this will entice people to increase their debt levels, since the costs will seem so low.
Housing prices in Toronto show no signs of slowing down and as favoured areas sky rocket people will find new pockets to gentrify. A key calculation for anyone thinking of buying is looking at rent, savings, investment return vs. cost of buying, mortgage levels and likely future value of the home. Then of course there are the intangibles like feelings and personal preferences.
I do not like loosing business, but I also do not want people to get in over their heads. Check is out and think about your best options.
http://www.theglobeandmail.com/globe-investor/personal-finance/mortgages/can-you-really-afford-that-mortgage-know-your-real-life-ratio/article17333137/
If your path takes you into the market or you want to use the equity in your home to add the extra space please let me help you get the right mortgage at a great rate.
After writing this of course we had a busy start to the week with major market shifts and a record low dollar. We will see what happens over the next while, but it looks like more Bank of Canada rate drops ahead.
All the best.
The media covered the Bank of Canada rate drop pretty thoroughly and the rather interesting (read perhaps political) failure by the chief of the Bank to use the "R" word, recession. A pretty standard definition of this term is "a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters."
In the Bank's press release it said, "Real GDP is now projected to have contracted modestly in the first half of the year, resulting in higher excess capacity and additional downward pressure on inflation." I italicized the "first half of the year" to point out that this in fact equals 2 quarters.
There has been a great deal of news since then, here are a few items of note:
China's market's have people watching and guessing about what it all REALLY means, but the bottom line for Canada right NOW is they are buying fewer of our resources and it hurts our overall economy.
Harper has declared that if re-elected he will increase the First Time home buyer RSP withdrawal limit from $25,0000 to $35,000. This is great for people who make enough to have contributed this much to their RSPs and who can pay it back on top of the cost of home ownership over the next 15 years. So this helps a small percentage of well to do buyers.
The Bank of Canada still says high personal debt, whether student loans, mortgages, car loans, credit card, or other forms debt is the biggest threat to our long term economic success and yet BMO comes out with an article about "GOOD DEBT." Good debt in this case is student and home loans, Student debt is only good if t leads to better jobs and more income, so until that is proven it is hard say it is "good" because having a large student loan and working minimum wage for years on end is not good debt for many. I think people need to be smart about debt, and do their best to use it wisely, and what that looks like for each person is a bit different, but everyone should have a plan to get OUT of debt.
Real estate values are dropping in some parts of the country which can cause problems for some, but in the short term is fine of you are planning to stay in the home.
Harper government hints at toughening up some aspect of mortgage lending before the election was called, and banks are tightening their lending practices. After the election we will see what becomes of the mortgage market.
While I do not have all the data to hand, my sense is that there will continue to be bumps in the road, but that overall the economy will tick along with no big ups or downs, we have no room for big growth because we did not fall as far as the US, and while our economy is tied to many markets there are no real signs that anything crazy is happening on the upside that should lift us significantly higher. The global situation will force the Bank of Canada to keep rates low for the foreseeable future and this will entice people to increase their debt levels, since the costs will seem so low.
Housing prices in Toronto show no signs of slowing down and as favoured areas sky rocket people will find new pockets to gentrify. A key calculation for anyone thinking of buying is looking at rent, savings, investment return vs. cost of buying, mortgage levels and likely future value of the home. Then of course there are the intangibles like feelings and personal preferences.
I do not like loosing business, but I also do not want people to get in over their heads. Check is out and think about your best options.
http://www.theglobeandmail.com/globe-investor/personal-finance/mortgages/can-you-really-afford-that-mortgage-know-your-real-life-ratio/article17333137/
If your path takes you into the market or you want to use the equity in your home to add the extra space please let me help you get the right mortgage at a great rate.
After writing this of course we had a busy start to the week with major market shifts and a record low dollar. We will see what happens over the next while, but it looks like more Bank of Canada rate drops ahead.
All the best.
Tuesday, July 21, 2015
July Economic Commentary - Mortgage Rates are dropping, again
So much has happened. Sorry for the delay in getting back to the posts.
Last week as the media covered the Bank of Canada rate drop pretty thoroughly and the rather interesting (read perhaps political) failure by the chief of the Bank to use the "R" word, recession. A pretty standard definition of this term is "a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters."
In the Bank's press release it said, "Real GDP is now projected to have contracted modestly in the first half of the year, resulting in higher excess capacity and additional downward pressure on inflation." I italicized the "first half of the year" to point out that this in fact equals 2 quarters.
