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.

Youth are worth nothing to business if they have to work for free

The Bank of Canada Governor set off a new round of discussions about unpaid internships.  I love all the coverage, but I must say that while some of the articles sound tough they are really skirting some of the really IMPORTANT points.

1) Bank leaders like Mr. Poloz and other "Lords" of industry I am sure do not have their children working for free.  They probably call up a buddy at another company and get their kids on the payroll somewhere.  It may be an entry level job, but it is a paid job with a future, barring massive stupidity on the part of the young worker.

2) Why is it that the young people in earlier generations took on these same mail room type jobs and got paid?  In the 50s 60s and even 70s there were jobs, and they all brought about the equivalent level of skill and knowledge, for their time, to the table as the young graduates of today.  Somehow businesses valued what they brought enough to pay them, sometimes not much, but it was a paycheque and a chance to prove oneself.  Now, whatever work the interns are doing in the companies has no value and the students, or graduates, the companies bring on have nothing to offer, and the companies do not see them as having any potential.  If they did then they would pay them right?


I understand that it will take a couple of generations to plant the seeds that this is OK, and that a form of serfdom is a way to get ahead.  But even serfs were able to use some land to feed themselves and were entitled to protection, and justice.  OK, so the state has taken care of the justice part, sort of, and the protection of things like OHIP, but what about the feeding part.  I guess they have to work triple hours, most for free and a bit at the food counters to keep fed.

I am not seeing any great improvement from the Middle Ages in terms of treatment by the "Lords" of industry.  Wage pressures continue increase the levels of poverty for those that are working, and now we are asking parents to carry the burden so multimillion dollar corporations can increase executive compensation and dividend payments to the people who can afford to own shares. (Yes, I know many of the parents' pensions benefit, but hey may never retire if they have to keep supporting their kids.)

Is anyone else seeing a problem with this?

I understand that it is an opportunity to build a resume, or try a new field, but people used to get paid to do the same work.  I guess if I were an intern I would be happy to go in and observe the work of others, and see how it all came together, but the minute I actually had to do something I think it is fair to get paid. Right?

Maybe they think of this as an apprenticeship?  If so, then if we are sticking with the historical references, then there was a legal agreement that the apprentice was bound to the master and got something in return.

What it was like to be an apprentice in early New England is indicated by these words from a 1640 indenture.
"Know all men that I, Thomas Millard, with the Consent of Henry Wolcott of Windsor unto whose custody and care at whose charge I was brought over out of England into New England, doe bynd myself as an apprentise for eight yeeres to serve William Pynchon of Springfield, his heirs and assigns in all manner of lawful employmt unto the full ext of eight yeeres beginninge the 29 day of Sept 1640. And the said William doth condition to find the said Thomas meat drinke & clothing fitting such an apprentise & at the end of this tyme one new sute of apparell and forty shillings in mony: subscribed this 28 October 1640." (http://www.lni.wa.gov/TradesLicensing/Apprenticeship/About/History/)

While not always treated fairly, they were housed and clothed, I am not seeing that today, that burden is shifted to the families, who may also be struggling.

We are sort of getting the points across in the media, but the media also seems to be missing a big point.  Just because those who shape society want us to believe it is OK to work for free and thus also enslave our families who then have to feed and clothe us, does not mean it is actually a right and just thing.  For the leader of the Bank of Canada to say this proves that he is part of the machine of  mistreatment and not looking to the companies to help grow the economy.

Saving a company a few dollars is nothing compared to the value to an economy of giving any person paid employment and having them contribute to the economic life of the whole society in a meaningful way.  Do not forget the more impoverished the family they less likely they are to be able to navigate the system and crime for some, even middle class youth, may becomes a more enticing future because there is money in criminal behaviour, right big companies?

Financial Update from Newsletter

Ok, as weather goes this year has been weird and I guess this week will be no different.

But meteorological weather is in no way reflecting the financial weather we are all facing.

The world's smartest (well one hopes) leaders try as they might cannot seem to wrangle 7 billion people to behave in a way that makes the economy do what they want. Strange how that happens.  When I put it that way is it so surprising?

So what is new on the home front?

Well first off the 20 somethings of today are continuing the trend of earning less than the generation before, and the gap is widening.  The worst part is that older workers doing the same job, even accounting for experience, are getting paid WAY more than the younger workers.  The reason is simple it is corporations and governments gradually pushing down wage expectations so that when older workers, who knew a better life when workers were scarcer and they could make a living wage, will not kick up a fuss and rock the boat (they still have more democratic power), but the younger workers will not know any better and overall wage costs will decline increasing profitability.  It is a good business strategy and quite long term thinking for a change, I am just not entirely sure what the final social ramifications will be, but I am sure it will not be good.

