Mortgage Brokers See Record-low Rates Coming

Excerpted from The Globe and Mail
As banks hold off on cuts, brokers see record-low mortgage rates Add to ...

TAMSIN McMAHON - REAL ESTATE REPORTER

The Globe and Mail (includes correction)

Published Thursday, Jan. 22 2015, 7:19 PM EST
Last updated Friday, Jan. 23 2015, 10:28 AM EST

  

Canada’s major lenders are so far holding off cutting mortgage rates in the wake of the Bank of Canada’s quarter-point interest rate cut, but industry officials predict rates will fall to historic new lows just in time for the all-important spring housing market.

Toronto-Dominion Bank said it is not planning to lower its prime rate following the central bank’s decision. Both Royal Bank of Canada and Canadian Imperial Bank of Commerce said Thursday they were reviewing their rates in light of a lower overnight rate. 

  The winners and losers following the Bank of Canada’s surprise rate cut

The Bank of Canada marker is pictured in Ottawa on September 6, 2011. The Bank of Canada will release its latest monetary policy report this morning -- a document expected to explore the economic damage inflicted by falling oil prices. THE CANADIAN PRESS/Sean Kilpatrick

Mortgage brokers, however, say it is only a matter of time – anywhere from a few days to a few weeks – before banks start slashing their rates, with some predicting that as Government of Canada bond yields plummet below 1 per cent, five-year fixed rates could hit a new record-low 2.5 per cent, reigniting a fierce competition for new borrowers.

“Spring is around the corner and market-share battles will start to heat up,” said Vince Gaetano of Mortgagemonster.ca. “The first bank to make that change, it’s going to be huge from a market-share perspective.

“Someone will blink and that will probably lead everybody down the same path.”

Some small non-bank lenders have already begun cutting their fixed-mortgage offerings, said Drew Donaldson, a mortgage broker and executive vice-president Safebridge Financial Group. Consumers with variable-rate mortgages and preapprovals have been calling Mr. Donaldson’s office in droves looking to find out when their rates might drop.

In the past, when rates were high and lenders could expect wide margins on their mortgage businesses, the major banks would quickly follow on the heels of a Bank of Canada rate movement.

But with bond yields and interest rates plummeting to new lows and lenders facing a host of new regulatory requirements in the aftermath of the global financial crisis, banks have become far more reluctant to slash rates, mortgage planner Robert McLister said.

Banks will likely wait until the end of the fiscal quarter on Jan. 31, after a large share of homeowners have refinanced their mortgages, to slash rates in order to protect their profits, Mr. Gaetano said.

Some industry officials say that while banks will inevitably be forced to drop their fixed mortgage rates if bond yields settle at record lows, they may put off dropping their prime rate, which affects variable-rate mortgages along with a host of non-mortgage lending, such as car loans and personal lines of credit, in order to protect their non-mortgage profits and push borrowers toward longer-term fixed rate mortgage contracts.

Disparity Between Prices of Houses and Condos in the GTA

Excerpted from The Globe and Mail
Price gap between Toronto houses, condos hits record high Add to ...

TAMSIN MCMAHON - REAL ESTATE REPORTER

The Globe and Mail

Published Tuesday, Jan. 20 2015, 6:17 AM EST
Last updated Tuesday, Jan. 20 2015, 10:07 AM EST

 

The growing price gap between condominiums and houses hit a record high last year in the Toronto area, as the market saw a huge jump in the number of newly built condos and buyers battled over a persistent shortage of houses.

The average price of a low-rise home in the Toronto area hit $705,813 in 2014, up 8 per cent from the year before, while the average price of a high-rise unit rose just 4 per cent to $454,476, according to new data from real estate research firm RealNet Canada Inc. and the Building Industry and Land Development Association.

 

 

The gap between condos and houses grew 16 per cent in December compared to a year earlier, hitting a record of more than $251,000. (Low-rise homes consist of houses, including detached and semi-detached houses, townhomes and link homes, while high-rises encompass all condos and lofts.)

The growing price divide comes as developers have been under pressure to shrink the size of new condo units to keep costs down, while an insatiable appetite for houses, coupled with a shortage of supply, has driven up the cost of low-rise development.

“It’s creating a bit of an extremity condition in the market,” said RealNet president George Carras. “Living in a ground-oriented home is really becoming further and further out of reach.”

The story is largely one of government policy, not of low interest rates and easy credit, Carras says. Provincial intensification and land-use policies have limited new development in the greenbelt around the Greater Toronto Area and encouraged more density, helping to drive up the price of new homes and increase the supply of new condos. Last year saw a near-record number of 25,571 condo completions in the region, up from about 16,668 the year before.

While much of the jump in condo development is concentrated in the downtown Toronto core, the price gap between the two forms of housing has been spilling outward into suburbs like Mississauga and Vaughan, where detached homes can sell for as much as $1-million and a shortage of available land has also driven development toward high-rise projects.

Despite the growing price disparity, 2014 was a good year for sales of both houses and condos, with house sales jumping 46 per cent to 17,745 and condo sales up 38 per cent to 21,991. After years of shrinking condos, the average unit size increased slightly last year, from 796 to 816 square feet. The average price per square foot jumped 2 per cent to $557. Condo developers also shifted back toward building more two-bedroom condos after years of building mainly one-bedroom units. The proportion of new condos that were two bedrooms rose from 31 per cent in 2013 to 40 per cent last year, while one-bedroom units fell from 61 per cent to 48 per cent.