The rest of the piece has loads of optimism about the future growth, despsite the steep decline in the Chinese economy with the corresponding decline in demand for raw materials. It would seem the lower dollar should stimulate the other parts of the economy to help offset the decline in sales and investment in the resource sector, particularly oil and gas.
There does appear to be an improvement in the labour figures and consumer confidence is high. I often wonder if "high'' is, in part, an adjustment to the new reality, in other words have we lowered our expectations and are happy with the new norm, or does high mean we really think we will get back to spending like crazy?
On the mortgage front the rate drop is good news borrowers, particularly those of us with variable rate mortgages. It means if we keep the payments the same, we are paying down our mortgages incrementally faster, but in the long run even a few dollars more each month can make a big difference, especially if rates ever go up. While the banks are keeping some of the decrease, in January and this month they have only passed on 30 bps of the total 50 bps (or 0.50%) the Bank of Canada announced. There are any number of reasons given, but if you cannot beat them then buy the stock, since it probably means they will be making great profits this year, but then when don't they?
The other rumblings about mortgages hinge around regulations, now with the election in October, I am not sure the Conservatives are going to annoy people by tightening borrowing rules, not after they so generously bought votes this week by passing on money to parents of kids under 18, (most parties in power use similar pre-election giveaways) but the threat seems to be aimed squarely at first time buyers. They are talking about raising the minimum down payment.
While I agree first time buyers are the people taking the biggest risks relative to income compared to people selling one property to buy another. In other words they often buy as much as they can afford to get a foot in the door with as little as possible down. Why not? Most of these young people have come of age since 2008 and they do not know the days of 7-16%+ mortgage rates, and since things still look pretty bleak on the economic front around the world, then why worry about the increase? By the time a significant rate increase hits they will be in better financial shape and will own a much higher percentage of their homes. They also have a long life expectancy, and can pay it off over a long time. How else will they ever get into the market? Hope to win the lottery? Here is to hoping that the boom is not dropped lower on first time buyers.
Last week as the media covered the Bank of Canada rate drop pretty thoroughly and the rather interesting (read perhaps political) failure by the chief of the Bank to use the "R" word, recession. A pretty standard definition of this term is "a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters."
In the Bank's press release it said, "Real GDP is now projected to have contracted modestly in the first half of the year, resulting in higher excess capacity and additional downward pressure on inflation." I italicized the "first half of the year" to point out that this in fact equals 2 quarters.
The rest of the piece has loads of optimism about the future growth, despsite the steep decline in the Chinese economy with the corresponding decline in demand for raw materials. It would seem the lower dollar should stimulate the other parts of the economy to help offset the decline in sales and investment in the resource sector, particularly oil and gas.
There does appear to be an improvement in the labour figures and consumer confidence is high. I often wonder if "high'' is, in part, an adjustment to the new reality, in other words have we lowered our expectations and are happy with the new norm, or does high mean we really think we will get back to spending like crazy?
On the mortgage front the rate drop is good news borrowers, particularly those of us with variable rate mortgages. It means if we keep the payments the same, we are paying down our mortgages incrementally faster, but in the long run even a few dollars more each month can make a big difference, especially if rates ever go up. While the banks are keeping some of the decrease, in January and this month they have only passed on 30 bps of the total 50 bps (or 0.50%) the Bank of Canada announced. There are any number of reasons given, but if you cannot beat them then buy the stock, since it probably means they will be making great profits this year, but then when don't they?
The other rumblings about mortgages hinge around regulations, now with the election in October, I am not sure the Conservatives are going to annoy people by tightening borrowing rules, not after they so generously bought votes this week by passing on money to parents of kids under 18, (most parties in power use similar pre-election giveaways) but the threat seems to be aimed squarely at first time buyers. They are talking about raising the minimum down payment.
While I agree first time buyers are the people taking the biggest risks relative to income compared to people selling one property to buy another. In other words they often buy as much as they can afford to get a foot in the door with as little as possible down. Why not? Most of these young people have come of age since 2008 and they do not know the days of 7-16%+ mortgage rates, and since things still look pretty bleak on the economic front around the world, then why worry about the increase? By the time a significant rate increase hits they will be in better financial shape and will own a much higher percentage of their homes. They also have a long life expectancy, and can pay it off over a long time. How else will they ever get into the market? Hope to win the lottery? Here is to hoping that the boom is not dropped lower on first time buyers.
