A recent survey shows that 65% of Canadians do not compare between lenders when their mortgage comes up for renewal. It may be the easiest route to simply renew with your original lender. However, renewing at a lower rate can mean the difference of thousands of dollars in interest. This article illustrates that there are several reasons to do some comparitive shopping before renewing your mortgage. Your mortgage needs are likely different now than they were when you originally purchased your home, or even the last time you renewed. Renewing at a lower interest rate can lower your monthly payments, giving you more financial freedom. You may even be able to use the equity you have built towards home repairs, renovations or even debt consolidation. If it's time to renew your mortgage, consider your options. Enlisting the services of a professional mortgage broker can be of substantial benefit to you. February 22, 2012 Canada's current house market is thriving thanks to the recent decrease in mortgage rates. This interview with George Athanassakos, a professor of finance at the Richard Ivey School of Business shows housing investment as a percentage of the gross domestic product (GDP). Historically, when this ratio reaches the 7% mark, the price of the average home tends to decrease. Based on figures from Statistics Canada, the ratio of Canada's housing investment to GDP is currently close to reaching 7%, meaning we should see a correction in home prices in the coming months. February 21, 2012 Three major factors to keep in mind when applying for a first mortgage are credit, employment and a down payment. For many new graduates, these factors may seem intimidating. Many believe that student debt and a new career can negatively impact the chances of getting approved, but the Globe and Mail reports that this is not always the case. The first priority is to formulate a realistic budget. Once you start house hunting, it is easy to get caught up in that ideal "dream home". However, this can easily lead to over spending. It is important to know what you can realistically afford. Once you have a budget in mind, speak to a professional mortgage broker. This will give you viable information regarding what lenders are looking for when you apply. For instance, student debt is often viewed as a negative when, in reality, if you are making your payments in full and on time, this has a positive impact on your credit rating. Employment is also important. It is recommended to be able to show at least a year of steady employment in your new career to prove stability. Purchasing your first home is an exciting endeavor. This article is an excellent summary of very important points to get you started. February 17, 2012 When To Consider Raising Your Home Buying Budget Setting a budget for your home purchase is an important decision.  You need to know how much you can afford each month and translate that into the amount you can afford to take out on your new mortgage.  When you start house hunting with that budget in mind, you may find that you are not seeing many homes in the price range you have set that match your needs. There are three choices you have in this situation.  The first is to wait it out, keep looking, and hope the house you want comes up on the market in your price range.  The second is to compromise and buy a house that is affordable but not really what you want.  The final choice is to look at raising your home buying budget. How Much Will It Really Cost? The first thing to consider when you are looking at raising your maximum purchase prices is what difference it will make in your actual monthly payment.  In many cases, the difference may not be as difficult to handle as you might think.  Pull out that mortgage calculator and figure out what it would cost you per month to go $25,000 over budget, $50,000 over budget, or even $100,000 over budget.  Sometimes even a small raise in your maximum price can put you into a whole new class of available homes. Do You Have A House In Mind? So you drove past a house for sale the other day and fell in love, but it's out of your price range.  Take that number home and punch it into your mortgage calculator.  Can you afford that house, even if it might be a stretch?  Are you willing to consider making other budget cutbacks, such as on entertainment, to have the home of your dreams?  Prioritize your expenses and be realistic about your needs versus your wants. If having the right house is important enough, and the increased price is not going to strain your finances too much, you can consider going for it.  Remember that you can always offer less than asking price, and hope to get that dream home for a price closer to the original budget. A little flexibility is always a good idea when you start searching for the right house.  Remember that a new home is an investment and sometimes spending a little more will reward you later in terms of property value.  