Wednesday, January 25, 2012

No Bank of Canada rate change

The Bank of Canada announced that it is maintaining its target for the overnight rate at 1 per cent. As a result, the prime rate will remain at 3.00%, much to the benefit of variable rate mortgage holders.

In a press release, the Bank of Canada gave the following reasons as to why they took another pass on a rate hike this time around:

"The outlook for the global economy has deteriorated (since October)."
"...very favourable financing conditions are expected to buttress consumer spending and housing activity."
"...the ratio of household debt to income is projected to rise further."
"The economy is only anticipated to return to full capacity by the third quarter of 2013, one quarter earlier than was expected in October."
"With the target interest rate near historic lows and the financial system functioning well, there is considerable monetary policy stimulus in Canada."

The next Bank of Canada rate meeting is March 8, 2012. It is expected to continue with no rate change at this meeting too.
What does this mean for you , the average consumer? If you have a variable rate mortgage or a line of credit, your interest rate will remain the same at least until March 8th. If you have a fixed rate mortgage, this announcement does not affect you at all.
By the way, if you have an unsecured line of credit you are probably paying about 6% now. If you own a home, you can get a line of credit secured against your home and pay about 3.50%. This can be a considerable saving. Contact me for more information on how you can save money.

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Thursday, January 12, 2012

Popularity of reverse mortgages increasing - Study

The need for an improved cash flow in retirement is leading to record number of reverse mortgages in Canada, according to a HomEquity Bank study.

The report released by the only national provider of reverse mortgages in Canada notes its reverse mortgage originations were up 42% in the fourth quarter of 2011. On an annual basis, the company originated $239 million in reverse mortgages, a 16% year over year jump.

As at December 31, 2011, the bank’s portfolio of reverse mortgages of $1.2 billion was 17% higher than at the end of 2010.

“Since its inception 25 years ago, HOMEQ Corporation has analyzed the demographic wave of Canadian seniors and how our business can address these trends,” said Steven Ranson, president and CEO.

“Now, the wave is here and we are meeting seniors’ needs for improved cash flow in retirement. This tremendous market demand is fuelling our strong growth in originations, while our disciplined approach to operating the business is resulting in healthy net income growth.”

Reverse mortgages are offered to Canadian homeowners 55 and older and have no income, credit or health qualifications. Unlike traditional loans, borrowers don’t have to service the interest or repay the principal for as long as they own their home and are living in it.

Experts like Bryan Yu, economist, Central 1 Credit Union, are watching this trend closely. “It really speaks to the overall economic environment, but also over the longer term we’re looking at the demographic that are involved with reverse mortgages.”

Over the next 20 to 25 years, the Canadians population over 55 years will reach 10 million, Yu says, predicting that retirement tools such as reverse mortgage are going to get more popular.

“Instead of making a downward move [selling property] they might want to stay within the own home and [a reverse mortgage] provides them another tool that allows them to stay in place, but also obtain an income flow from that asset without selling it.”
If you have any questions about reverse mortgages and whether they are right for you or your parents Contact me to discuss this without any obligation. .
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Wednesday, January 4, 2012

CIBC Poll: Paying Down Debt named the Top Financial Priority for Canadians

Annual poll reveals the focus on debt management and budgeting is increasing - while retirement planning takes a back seat among younger Canadians

TORONTO, Dec. 28, 2011 /CNW/ - A new CIBC (TSX: CM) (NYSE: CM) Poll conducted by Harris/Decima reveals Canadians named paying down debt as their number one financial priority entering 2012, followed by managing day to day spending and retirement planning. Compared to the findings of the same poll one year ago, more Canadians are focusing on debt repayment in the year ahead.

Top 3 Financial Priorities, year over year:

2011 2012
Paying Down Debt 14 per cent 17 per cent
Managing Day to Say Spending & Budgeting 12 per cent 14 per cent
Retirement Planning 13 per cent 11 per cent

"More Canadians are recognizing the importance of managing debt as a component of their overall financial plan, and that is driving an increased focus on debt management and day to day budgeting entering 2012," said Christina Kramer, Executive Vice-President, Retail Distribution and Channel Strategy, CIBC. "Canadians are also increasingly seeing the connection between good management of their day to day budget and their longer term financial goals, recognizing that taking smaller steps today as part of a plan can lead to significant benefits down the road."

While paying down debt was the top priority among Canadians, financial priorities vary across age groups:

Among 25 - 44 year olds, 23 per cent named paying down debt as their top financial priority right now, while 14 per cent of this age group said building savings was their top priority.

Among 45 - 64 year olds, 20 per cent named retirement planning as their top financial priority right now, followed by paying down debt (16 per cent).

Managing day to day spending and budgeting was also a key theme in the survey across all age groups. Those 65 and over placed a particular emphasis on this aspect of their finances, with 24 per cent of those surveyed in this age group naming this as their top financial priority.

"It's not surprising to see that the financial needs of Canadians vary at different stages of life, which speaks to the need for individual financial advice," said Ms. Kramer. "For example, baby boomers have a clear focus on retirement, while Canadians over 65 years of age are focused on cash flow management given that many in this age group have started drawing on their retirement savings."

Ms. Kramer noted that while Canadians have a clear sense of their priorities for the year ahead, it is important to recognize that your finances are integrated.

"Paying down your debt can improve cash flow, which in turn gives you more money to work with each month to put towards your savings goals or longer term goals such as retirement," added Ms. Kramer. "With interest rates low as we enter the New Year, 2012 presents a good opportunity for Canadians to make progress on debt repayment as part of their long term financial plan."

While boomers maintained a strong focus on retirement, few Canadians in their 20s and 30s ranked retirement planning among their top financial priorities. Only 5 per cent of Canadians surveyed between 25-34 years of age said retirement planning was their top priority, while another 8 per cent said it was their second priority.

"It's understandable that younger Canadians are more focused on managing their mortgage and building their savings, but it's never too early to start saving for retirement, particularly with time on your side to have those savings grow over the years," added Ms. Kramer. "Part of a discussion with a financial advisor about your needs should include a long range plan for retirement that you can start taking small steps towards today."


Percentage of Canadians that name paying down debt as their top financial priority by age:

18-24 21%
25-34 22%
35-44 24%
45-54 17%
55-64 14%
65 and over 9%

Percentage of Canadians that name managing day to day spending and household budgeting as their top financial priority by age:

18-24 9%
25-34 14%
35-44 10%
45-54 12%
55-64 13%
65 and over 24%

Percentage of Canadians that name retirement planning as their top financial priority by age:

18-24 2%
25-34 5%
35-44 7%
45-54 19%
55-64 21%
65 and over 5%

Results are based on a CIBC poll conducted by Harris/Decima, via teleVox, which surveyed 2,015 Canadians. The associated margin of error is +/-2.2%, 19 times out of 20. Polling was conducted between November 10th to 21st,

If you are having problems managing your debt I can help. Contact me and get your finances in order for 2012
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