Thursday, March 19, 2015
March Commentary - Economy, Housing and Mortgages
Spring
is nearly here, in Toronto at least, (sorry Halifax) the snow is fast
disappearing and while the weather has graced us with a couple of warm
days we are at least seeing longer days. I love the sunshine. Maple
season is here for those heading out to the sugar bush events and houses
are being listed and sold at a searing pace, with the first 2 weeks of
March seeing 3,838 sales through MLS, an 11.8% increase over this time
last year.
The Bank of Canada has held rates down and while banks did finally drop their prime rates, 15 bps, they did not match the 25 bps the Bank of Canada announced in January. This has still been great for variable rate borrowers.
As ever the pundits are calling for the rates to stay low and to go up. While the US economy is doing well, places like Brazil and India have less momentum than they did, and if we can get around the official numbers it looks like China is slowing down more than the world had hoped.
The spillover effect of the sanctions imposed on Russia for their acts of hubris are hurting Germany, the engine of Europe, so this is going to be a lose-lose on the sanctions game, but since no one wants war with Russia and they still want to take a moral stance I guess there is still a price to be paid.
Canada is now more than ever a petro-dollar economy and so we will probably not see our dollar go back up anytime soon, the hope that other sectors would pick up has not proved as successful at offsetting the declines due to oil, as had been hoped, so the dollar is low, rates are low and in some sectors jobs are being lost. This does not suggest that we will see rate increases any time soon.
An average single detached house price in Toronto is now $1 million, a nice milestone to keep the news hounds happy, but what does this mean. A few things, 1) cheap financing 2) there is a LOT of money in Toronto, 3) people keep coming to Toronto and 4) land is finite. Developers, are now seeing the writing on the wall and are starting to invest in rental housing, they see that the long term prospects of owning a home will be further diminished as the wealth divide increases and more people will rent.
This means 2 things for the some people 1) it is a good time to invest in buying rental properties and 2) house prices are not likely to drop too much even when rates increase.
Our personal (non-mortgage) debt levels keep rising, but we seem to be managing. The government has not jumped on the banks for dropping their lending rates on mortgages this time, and Harper has indicated that they "are not planning to take any immediate action." This is good news for the real estate sector.
On a side note I have yet to see a news story where banks are dropping their credit card interest rates, but then those are not underwritten by government insurance and somehow they keep it out of the news.
Something always happens, at the moment though I do not think it will be much.
I
do not think there should be a mad rush to buy just because of the
current interest rates, while they may rise and fall a bit we are still
in crazy low territory, so take your time and buy what you want when you
can.The Bank of Canada has held rates down and while banks did finally drop their prime rates, 15 bps, they did not match the 25 bps the Bank of Canada announced in January. This has still been great for variable rate borrowers.
As ever the pundits are calling for the rates to stay low and to go up. While the US economy is doing well, places like Brazil and India have less momentum than they did, and if we can get around the official numbers it looks like China is slowing down more than the world had hoped.
The spillover effect of the sanctions imposed on Russia for their acts of hubris are hurting Germany, the engine of Europe, so this is going to be a lose-lose on the sanctions game, but since no one wants war with Russia and they still want to take a moral stance I guess there is still a price to be paid.
Canada is now more than ever a petro-dollar economy and so we will probably not see our dollar go back up anytime soon, the hope that other sectors would pick up has not proved as successful at offsetting the declines due to oil, as had been hoped, so the dollar is low, rates are low and in some sectors jobs are being lost. This does not suggest that we will see rate increases any time soon.
An average single detached house price in Toronto is now $1 million, a nice milestone to keep the news hounds happy, but what does this mean. A few things, 1) cheap financing 2) there is a LOT of money in Toronto, 3) people keep coming to Toronto and 4) land is finite. Developers, are now seeing the writing on the wall and are starting to invest in rental housing, they see that the long term prospects of owning a home will be further diminished as the wealth divide increases and more people will rent.
This means 2 things for the some people 1) it is a good time to invest in buying rental properties and 2) house prices are not likely to drop too much even when rates increase.
Our personal (non-mortgage) debt levels keep rising, but we seem to be managing. The government has not jumped on the banks for dropping their lending rates on mortgages this time, and Harper has indicated that they "are not planning to take any immediate action." This is good news for the real estate sector.
On a side note I have yet to see a news story where banks are dropping their credit card interest rates, but then those are not underwritten by government insurance and somehow they keep it out of the news.
Something always happens, at the moment though I do not think it will be much.
When you or someone you know is ready to buy, refinance or renew give me a call I will always work to get you a great deal and take advantage of the battle of the lenders to make sure you get the RIGHT mortgage at a GREAT Rate. More often than not I can get you something better than most people can find on their own.