It can also save you from having to move again when you decide the compromise to save money was not worth it. February 16, 2012 Before diving into a new mortgage for a rental property, there are several things to consider. Purchasing an investment property while you rent is a terrific way to get started in the mortgage market, however, one needs to be well informed of the differences between purchasing one's own home and a property that is being rented. This article gives a summary of important points to keep in mind when making this decision. The first thing to consider is to establish contact with Revenue Canada regarding any taxes you would be liable for. They can also inform you of which expenses can be offset against the rental income. It is also important to know that while some lenders will advance 80% to purchase an investment property, it is often less expensive to put 20% down. Finally, keep in mind who will be inhabiting this residence. It is recommended to view renting a property as a business transaction. However, it may be difficult for some to detatch emotionally when a large portion of their savings is involved. February 15, 2012 With two weeks left to make RRSP contributions, many Canadians are grappling with the tough decision of where to invest their contributions. Many take the traditional route and invest in GICs, stocks or bonds. However, the Financial Post shows that the funds from your RRSPs can be invested in your mortgage. It is important when considering an investment of this nature to know that it comes with a set of strict regulations. One should also bear in mind the costs involved, such as mortgage administration fees and insurance premiums. Investment options aren't always easy to choose, however, this article gives relevant information on an option that could prove to be a lucrative one. February 14, 2012 The Canadian Mortgage and Housing Corporation, the crown corporation that insures Canadian mortgages, seems optimistic about the housing market in the next two years. Recently, there have been steadily rising concerns of what record low mortgage rates will do to the housing market. However, in this article we learn the CMHC is predicting the market will stay at a steady pace into 2013. This coupled with the expanding Canadian economy is expected to keep the market on an even keel. We also learn the average home price will slightly increase in 2012 and into 2013. These increases are moderate and shown to be consistent with the market conditions of 2011. February 13, 2012 While some may seem like they have it all figured out, many Canadians are struggling with the choice between the largest financial priorities in their lives. With a mortgage, a growing family and retirement in the future, where should the bulk of your income be spent? Building equity in your home, contributing to an RRSP or saving for your children's education? Of course, these choices will not be the same for everyone. Depending on interest rates, some are able to pay their mortgage off faster which will allow for a little more financial freedom in their retirement. Ultimately, this decision boils down to the individual and their personal goals. This article gives a little more insight into a decision with many factors. February 10, 2012 Before diving into a new home purchase, a thorough home inspection is a must. Although finding a trustworthy home inspector may not be a challenge, it is difficult, especially for first time homebuyers to put all of their trust in one person. This article gives a detailed list of areas to check that you or your home inspector may not think of. From inspecting and possibly running appliances to very simple things like moving items on counters to look for defects, this list is a comprehensive summary of important details to keep in mind when inspecting your dream home. A new mortgage is an incredibly important decision, and the home inspection is one of the most important steps included in the process. Taking some extra time and effort when inspecting your home can save you ample time and maintenance later on. February 9, 2012 The Globe and Mail reports a January decline in housing starts compared to December. The January rate of annualized housing starts was 197,900 units compared to December's rate of 199,900. Despite this decrease, the statistic is still above the expected rate of 194,000. It has been suggested by the Bank of Canada that some markets have become overvalued, and building permits in December reached a 4 1/2 year high. However, regulators are closely monitoring the situation. Although there is some concern on behalf of lenders that mortgage seekers are spending more than they earn, it is expected that the housing market will stabilize. February 8, 2012 The MLS Home Price Index shows an increase of 0.27 percent over last month and a 5.2 percent increase over last year. The Home Price Index monitors home prices in five major urban markets but does not provide any actual prices. In this article, we learn that although home prices are up from last year, month to month growth appears to be steadying and is expected to stabilize in the coming months. The good news for mortgage seekers is that townhouse and apartment prices are showing signs of slowing. Canada's policy makers should be pleased with this development, as these market trends should decrease the fears of a housing bubble. February 7, 2012 As we draw nearer to tax time, Canadians will receive a high frequency of reminders to make their RRSP contributions. This is believed to be good advice for most. However there are cases where