Suggested Uses Of Your Gas Savings

Excerpted from The Globe and Mail
ROB CARRICK

Five ways to use your gas savings wisely Add to ...

Rob Carrick

The Globe and Mail

Published Monday, Jan. 05 2015, 6:41 PM EST
Last updated Tuesday, Jan. 06 2015, 11:25 AM EST

Falling gasoline prices offer a chance for some personal finance redemption in 2015.

As a country of confirmed borrowers, we need it. It’s now obvious that as long as interest rates stay low, Canadians will continue to wallow in debt.

For every good bit of news on debt, there’s an offsetting piece of bad news. We’ve seen data showing people are smartly paying down their mortgages, but also a surge in car loans. Bottom line, the ratio of debt to household income was at record highs in the third quarter of 2014.
 

Thanks to falling gas prices, you’re saving money every time you fill up your car or truck. But are you actually saving it, or are you spending it like found money? It’s by putting our gas savings in an emergency fund, a retirement fund or a child’s registered education savings plan that we redeem our borrowing excesses. Spending the money on a better cable package or more restaurant dining is a blown opportunity.

BMO Capital Markets economist Sal Guatieri estimates that households would save almost $1,000 a year if the 35-cent-per-litre decline in gas prices over the second half of 2014 is sustained. It very likely won’t be. The decline seems too extreme for it not to be reversed to at least some extent. So let’s figure on a little more than half that level of saving on gas for next year, or $600 a household.

That’s $50 a month, which sounds puny. But at a time when debt levels keep expanding, a lot of us need to make even a modest attempt to do better as savers. Here are some ways to use your savings on gas, starting with the most urgent:

1.) Eliminate your credit card balance

When you’re paying interest rates of close to 20 per cent on a card balance, hammering it down to zero is your top financial priority, period. Forget about investing in tax-free savings accounts and registered retirement savings plans. There’s no way you generate returns in them that are even close to what you’re paying on card interest.

2.) Build your safety net

We need a new phrase to replace “emergency fund,” which sounds too vague and old-fashioned. A safety-net fund covers any unplanned expenses that you can’t cover out of your regular household cash flow. Think of expenses ranging from the ordinary – you unexpectedly need new tires for the car – to catastrophic events such as a job loss or major illness. Having $600 in your emergency fund one year from now may not be a difference maker, but it’s a good start. Guarantee: You will never say, “Damn, I wish I didn’t save that $600.”

3.) Build a registered retirement education savings plan

RESPs are Canada’s most neglected savings vehicle. In the Yconic/Abacus poll of millennials that was widely covered by The Globe last spring, just 46 per cent of participants said their parents used RESPs. Parents, today’s tough job market for young people makes it harder than ever to get student loans repaid in a timely manner. Help minimize those debts by investing in an RESP. A $600 RESP contribution over a year would generate $120 in matching federal grant money. That’s enough to cover books and supplies for at least one semester of university or college.

4.) Save for a house

Retirement saving would ideally appear in this slot, but people in their 20s and early 30s won’t get into big city housing markets unless they bring all their savings power to bear on a down payment (let’s assume student debts are fully repaid). Saving an extra $600 annually for a few years will help you borrow a little less on your mortgage and thus reduce the amount of interest you pay over the course of your mortgage.

5.) Retirement

Here’s where that $600 a year amount starts to really add up. Over 20 years, annual contributions of that amount would be worth $20,832, assuming an average 5-per-cent growth rate.

For the past several years, Canadians have been finding room in their budgets to increase borrowing above and beyond the amount that their incomes are rising. It seems hopeless getting Canadians to carve out room for saving, but fortunately we don’t have to as a result of falling gasoline prices. Take advantage and redeem your finances in 2015.

Ten Free Tools For 2015 Budgeting

Information gathered mostly from Time Inc. article by Wise Bread.
Why is there a need for a new budget for 2015.


Gas prices have gone down making the likelihood of some savings more realistic could be a reason. Or you have overspent the holidays may be another. At any rate creating a new budget for your financial plans for 2015 may be a necessity.
Newer budgeting tools does better in tracking expenses to help you attain your financial goals:


1. Mint
Mint gives the ability to view accounts, investments & etc. on a single platform. It allows you to have an unlimited number of budgets. Compatible with smartphones and tablets.


2. Personal Capital
Similar to Mint Personal Capital is said to be snappier but not as robust. They also offer advice and management for a fee.


3. Buxfer
Buxfer allows you to send money to friends and family inline in addition to the capabilities of 1 & 2 above.


4. BudgetPulse
Being web-based may be preferable if you do not want to link all your accounts. BudgetPulse may require more manual entry work but you may find some easy-to-adjust budgeting tools.


5. Level Money
Level Money provides an additional feature called "spendable cash" to know how much cash you have left for spending.


6. GnuCash
More geared for personal and small business accounting GnuCash works on most computer platforms. It is based on the double-entry accounting system, very robust but may be confusing requiring some sophistication in accountancy.


7. Spendee
Where is you money going? That's Spendee 's strength. Not as robust as the others but may be good enough for tracking spending.


8. HomeBudget
Good for couples who wants to budget together. HomeBudget is compatible with iOs, Android, and desktop platforms. Good syncing capability. Downside- costs $4.99.


9. Paper Envelopes
Have a handful of plain white envelopes handy, fill each envelope with cash for budget items from your old budget. Once envelope is empty- there's no more to spend, so make the necessary adjustment. Can help you reduce dependency on credit cards to control spending.


10. Microsoft Excel
May seem outdated. Here's a simple monthly budget template to compare income and expenses.


Choose the one that suits you best.