Thursday, June 30, 2011

Opps ! rates are going up soon

Today's Financial Post had an article on rising variable rate mortgages. Inflation for May 2011 figures came in today and they don't look good. The best bet now is that rates will go up but by how much? 1/4 or 1/2 a point would be significant for many home owners. Perhaps in response to this National Bank announced that they are cutting their discounted rate from Prime rate - .75 to Prime - .65 as of 10 pm tonight. If you want a 180 day rate hold for this lower rate you have to contact me this afternoon. Don't miss out on what have been the lowest interest rates in 111 years.
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Tuesday, June 21, 2011

No US House Price Recovery Until 2014

Today an article appeared with an economist saying that US housing prices will not be rising until 2014. What does that mean to the average Canadian? An opportunity.
We've all heard about Canadians buying homes in Florida and Arizona at a fraction of what they would have cost in 2008. It appears there's still an opportunity for those of us who did not take advantage of this earlier.
How can a Canadian buy a property in the US? As a foreigner you need to provide at least a 25% down payment. With prices this low 25% isn't a huge number and the monthly mortgage payments might be $250, more like a car payment.
How do you get the 25% down payment? If you own a home in Canada and have owned it since at least 2006 you probably have at least $100,000 in equity. A Calgary mortgage broker like myself can arrange a line of credit or refinance your home to get you the cash for this investment. If you are interested in taking advantage of a once in a lifetime opportunity contact me and I will be happy to help you.

Here's the full article.

U.S. home prices won’t rise consistently until 2014 amid continuing structural problems in the housing market, an economist argues.

In Capital Economics latest look at the housing market, economist Paul Dales says that the current double dip in the market won’t reverse course quickly. He argues that the low level of demand isn’t something that a general economic recovery can easily fix.

Rising down-payment requirements for homes are keeping first-time buyers on the sidelines, while widespread negative equity is making it difficult for repeat buyers to move up to more expensive houses. “These constraints on demand are structural rather than cyclical, meaning that even faster employment and income growth over the next few years is unlikely to lead to anything more than modest rises in home sales. In any case, in recent months the economic outlook has deteriorated,” Dales writes.

To make matters worse, Dales notes that the risks to his forecast are more to the downside than the upside. If the economy stagnates, with the unemployment rising back up near 10% and disposable incomes declining that would put further pressure on housing. Meanwhile, if markets begin pushing up Treasury yields that could send mortgage rates higher. “After a year’s lag every 0.25% rise in mortgage rates tends to reduce house price inflation by between 1% and 2% per year,” he writes.

Courtesy of WSJ Real Time Economics

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Monday, June 20, 2011

Bank of Canada Unveils Polymer Bank Note Series

The Bank of Canada just unveiled our new money. It will be printed on a polymer based product instead of the special paper it has been printed on for many years.
The Bank of Canada unveiled a new polymer bank note series today at its head office in Ottawa. Information on the polymer material and advanced new security features was released, along with the images and designs of the soon-to-be-issued $100 and $50 bank notes, and the themes for the remaining notes in the series.

The $100 note, which is to be issued in November 2011, features images that focus on Canadian innovations in the field of medicine: from pioneering the discovery of insulin to treat diabetes, to the invention of the pacemaker and to the role Canadian researchers have played in mapping the human genetic code. Sir Robert Borden, Prime Minister of Canada between 1911 and 1920, in an updated portrait, remains on the front of the note.

The $50 note, which will be issued in March of 2012, features images of the Canadian Coast Guard Ship Amundsen in the North, reflecting Canada’s leading role in Arctic research. It also evokes the part that Canada’s northern frontier—with its vastness and splendour—has played in shaping our cultural identity. An updated portrait of William Lyon Mackenzie King, the Canadian Prime Minister between 1921 and 1930 and again from 1935 to 1948, is on the front of the note.

The notes will contain a number of unique features that expand the frontiers of bank note security and will make them difficult to counterfeit but easy to check. Most prominent are two transparent areas: the larger area extends from the top to the bottom of the note and contains complex holographic features; the other is in the shape of a maple leaf.

“The Bank’s objective with every new series is to produce a bank note that Canadians can use with the highest confidence,” said Governor Mark Carney. "The Bank is combining innovative technologies from around the world with Canadian ingenuity to create a unique series of bank notes that is more secure, economic and better for the environment."