putting your savings into an RRSP isn't always the best idea. As a first time home buyer, clients have the opportunity to withdraw funds from their RRSP to apply to their first purchase. RRSP contributions are ultimately a tax deferral or sheltering tool. This article illustrates the situations in which making an RRSP contribution will not necessarily give these benefits. Will your salary be increasing in the upcoming years? Are you met with a high volume of expenses alongside your mortgage? Do you have a pension plan at work? If you fall into one of these categories, you will also be given other options to consider that may benefit you more, such as contributing to a Tax Free Savings Account (TFSA) or making the contribution to your RRSP and simply not claiming it in this year's tax return. February 6, 2012 On Tuesday, documents released by Bloomberg showed signs that the Office of the Superintendent of Financial Institutions is concerned about the effect that loosening mortgage standards will have on the Canadian economy. In this Globe and Mail article, it is reported that lenders are tending to hand out loans without sufficient income requirements. Banks are under scrutiny as reports reveal that loans are being administered with the mere promise of repayment. Finance Minister Jim Flaherty shares this concern, but assures the public that these issues are being corrected. February 3, 2012 Renovating your kitchen is a great way to add value to your home and simplify your day to day routine. This article provides the top ten tips for a smooth kitchen renovation. From what materials will be the best for you to what important decisions to make before you start, these tips should prove extremely helpful when planning your kitchen renovation. You'll also learn what common pitfalls to avoid, like choosing a stain for your cabinets that isn't cohesive with the rest of your colour schemes. It is suggested you select surfaces that are easy to maintain and clean. In addition, keep it simple. Don't go overboard with decorative details or over the top appliances with all the bells and whistles. It is sometimes unecessary and may not always give you the best bang for your buck. For many people who have the goal of a dream kitchen, there are several refinancing options available. Make your dream a reality! Refinance or take out a Home Equity Line of Credit. This can be an excellent way to achieve your renovating dreams. February 2, 2012 Retiring with a mortgage doesn't have to be a nightmare. After retirement, continuing mortgage payments isn't always ideal. However, having a plan can provide options. This article outlines how mortgage payment options can assist you with your transition into retirement. February 1, 2012 As the Crown corporation draws closer to the 600 billion dollar cap imposed by the Federal government, the Canada Mortgage and Housing Corp. is starting to cut back on the amount of mortgages it will insure. Recently the CMHC has been met with an unexpected volume of requests for portfolio insurance. Click here to find out more ... January 31, 2012 Despite warnings about Canada's overstretched housing market, this article indicates we are not in the midst of an economic meltdown.  It is believed a true meltdown would only be precipitated if we see a sudden spike in mortgage rates. January 31, 2012 See how weighing the options of using your RRSP's vs using your TFSA can help first time homebuyers. January 30, 2012  Steve Maxwell :  SPECIAL TO THE STAR A good house in good repair. This is my idea of home improvement success, and if it’s also yours, then I want to explain something that rarely gets talked about. Whether or not you’re seriously into doing renovations and maintenance yourself, or you hire a professional to do everything right up to replacing the light bulbs, the key to a good house isn’t fundamentally about hands-on skills. Sure, the ability to work with tools is important (either your ability or that of the pros you hire), but skills are not enough. I’ve seen more than a few skilled people spend a lot of money renovating homes badly. I’ve also seen naturally klutzy people transform ugly, rundown places into beautiful houses in great condition. So what’s the difference? The make or break issue boils down to the way you handle inevitable, unforeseen problems as they emerge, especially in relation to time. Every human endeavour spawns problems and unpleasant surprises. Roadblocks are inevitable, but they’re especially common whenever home improvements are involved. And the older your house, the wilder and more interconnected your roadblocks are likely to be. Take a typical flooring replacement job in an older home as an example. You’ve got it in your mind to install that laminate flooring that’s been piled in your living room for a week, and you’ve taken four days off from work to get the job done. You spend the morning tearing up the old carpet, and discover why the floor has always been so squeaky. The original subfloor is made with pine boards alone, not capped with plywood as you expected. These boards are secured with nails that have worked loose over the years. You could screw the boards down, except that the screws you have kicking around in the basement are only long enough to penetrate ½ inch