All the best.
Friday, March 13, 2015
Debt - Inheritance - Get your affairs in order!
This article from the CBC (http://www.cbc.ca/news/business/high-consumer-debt-reflects-laissez-faire-attitude-to-borrowing-1.2988768) and others discuss the growing debt burden on Canadians. They make allowances for the fact that house prices are insane, and interest rates are also historically low, and that despite the slump in the oil sector a lot of Canadians do not feel that the economy is too bad, but the pundits still feel their is a need to worry.
Then there are other articles about the transfer of wealth, and in the case of the Maclean's article, the battles that can come with that transfer (http://www.macleans.ca/society/life/the-inheritance-wars/).
So, how much of the transfer will offset the debt? And an insufficiently covered part, until I read the Maclean's piece, was how much will the lawyers get.
There are several battles waging for the money that might be transferred. The longevity and health of the people currently holding the wealth: they may be healthy enough to spend it travelling, or need more expensive medical care. The amount that their children might have needed during the much rockier times since the 70s with more schooling, poor job markets and now, high costs of housing. Then of course there is also the philosophical position of those holding the wealth. In 2013 this article came out (http://www.businessinsider.com/tycoons-not-leaving-money-to-their-kids-2013-8?op=1) and while being taken care of by billionaire parents might be more than most would get, it is still not what the rest of us thought might happen. I also know middle class families that hold the same views, that children need to make their own way and should not rely on their parents to get ahead.
I think I lie somewhere in the middle. The world is a tough place and while I think children, young or grown, need to be able to fend for themselves and build a future and not depend on what may be left to them, I think some help is OK. Some might want to build a dynasty, or grow family wealth and set things up so that whatever you are given by your parents you must give each of your children at least that amount. If this were the case then someone must double, or triple their net worth to keep those standards if they have children. Is this done through a Trust? How can you hold people to this? I think the key thing is raising your children with the values you really want them to have, and giving them too much will definitely lead to zero motivation to succeed on their own. So what this help looks like will be different for every family, but what I can say is whatever your plans make sure you get them down on paper and make sure they cover all eventualities.
Do not forget you, or a family member, may get dementia and you should know that, in Ontario anyway, the laws are against the family in the case of a single adult with dementia. Why do I say this? If you think children can be nasty fighting over their inheritance just think about what could happen if a nice man, or woman, saw your single mother, or father, with dementia and a tidy nest egg. Maybe the Will was in place before your parent got dementia, and maybe mom, or dad cannot legally sign a contract to buy a car, but they can get married, and in Ontario at least, if they get married that Will they wrote back when they knew what they wanted, becomes NULL & VOID, and then when they die, well, I guess the lawyers could get most of it, but it certainly will not shake out the way it was planned. (In case you want to read more check out this book, it is well worth the investment if you, or your parents have any net worth that might be targeted. http://www.carswell.com/product-detail/capacity-to-marry-and-the-estate-plan/ and/or listen to the following broadcast http://podcast.cbc.ca/mp3/podcasts/ontariotoday_20150115_54711.mp3 ).
I could go on, but my belief is that we are not going to see debt ratios getting any better while interest rates are so low and housing prices remain so high. I also think despite articles warning that there may be less than one planned when parents die, and it may come later, people are still going to pretend they will rely on their inheritance to get them through their own retirement. This kind of wishful planning is not the best path so whatever your beliefs, or plans, make sure you have the paperwork and budgets in line to meet your own, and your family's goals.
Then there are other articles about the transfer of wealth, and in the case of the Maclean's article, the battles that can come with that transfer (http://www.macleans.ca/society/life/the-inheritance-wars/).
So, how much of the transfer will offset the debt? And an insufficiently covered part, until I read the Maclean's piece, was how much will the lawyers get.
There are several battles waging for the money that might be transferred. The longevity and health of the people currently holding the wealth: they may be healthy enough to spend it travelling, or need more expensive medical care. The amount that their children might have needed during the much rockier times since the 70s with more schooling, poor job markets and now, high costs of housing. Then of course there is also the philosophical position of those holding the wealth. In 2013 this article came out (http://www.businessinsider.com/tycoons-not-leaving-money-to-their-kids-2013-8?op=1) and while being taken care of by billionaire parents might be more than most would get, it is still not what the rest of us thought might happen. I also know middle class families that hold the same views, that children need to make their own way and should not rely on their parents to get ahead.