RCMP Commissioner Elliott stated that, “These new and technically innovative notes will go a long way to deter the threat of counterfeiting in coming years.” He added that the RCMP will “continue to work with the Bank of Canada, and our policing partners, to maintain public confidence in Canada’s currency.”

In the next six months, the Bank will focus on raising public awareness of the coming note series. It will also continue to provide information to the cash-handling industry to help prepare the system for polymer notes, and will work to inform retailers, financial institutions and law enforcement agencies about how to check the new security features once the notes enter circulation.

Starting with the $20 note in 2012, the remaining bank notes in the polymer series will be issued by the end of 2013. The themes of the other denominations will be:

$20 The Canadian National Vimy Memorial—evokes the contributions and sacrifices of Canadians in conflicts throughout our history. (Portrait: HM Queen Elizabeth II)

$10 The Canadian train—represents Canada’s great technical feat of linking its eastern and western frontiers by what was, at the time, the longest railway ever built. (Portrait: Sir John A. Macdonald)

$5 Canadarm2 and Dextre—symbolize Canada’s continuing contribution to the international space program through robotics innovation. (Portrait: Sir Wilfrid Laurier)

The specific designs and detailed images of these notes will not be released until their official unveiling dates.

More information on the new polymer bank note series can be obtained by contacting Jeremy Harrison, Assistant Director, Public Affairs at 613 782-8782 or

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Wednesday, June 15, 2011

Savvy Albertan first time homebuyers do their homework

TD issued a report today based on a survey they took in April and May. The report says that Albertans are doing their homework. If you are going to make the largest purchase in your lifetime, you 'd better be doing your research. It is also important to hire a realtor to help you. They ask questions that you may not think of. Here is the report

- 2011 TD Canada Trust First Time Home Buyers Report reveals Alberta buyers least willing to pay more than asking price on a home-

CALGARY, June 15, 2011 /CNW/ - Albertans are the most willing in the country to visit multiple open houses before they purchase their first home. In fact, one-third say that they will view more than 10 houses in their search (32% versus 26% nationally). This is according to the TD Canada Trust First Time Home buyers Report, which for the second year in a row found that the overwhelming majority of first time buyers in Alberta (97%) expect to buy their home for at - or below - the listing price. Despite viewing so many homes and being set on finding a home to purchase at or below the list price, Albertans are most likely to say they'll spend six months or less shopping for their new home (76% versus 64% nationally).

The survey also found that many house-hunters are flying solo on the house-hunt. In Alberta, 41% of first time buyers plan to purchase their first home on their own (rather than with a co-purchaser). Nationally, nearly six-in-ten men (57%) will buy on their own, along with 33% of women.

"A home is a very big purchase and it's great that so many feel financially equipped to take on the expense on their own," says Jessy Bilodeau, Mobile Mortgage Specialist, TD Canada Trust. "Our report found that Albertans explore their options and stick within their price range when looking at homes. This is important - especially for those buying a home on their own. If you buy without a co-purchaser, should your financial situation change, you are the only person legally responsible for the mortgage. Ensure your mortgage allows room in your budget to set some money aside for the future."

While people buying independently don't have to compromise with anyone about the features, location and type of home they're looking for, first time buyers realize they may have to make concessions because the perfect home may not exist - or at least not be in their price range. Encouragingly, the survey found that Albertans name price as the factor they are least willing to compromise on.

First time homebuyers are most likely to say they would not compromise on:
• Price (60%)
• Number of bedrooms (48%)
• Garage or sheltered parking (39%)

They are most willing to make concessions about:
• Proximity to recreational activities (84%)
• Layout of home (82%)
• Features of the home and proximity to shopping (both 81%)

Compared to last year, home buyers doing slightly less homework

Many first time home buyers in Alberta are doing their homework to prepare for the home buying process. Albertans surveyed were most likely to research mortgage options (83%), estimate the cost of heating and water bills (76%) and calculate closing costs (75%).

Though a significant number of buyers are still taking steps to prepare themselves, the 2011 TD Canada Trust First Time Home buyers Report found an overall trend that not as many buyers as last year were preparing themselves; findings in Alberta were consistent with this trend. Nationally, steepest declines were in terms of getting pre-approved for a mortgage (76%, down from 91%), speaking to a mortgage lender before shopping (72%, down from 84%) and arranging for a home inspection (67%, down from 85%). First time buyers were also less likely this year to learn about mortgage options (85%, down from 93%), estimate heating, electricity and water bills (78%, down from 85%) and calculate closing costs (77%, down from 88%) in 2011 versus 2010.