So, now younger workers cannot buy new homes, what will that do to prices over time?  Older people may not get the money out of their homes that they had hoped, unless they sell to overseas parties hiding money in Canada, so maybe their retirement is not as easy.  The other thing I think the western world is waiting for is to see what the generational shift in wealth will do to pull them out of the hole they are digging.  I think that will depend on how selfless parents are in terms of spending their hard earned money vs. sacrificing again to leave something to their children, the "ME" generation giving up things...?  Still a tough call.

So the government has tightened mortgage rules, debt with solid underpinnings (relatively) instead of credit cards etc.  But OOPS we forget TD, and other banks now have all your assets underwriting any debts you have, (read your fine print) so if you get into trouble with an "unsecured" line of credit or credit card, they might dip into your savings accounts to clean up your mess, it might not have been your plan, but it is theirs.  I generally suggest keeping debt at one financial institution and assets at another to keep those two worlds from colliding, and maybe undermining your self management.  Your call though.  I keep reminding people banks are only your friends when they can make money from you, so be careful how you handle that relationship. There is a reason they give you a better rate when you give them more business.  FINE PRINT.

The Bank of Canada held its overnight rate for a long time now, with no signs of change for some time. This is great news for variable rate holders.  They are predicting rate increases, but no timelines yet.  But the increases they are anticipating are not earth shattering, though it may shock young people who have only been borrowing since 2008.

Bond rates are going up so lenders are on the cusp of raising rates again.  Not much, and they may come down again, but generally there are optimistic noises coming form economists which is not good news for borrowing rates.

The deals I post today may not hold tomorrow but more often than not I can get you something better than most people can find on their own.



All the best.

Bank of Canada and rates hold steady

Greetings ALL





It is a new school year but the world has not yet decided that it is ready to do great things again.  I cannot help but think that the West's reluctance to go to war again, while not a bad choice,  because most wars don't solve problems, it does mean continued uncertainty on how to stop a massive ego on one front and "medieval mayhem" on the other.  (Modern politics is far from simple.) Harper's reluctance to spend his vote getting pot of money supporting Canada's allies with increased military spending is either a good idea, or a bad one, depending on how big a view you take of all the events going on.  As with anything big, history and the victors will decide the true value of these choices. 



In the meantime, on the homefront it is still good news for borrowers.  With a chance to get 2.79% 5 year fixed mortgage, the BoC announcement is reaffirming for home buyers.  They have time.

Things are going as the Bank of Canada expected, economically speaking, which is why the target for the overnight rate is still sitting at 1%.

The Bank announced on Wednesday that, with the global economy performing largely as expected and Canadian inflation settling down again, there doesn't seem to be a need to increase interest rates-for now.

Stronger growth in the second quarter-due largely to surging exports-has brought the GDP almost exactly to the point the Bank projected in July. The housing market continues to perform stronger than expected, but so far it hasn't impacted inflation enough to warrant higher interest rates.

For now, risks contributing to the increase of inflation seem to be balanced, which is why the Bank ultimately decided to stand pat. But it's not making any promises going forward, however, as it says only time will tell what the global and Canadian economies will look like heading into the October 22 announcement.

If you're wondering how this announcement affects your specific situation-or if you have questions about variable mortgages, locking in or anything else mortgage-related—feel free to drop me a line. I'd love to chat!  416.486.1113

What Mortgage Brokers do - FAQ

What is a Canadian Mortgage Broker?

Canadian Mortgage brokers are independent, trained professionals licensed to represent and provide you with the best advice for your mortgage needs.
Mortgage brokers primary expertise is locating funding for mortgage financing. They know where the best rates can be found. What's more, they have the knowledge required to present a proposal for financing to lenders in the best way possible to successfully obtain mortgage financing.

Why deal with a mortgage broker in Toronto?
Mortgage brokers represent you, the customer, not the lender. Because they are not employees of a lending institution, brokers are not limited in the product they can offer you. brokers seek out the best lender package to suit your specific situation, whether it’s with a Chartered Bank, Trust or Insurance Company, or Private Funds.
There is a wide assortment of options and features available to homebuyers today. Shopping around takes a lot of time and effort. The mortgage process within today's very competitive marketplace intimidates many Canadian homebuyers. It pays to work with a mortgage professional who will represent you and ensure the mortgage you get is the one best suited to your needs.
Choosing the wrong mortgage can cost you thousands of extra dollars. Mortgage brokers are trained professionals who can help you save on your mortgage dollar.

Other than rates, why should I use a mortgage broker?
In addition to rates, because mortgage-based financing is the broker's primary business, he or she has developed expertise in what type of mortgage financing each lender prefers to pursue. This kind of knowledge not only results in the most favourable rates for each project, but often whether a project is funded at all.