I think I lie somewhere in the middle. The world is a tough place and while I think children, young or grown, need to be able to fend for themselves and build a future and not depend on what may be left to them, I think some help is OK. Some might want to build a dynasty, or grow family wealth and set things up so that whatever you are given by your parents you must give each of your children at least that amount. If this were the case then someone must double, or triple their net worth to keep those standards if they have children. Is this done through a Trust? How can you hold people to this? I think the key thing is raising your children with the values you really want them to have, and giving them too much will definitely lead to zero motivation to succeed on their own. So what this help looks like will be different for every family, but what I can say is whatever your plans make sure you get them down on paper and make sure they cover all eventualities.
Do not forget you, or a family member, may get dementia and you should know that, in Ontario anyway, the laws are against the family in the case of a single adult with dementia. Why do I say this? If you think children can be nasty fighting over their inheritance just think about what could happen if a nice man, or woman, saw your single mother, or father, with dementia and a tidy nest egg. Maybe the Will was in place before your parent got dementia, and maybe mom, or dad cannot legally sign a contract to buy a car, but they can get married, and in Ontario at least, if they get married that Will they wrote back when they knew what they wanted, becomes NULL & VOID, and then when they die, well, I guess the lawyers could get most of it, but it certainly will not shake out the way it was planned. (In case you want to read more check out this book, it is well worth the investment if you, or your parents have any net worth that might be targeted. http://www.carswell.com/product-detail/capacity-to-marry-and-the-estate-plan/ and/or listen to the following broadcast http://podcast.cbc.ca/mp3/podcasts/ontariotoday_20150115_54711.mp3 ).
I could go on, but my belief is that we are not going to see debt ratios getting any better while interest rates are so low and housing prices remain so high. I also think despite articles warning that there may be less than one planned when parents die, and it may come later, people are still going to pretend they will rely on their inheritance to get them through their own retirement. This kind of wishful planning is not the best path so whatever your beliefs, or plans, make sure you have the paperwork and budgets in line to meet your own, and your family's goals.
Friday, January 23, 2015
Bank of Canada Announcement not really a surprise
Well, Well the New Year has brought a big surprise for the business news watchers.
Personally, have had a great start to the year and hope the same for you.
The unpredictability of the economy and what the big guys do has never been more evident than with the most recent Bank of Canada (BoC) announcement. The 1/4 point drop in rate means they are worried about the effects of the low price of oil on the Canadian economy. Granted we were reassured that the other parts of the economy e.g. manufacturing etc. are growing, and with the stronger US economy and a lower Canadian dollar it certainly opens opportunity for export growth, but this announcement means they do not expect the one aspect of the economy to pick up enough slack to offset the oil patch slow down any time soon.
The focus was on opening the lending gates to business to help them grow, and while the BoC hedged around it, the media sources jumped on the fact that people might take this opportunity to borrow and dig themselves deeper into debt. So the banks have held off on dropping personal lending rates and even those of us with variable rate debt had hoped it would mean our payments would be making a bigger dent in the principal. The banks though have taken the "general concern" and turned it into a window to boost profits as their margins improve while they save us from ourselves. Maybe a good time to up the bank stock holdings? Anyway, the rate drop does mean that while we had it pretty easy after the 2008 collapse we are going to have to pay some price for our focus on oil.
Look at the federal government, in an election year they are postponing the next budget and starting an aggressive pre-election media and phone campaign and trying to figure what they can put on the table to give to voters because the money they thought they had has evaporated. This means that even they are worried about the effects on all Canadians. So this is no small announcement.
I also listened to the Obama state of the union and while I must admit I like the guy as a orator, I also think I like the way he reached across party lines and tried to find a way to help all Americans benefit from the current growth in the US. I did not see a lot of happy Republican faces, but where before Obama was learning the job and the games and then had to be re-elected, maybe he meant it that he would use the 2 years he has left to do more of what people elected him to do the first time? If that happens it may have a spin off effect in Canada.
Why you might ask? Well if he can get people paid sick days, fair wages and maternity leave, maybe some parts of the US will have improved economies and this would further boost consumption of both US and Canadian goods, and if wages go up we may be more competitive in our labour costs. We do need to work on our productivity though.
The experts say they were caught off guard by the rate drop, and the Bank of Canada said they dropped hints and that the experts understood the effect the big drop in oil prices would have so they should not have been surprised. The BoC said this move was for insurance purposes and reminded us that the effects of a drop are never immediate ( 6 - 8 quarters to influence inflation) and that it could take a year to get back on track. They have room to go up, or down, if they still need to and with their models predicated on $60 it is going to be interesting. The recent death of the Saudi King may also lead to changes, overall it is a dramatic start to the year.