"The majority of first time buyers in Alberta are taking the right steps to prepare themselves. To make sure they've covered all their bases, I recommend all buyers speak with a mortgage expert," says Bilodeau. "From getting pre-approved for a mortgage to estimating closing costs and hydro bills when you move in, there are many aspects of the home buying process and home ownership that many first time buyers may not even consider. A mortgage expert can walk you through the process and prepare you for each step along the way."

Buyers take in tenants to pay off mortgage faster:

One quarter of Albertans surveyed (25%) bought or plan to buy a home with a rental unit. Three-quarters (73%) say they will use the income from the rental property to pay their mortgage off faster. Those who will not be putting the payments towards their mortgage say it will help them live more comfortably (15%) or they'll put it towards savings (12%).

Half of those planning to buy a home with a rental unit expect it to generate $500-$750 per month in rental income (50%). Thirty-five percent expect to earn $750-$1,000, while fewer expect to earn more than $1,000 (8%) or less than $500 (8%) in extra income each month.

"Taking in a tenant can be an effective way to supplement your income and pay off your mortgage faster," says Bilodeau. "For the quarter of Albertan buyers who are considering taking in a tenant, I'd recommend exploring flexible mortgage options. For more information on your options Contact me If you want to crunch some numbers my mortgage calculators can be found here.
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Monday, June 6, 2011

Is buying your student child a condo a good idea?

Sometimes a parent decides to buy a place for their children while they hit the books in university or college. It can be a good alternative to paying thousands of dollars toward residence fees or rent. Just look at the math:
Student rent of $500 a month = $6,000 a year = $24,000 over 4 years of school.
That money could go to your mortgage instead as an investment for you.
In Ottawa, for example, you can buy an older one-bedroom condo for about $195,000. Or, buy a 2-bedroom for $240,000 and let your child's roommate help cover the mortgage by paying rent. Let's assume you pay 20 per cent down. Here's an example of what your monthly costs could total when mortgage rates are low:
Cost 1-bedroom 2-bedroom
Mortgage payment $800 $1,000
Condo fees $350 $450
Property taxes, maintenance $300 $400
Total: $1,450 $1,850
Think about it: if your child rents a place, your money is helping the landlord pay his or her mortgage and other costs. If you buy a place instead and rent it to them, you have a real estate investment with a guaranteed tenant: your child. If the investment goes up in value, you will make money. Just remember that those gains will be taxed.
Also remember, mortgage rates and other costs change, and these changes will impact the numbers and your decision.
Things to consider before you decide:
You can buy the property in your name, in your child's name, or both. If you buy the property in your name, you should consider:
• The rental income you charge can pay a lot of your costs. Just remember you have to declare that income on your tax return.
• As a landlord, you can also claim many of your expenses, including mortgage interest. Assess your costs carefully before you buy. They will vary with the local real estate market, mortgage rates and other factors.
• Plan for some vacancies. Your child (or their roommate) may not stay in the condo over the summer break. Are you really going to ask them to pay rent if they are living somewhere else for a few months?
• Remember that you will own a greater share of the equity as you pay off the mortgage. And, the value of the condo may rise over time. This can offset your costs. But whether you do more than break even depends on what happens to housing prices in the area.
There are other benefits, too. Your child won't need to look for a different place to live each year. They also won't have to worry about subletting every summer. And their furniture won't be coming back with them if they live at home over the summer break. Not a bad deal.
Remember: you may not make money if you buy a student condo.
But there are other reasons you may decide to go ahead. At the very least, you can provide your child with a nice place to live in a good neighbourhood while they go to school. Want to talk to a mortgage expert about this? Contact me and we'll go over the numbers.
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The Big Picture according to Benjamin Tal

Benjamin Tal, the deputy chief economist at CIBC recently published a report on what he thinks will happen to Canada's economy and looking at the big picture. Here is his report

Recently both the U.S. Federal Reserve (the Fed) and the Bank of Canada described the economic picture as “unusually uncertain.” And this was before the unrest in the Middle East and Africa and before the devastating development in Japan. Add to this scenario the recent downgrading of Spain and Portugal by Moody’s, and you have a world that is even more uncertain than “unusually uncertain.”