into the underlying joists, instead of a more reliable 1 inch. The boards are also uneven here and there, and you seem to remember something about laminate flooring needing a nice flat surface underneath to support it. With the carpet gone, you also notice drafts coming up from the basement through cracks between boards. It’s decisions you make at stages like these that determines whether you’ll have a good house or a bad one. The thing about home improvement disasters is that they rarely look like disasters in their embryonic state. What appears to be a little surprise about the subfloor in your living room actually holds the seeds of three different reasons your new floor could end up being a total mess. The loose, uneven and gapped subfloor boards are unforeseeable roadblocks, and the difference between success and failure depends entirely on resisting the common and powerful emotion of impatience. Before you started your flooring job, you had your heart set on walking on a new floor before going back to work. That’s a good goal, but the fact that it was based on incomplete information doesn’t naturally eliminate the urge to plow ahead and “get things done” even though circumstances are different than you initially believed. So do you use those screws that are not quite long enough, or get in the car and buy the right ones? Do you go online and find out how flat a subfloor really needs to be to properly support your particular brand of laminate flooring, or do you go ahead and lay the floor as things are, hoping for the best? And when you go online and find out that the 1/8-inch ridges in the subfloor are too tall, do you track down a power planer and hog them off after setting all the old nail heads below the surface of the wood? The route to home success in any venture is rarely a straight line. It almost always involves backing and forthing as new information comes in and new realizations appear. Home improvement success is often based on your ability to say no to the timeline of your initial game plan in favour of doing things optimally. Notice I didn’t say “perfectly.” There is no such thing as absolute perfection in this world, and trying to achieve it will drive you and any hired trades people crazy. That said, things can be functionally perfect, and this is worth shooting for. You or your pros need to understand the need to bend and flex in the pursuit of functional perfection. This often comes down to nothing more than the ability to endure short-term disappointment (no new floor before your next shift at work), in favour of better long-term results. Show me a person’s home and you’ve shown me how they deal with roadblocks throughout their entire life. The ability to flex and optimize with wisdom and patience as reality intrudes on our plan is where quality really comes from. January 27, 2012 Ryan Remiorz THE CANADIAN PRESS OTTAWA—A new analysis of household finances shows Canadians least able to afford it — boomers nearing retirement and those already in hock — are the ones piling up the most debt. The CIBC says its analysis suggests Canada may have a bigger household debt problem that the raw numbers suggest. The raw numbers are bad enough. The ratio of household debt to disposable annual income has reached 153 per cent. That’s a record high for Canada and approaches the 160 per cent level that preceded the housing collapse in the United States four years ago. But a closer look at who holds the debt shows those already above the 160 per cent line — about one-third — hold three-quarters of all the household debt. As well, a rising share of the highly indebted are 45 years and older, a time when the opposite would be expected. CIBC chief economist Avery Shenfeld says the micro analysis of debt does not point to a crash, but suggests that household spending will need to slow and will dampen economic activity going forward. January 26, 2012 Jonathan Chevreau  Jan 25, 2012 – 7:59 AM ET It was front-page news recently when BMO’s 5-year mortgage rates dipped below 3% for the first time in its 190-year history. Other banks followed with similarly sweet deals: RBC offered a four-year special 2.99% fixed-rate mortgage and a 3.99% rate on a seven-year term. When a week later the Bank of Canada held the line on interest rates, it should have been clear these historically good times for indebted homeowners may continue for some time. But is it an equally auspicious time to borrow to maximize retirement savings plans? RRSP “top-up loans” are available for up to $22,000 to maximize this year’s contribution, for those who lack the cash.  