How do mortgage brokers find the best rates?
Interest rates are a concern to borrowers. Because of their daily contact with lenders, brokers know which project or home attracts a favorable interest rate from one institution, but a higher rate at another. Some institutions, in fact, will only accept mortgage submissions from mortgage brokers.
These rates, and preferences for types of mortgages, can change daily, depending on economic circumstances or based on the size of an institution's portfolio in a particular type of mortgage. Your mortgage broker keeps current and knows which lender to approach first. As a result, mortgage rates obtained by brokers are among the best available at the time of placement.

Why should I go to a mortgage broker first?
A professional presentation to a lender on the first application will get the best response and save you valuable time and money. Secondary applications with previous credit bureau inquiries may be more costly.
Often the success of obtaining mortgage approval depends on the way a proposal is presented and to whom it is sent. Your mortgage broker is trained to present your mortgage proposal where and how it will get the most immediate, positive result.
You don't call an insurance company for insurance - you use an insurance broker, because of their expertise, product knowledge and rates. So remember, call your mortgage broker first!

Do mortgage brokers only do residential mortgages?
Brokers can place all types of loans provided they are backed by mortgage collateral. This includes small loans backed by a residential property to million dollar commercial loans backed by commercial property. Mortgage-backed loans in the millions are not uncommon with private pension funds and private lenders.
In addition to handling straight mortgages, mortgage brokers are often called on to assemble financing ( based on mortgage collateral) for businesses. Mortgage brokers excel in this type of financing package because of their expertise in looking at loans from a mortgaging perspective, as well as their knowledge of financial institutions' interests and desires for a particular product at specific times.

How do mortgage brokers get better deals than many banks?
The lenders who work with mortgage brokers include traditional sources, such as chartered banks, trust companies, as well as corporate and private pension funds.
In addition to these sources, brokers often develop professional relationships with private sources of funds, termed private lenders. These lenders can provide many various mortgage products not available at conventional sources. For best results call your Broker first.
Can I still go through my bank with my mortgage broker?
Yes, letting a mortgage broker represent you to your own financial institution can often result in a better mortgage rate than you could get on your own.

Buying a Place for Your Student

Granted the ability to buy a place for your children as they head off to College or University is not for everyone, but for some people it is a great way to launch their kids and make sure they do not come back.

Depending on where they go to do their post secondary education it can often make financial sense to buy something.  If they were going to stay home anyway and everyone is happy then maybe this is not for you.

If your student is heading off to a new town then it is time to consider the cost of a down payment and  a mortgage relative to the cost of being in residence, or if you were planning to help them get started anyway then why not now.  When they graduate they can either run it as a rental property or they can sell it and use the proceeds to buy their next home, if they have decided where they want to set down roots.

Owning a place can help build a sense of responsibility; managing a roommate and rental obligations can teach even more.

If you have 2 students going to the same University or College then it really does make a lot of sense from almost every angle.

Things to consider.

*  Housing market in the city or town where they will be located.
*  Term of the mortgage
*  Rental rates
*  Portion of mortgage payment that goes to principal (this is a form of savings)

And more, if you want to discuss your options then please feel free to call.  I would be happy to go through your options with you and help you think through whether this is the right step for your family.

More People to Please when buying a home?

How to juggle family opinion when buying your first home


These days, many first time home buyers are juggling a lot more than their finances. They have to deal with the challenge of well-meaning, but unwanted opinion. Why? Real estate agents agree that with down payments and closing costs increasing, more than ever before, young adults look to their parents for financial help. — As, so does the need for financial assistance from family members. This leads to a greater involvement in the house-hunting process, and new home buyers soon discover that their family members bring along their own opinions in addition to their cash. But when the young buyers' dream home ideals clash with the older generations' vision, both parties must do a balancing act.
“Satisfying both tastes is key,” explains Claudine Montanoa real estate agent on W Network's reality series My House Your Money. “For young adults looking in the urban city, I stage the place to appeal with a modern contemporary look for the young professional—sleek and modern, bold and intense in terms of paint, furniture and décor.”

When extended family members come along, the presentation certainly changes. “To appeal to young adults and their parents, it has to feel modern, but traditional as well. The look is not as bold in terms of paint and décor, but has a more relaxed, cosy feel with softer furnishings throughout, so both age groups can connect with the space.”

Having been through the process previously, parents tend to be much more critical in home purchasing and are a bigger challenge to delight. “The young couple is usually more excited, and focus on the things on their wish-list they are getting. In fact, they are excited to just purchase something they can call their own,” adds Montano.

When it comes down to it, winning this war is easier than imagined for the new home buyers, says fellow My House Your Money real estate agent, Helene Baguley. “Most parents or extended family members, even if they are providing the down payment, want to see their kids happy at all costs.”

Source: News Canada