If the real measure of intelligence is what you do when you don’t know what to do, then the next few months will test the economic IQ of both the Fed and the Bank of Canada. Given the increased uncertainty, it is reasonable to assume that both banks will be extremely conservative when it comes to monetary policy.

While short-term volatility will continue to influence markets in the near term, the focus should be on the big picture, which is much more predictable. And this big picture is changing. The great recession gave birth to a dramatic shift in the engines of economic growth in North America, and any successful investment strategy must incorporate this information.

The near 3% growth rate projected for gross domestic product (GDP) in 2011 masks the dynamics of powerful economic forces pulling in different directions. A vibrant business sector will gradually take over an exhausted consumer and restrained government.

Government spending was a buffer for economic activity during the downturn, but with ongoing gains in business activity, the coming years should see the government hand the reins of growth back to the private sector. Significant reductions in spending will come by late 2011, when infrastructure stimulus projects wrap up. Additional cuts to program spending should see compensation expenses drop on wage restraint, employment attrition and select job cuts.

On the other side of the scale, corporate Canada is doing much better. By any measure, the current recovery in capital spending is impressive. The rate of return on capital employed is back to its mid-2008 level, and despite the surge in investment, corporate Canada’s cash position is at a record high (in relation to both equity and sales). Large corporations can still raise funds relatively cheaply, and cash-starved small- and mid-sized firms can now borrow more easily, with overall credit outstanding to this sector starting to show signs of life after being in negative territory for the past two years.

In fact, the manufacturing sector is already positioned to start expanding — with its current capacity utilization reading of 81%, it stands above its long-term average and a record six points above that of the rest of the economy. The last time the utilization gap approached this level was in 1995, and manufacturing investment advanced by an average annual rate of more than 10% for the following three years. With relatively elevated capacity use and rates of return on capital employed in the manufacturing sector approaching a 10-year high, look for business investment in manufacturing to rise strongly in 2011, joining the upswing in western oil sands projects.

While current economic uncertainty will continue to influence markets and lead to sharp swings in commodity prices and related equities, the new mix clearly suggests that investors should focus on the improving the conditions of corporate Canada, in general, and the manufacturing sector, in particular. With supply-chain opportunities arising south of the border as a result of the U.S. manufacturing sector’s increased exposure to emerging markets, look for growing opportunities for high-end Canadian exporters in the coming years with positive implications for their valuations.

Another opportunity in this environment is the dividend-paying segment of the market. The recent increase in risk aversion will benefit this sector directly, as it tends to attract conservative money, and indirectly as increased uncertainty will limit any potential upward pressure on interest rates.

Benjamin Tal, Deputy Chief Economist, CIBC If you have any questions about credit, mortgages or interest rates contact me.

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Friday, June 3, 2011

Poll shows Canadians are split on fixed/variable rates being better

Canadians are split in their views on whether a fixed rate or variable rate mortgage is the right way to go in the current rate environment, even as they anticipate higher interest rates over the next year, according to a recent CIBC/Harris Decima poll.

Key findings of the poll include:

39 per cent of respondents said they would choose a fixed mortgage if they had to choose between a fixed or variable mortgage today.
32 per cent said they would choose a variable rate mortgage.
One-quarter (25 per cent) were undecided as to which would be the better choice.

61 per cent of respondents believe interest rates will be higher a year from now, while 24 per cent believe that rates will remain the same over the next 12 months.
Only 3 per cent of respondents believe rates will be lower a year from now than they are today.

"The divergent opinions on whether to go fixed or variable underscores what our advisors see everyday in their meetings with clients - choosing the right mortgage depends on your personal financial situation, and there's no single answer for everyone," commented Colette Delaney, Senior Vice President, Mortgages, Lending & Insurance, CIBC Retail Markets.

While the poll revealed that Canadians believe rates are likely to increase in the next 12 months, Ms. Delaney advised homeowners to consider additional factors beyond interest rate predictions when making mortgage decisions. "You need to approach the fixed versus variable decision from the inside out, starting with your personal financial goals and working from there," added Ms. Delaney. "Your mortgage is a major part of your overall financial plan, and your decisions should be based on how your mortgage fits with your long term financial goals, not on short term rate fluctuations."