Will this help return "output to its full potential" or help "close the labour market gap?" Hard to say. I am going to agree with Michael Hlinka on this and I think there is far too much under employment and people who are in the wings with better educations and skills than the economy is putting to use. I do not think the Canadian economy is crashing and burning, but I also am not yet convinced that this one cut will give us the growth we need if governments and business do not start investing in infrastructure, growth and people. And I am not sure I see enough of that across the country to say that me might not see another rate drop.
The benefit to the consumer is delayed by banks who will not match the rate drop, and it may take time to work its way into mortgage rates, but I guess the one thing we can be sure of is that mortgage rates will not be going up soon. So if your personal economics and job prospects are good it is still a great time to buy, and a great time for those happy with where they are to pay the debts down even faster and free up that cash flow for a much freer life down the road.
The dollar remains low and this too will affect how Canadians spend their money. Higher food prices ahead.
Personally, have had a great start to the year and hope the same for you.
The unpredictability of the economy and what the big guys do has never been more evident than with the most recent Bank of Canada (BoC) announcement. The 1/4 point drop in rate means they are worried about the effects of the low price of oil on the Canadian economy. Granted we were reassured that the other parts of the economy e.g. manufacturing etc. are growing, and with the stronger US economy and a lower Canadian dollar it certainly opens opportunity for export growth, but this announcement means they do not expect the one aspect of the economy to pick up enough slack to offset the oil patch slow down any time soon.
The focus was on opening the lending gates to business to help them grow, and while the BoC hedged around it, the media sources jumped on the fact that people might take this opportunity to borrow and dig themselves deeper into debt. So the banks have held off on dropping personal lending rates and even those of us with variable rate debt had hoped it would mean our payments would be making a bigger dent in the principal. The banks though have taken the "general concern" and turned it into a window to boost profits as their margins improve while they save us from ourselves. Maybe a good time to up the bank stock holdings? Anyway, the rate drop does mean that while we had it pretty easy after the 2008 collapse we are going to have to pay some price for our focus on oil.
Look at the federal government, in an election year they are postponing the next budget and starting an aggressive pre-election media and phone campaign and trying to figure what they can put on the table to give to voters because the money they thought they had has evaporated. This means that even they are worried about the effects on all Canadians. So this is no small announcement.
I also listened to the Obama state of the union and while I must admit I like the guy as a orator, I also think I like the way he reached across party lines and tried to find a way to help all Americans benefit from the current growth in the US. I did not see a lot of happy Republican faces, but where before Obama was learning the job and the games and then had to be re-elected, maybe he meant it that he would use the 2 years he has left to do more of what people elected him to do the first time? If that happens it may have a spin off effect in Canada.
Why you might ask? Well if he can get people paid sick days, fair wages and maternity leave, maybe some parts of the US will have improved economies and this would further boost consumption of both US and Canadian goods, and if wages go up we may be more competitive in our labour costs. We do need to work on our productivity though.
The experts say they were caught off guard by the rate drop, and the Bank of Canada said they dropped hints and that the experts understood the effect the big drop in oil prices would have so they should not have been surprised. The BoC said this move was for insurance purposes and reminded us that the effects of a drop are never immediate ( 6 - 8 quarters to influence inflation) and that it could take a year to get back on track. They have room to go up, or down, if they still need to and with their models predicated on $60 it is going to be interesting. The recent death of the Saudi King may also lead to changes, overall it is a dramatic start to the year.
Will this help return "output to its full potential" or help "close the labour market gap?" Hard to say. I am going to agree with Michael Hlinka on this and I think there is far too much under employment and people who are in the wings with better educations and skills than the economy is putting to use. I do not think the Canadian economy is crashing and burning, but I also am not yet convinced that this one cut will give us the growth we need if governments and business do not start investing in infrastructure, growth and people. And I am not sure I see enough of that across the country to say that me might not see another rate drop.
The benefit to the consumer is delayed by banks who will not match the rate drop, and it may take time to work its way into mortgage rates, but I guess the one thing we can be sure of is that mortgage rates will not be going up soon. So if your personal economics and job prospects are good it is still a great time to buy, and a great time for those happy with where they are to pay the debts down even faster and free up that cash flow for a much freer life down the road.
The dollar remains low and this too will affect how Canadians spend their money. Higher food prices ahead.
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