The poll results also highlight that views on choosing a fixed or variable mortgage can change depending on your stage of life. For example:

Among 25-34 year olds, who are more likely to be first time buyers or new homeowners, only 27 per cent would choose a variable mortgage
That climbs to 42 per cent among respondents 45-54 years of age, who are more likely to be near the end of their mortgage and have greater tolerance for rate changes within their mortgage payment

Ms. Delaney noted that homeowners can look at both a fixed and variable strategy over the life of their mortgage. "For most people, your mortgage is a long term proposition, so your strategy should look beyond your first term," commented Ms. Delaney. "You may choose to start with a fixed mortgage when you buy your first home, then transition to a variable mortgage in later terms when you have improved your financial situation and paid down some of the principal."

While homebuyers this Spring will need to make the fixed vs variable decision when they buy a new home, Ms. Delaney also encouraged existing mortgage holders to take a fresh look at their mortgage and evaluate their options to help reduce their balance faster.

CIBC has a mortgage offer for existing mortgage holders who may be in a closed mortgage with another financial institution and who want to consider switching their mortgage as part of their long term strategy to reduce the total interest they pay. The CIBC Mortgage Switch offer includes cash back up front to help mitigate the cost of moving a mortgage before it is up for renewal, and a competitive fixed or variable rate to help homeowners take advantage of today's low rates and pay down their mortgage sooner.

Each week, Harris/Decima interviews just over 1000 Canadians through teleVox, the company's national telephone omnibus survey. These data were gathered between April 28 and May 1, 2011. A sample of this size has a margin of error of 3.1%, 19 times out of 20. If you want to discuss this poll and which option is best for you , Contact me.
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Wednesday, June 1, 2011

Canada Guaranty set to expand its Lender Reach

While most people are familiar with CMHC , Canada's largest mortgage default insurer, many are not aware that Genworth Financial, a private insurer is also active in Canada. In 2007, a third insurer entered the market in what could be called the boom times in the Canadian real estate market. While the firm did well, the failure of it's parent company, AIG Garanty in the USA, brought unwanted instability and ruined their name. MortgagebrokerNews , a online trade publication issued an article recently on the third insurer. Here it is in it's entirety. As per usual , if you have any questions contact me at Calgary Mortgage Broker.

Canada’s “third” mortgage default insurer is gearing up for a significant growth spur, the company readying to welcome a major lender to the fold at the same time it meets growth targets.

“We have achieved our year-to-date business projections, despite the relatively soft market,” Andy Charles, president and CEO of Canada Guaranty told, pointing to January through May premium numbers that have seen the Canadian-owned company cement market share. The progress comes even as the growth of new originations slows for Central and Eastern Canada as well as key Western centres.

The return to a more stable spring market coincides with Canada Guaranty’s first-year anniversary, the company’s launch coming in April 2010 with the acquisition of AIG’s book in this country. The new company is the only 100-per cent Canadian-owned private mortgage insurer, with Ontario Teachers’ Pension Plan and National Guaranty Mortgage Holdings Inc. as principal shareholders. That ownership team inherited the market’s No. 2 private insurer with assets of $270 million and a total equity of more than $118 million. Market share at the time was pegged at one per cent to two per cent of Canadian volumes.

Charles is actively building on that position, with a strategy focused on winning large institutional lenders. It’s now paying off.

“Canada Guaranty anticipates the announcing a new major lender to the group in June,” he said, with details to follow over the next couple weeks. The addition of one of the country’s Big Six would strengthen the insurer’s hand as competitor Genworth Canada grapples with the slowing market.

While the leading residential mortgage insurer outside of CMHC realized $101 million on net premiums written during the first three months of 2011, that's $33 million lower than the previous quarter. It does, however, represent a year-over-year improvement of $7 million, according to the company’s Q1 financial statement.

Some analysts were expecting a surge in new policies resulting from a crush of homebuyers looking to get into the market ahead of tougher federal mortgage rules.

That wave of business failed to materialize.

“The government mortgage rule changes that took effect March 18, 2011 did not have a material impact on mortgage originations in the quarter,” according to the Genworth report. “We delivered solid net premiums written in a slower origination market,” added CEO Brian Hurley.

Canada Guaranty hasn’t yet released details about its own performance in the run-up to that mid-March deadline, although brokers and a CMHC official both point to an active period, reflecting an increased number of refinancing applications.

Building relationships with individual brokers as well as broker channel lenders has been a top priority for Canada Guaranty, Charles told A large part of that is a user-friendly model, offering broker tools such as AMP-accredited continuing education and a quarterly market report.
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