The idea is to repay a big chunk of it with the resulting tax refund come April, then pay off the rest over the next six months, in time to start the cycle again a year from now. But there’s a bigger opportunity if you’re among the many Canadians with tens of thousands of dollars in unused RRSP contribution room built up over previous years. Consider “catching up” with RRSP catch-up loans. Most banks will happily lend good customers $50,000 or even $100,000 for the noble purpose of padding retirement accounts — especially if you choose their investment products. Total accumulated RRSP room is shown on your last notice of assessment or you can check “My Account” on the Canada Revenue Agency’s web site. Even if you contribute the whole amount you don’t have to deduct it all this year: you may want to deduct some of the contribution in future years if you’re in a higher tax bracket. Unlike borrowing for non-registered (taxable) portfolios, interest on RRSP loans is not tax deductible. But if you believe the combination of reasonable stock valuations and low interest rates is compelling, it’s worth considering. Apart from the large tax refund RRSP catch-up loans may generate, there is potential for this investment to grow over time. Uncertainty in financial markets has kept a lid on stock prices. Financial educator Talbot Stevens says data since 1956 shows that when the Canadian market is down at least 10% one year, as in 2011, it often rises more than that the next. Borrowing to invest is safer when markets are down. But if you borrow for your RRSP, avoid the temptation to spend the refund: pay off the loan and/or reinvest the refund into the following year’s RRSP contribution. Under certain circumstances, RRSP borrowers can get rates almost as low as their mortgaged counterparts. John Turner, national director of specialized lending for BMO Financial Group, says customers can get RRSP loans with rates as low as its prime rate of 3% if they invest in BMO products. If investing in non-BMO products, it’s prime plus half a per cent, or a total 3.5%. Note that these are variable-rate loans so it’s not quite analogous to the 5-year fixed rates of 2.99% homeowners are enjoying. “Given this rate and refund environment, most customers are opting for the variable rate,” Turner says. It’s not a requirement but most pay off their RRSP loans right away, he adds. These loans are fully open, with no restriction on repayments: payments can be bumped up or lump sums can be applied to pay down some or all outstanding balances at any time. But what if you choose a larger catch-up loan that requires several years to repay? It would be nice to pay only 3% on a variable-rate loan but what if you believe rates will start rising in two or three years?  Can you lock in an RRSP loan at a low rate that can be repaid over five years, just like homeowners ? Yes, but at BMO the rate is quite a bit higher if it’s an unsecured loan: a whopping 9% unless the loan is backed by real estate or non-registered investments. In that case, investors could get the same 2.99% fixed-rate over five years as homeowners. The problem with straight mortgages is they have less flexibility if reborrowing. An alternative is BMO’s HELOC (Home Equity Line of Credit), which it calls Homeowner ReadiLine. This lets you borrow both variable and fixed in a single instrument, which Turner likens to “dollar cost averaging for mortgages.” For small loans of $10,000 or $15,000 to be repaid in two years, Turner says it makes sense to go with variable at prime or prime plus a half. For such a short term, the security of opting for a fixed rate isn’t worth it. Rates are a bargain currently and the market somewhat depressed so “it would be a great time to get in but you need to sit down with an advisor and make sure the investment meets with your risk profile.” Scotiabank’s catch-up loan lets you repay over 15 years and lets you defer three monthly payments. CIBC’s RRSP Maximizer Loan lets you borrow over terms of one to five years. At TD Canada Trust, RRSP loans start at prime plus 1% to prime plus 1.5%, says associate vice-president personal lending Shahz Beig. The On the Spot RRSP Loan lets you borrow up to $22,000, with a one-year term. Customers can defer payment the first 120 days so they can receive a tax refund and pay off much of the outstanding balance. There are no penalties for paying it off early. TD calls its fixed-rate catch-up loans “carry forward” loans, which can be amortized up to ten years. If you want a 5-year term, you could get a fixed rate of 5.5% or gamble on variable at 4.5%. Beig says it may not make sense for those close to retirement to take out a long-term RRSP loan. It will be harder to repay once retired and RRSP loans count as outstanding credit and may impact applications for other credit needs. At the Royal Bank, vice-president personal lending Richard Goyder recommends paying off RRSP loans within a year since rates may rise by 2013 or 2014. Until then, low rates mean manageable debt servicing costs and an opportunity to pay down principal. He doesn’t recommend lines of credit be used for RRSPs because of their revolving nature. “An RRSP loan has a special purpose and should be paid down over a set term.” Typically, that term is the one year of a top-up loan. Catchup installment (or term) loans up to $100,000 may be available with longer amortizations. Depending on the term and credit rating, the rate will be no more than prime plus two or three points. Not everyone is keen on RRSP loans. Jeffrey Schwartz, executive director of Consolidated Credit Counseling Services of Canada, Inc., thinks Canadians are too responsive to marketing pitches based on ultra-low interest rates. He sees no problem with smaller RRSP top-up loans if they’re paid back within 90 days but says people with debt problems are often in lower tax brackets and can’t count on the refund paying off 46% of the loan, as is the case with higher-bracket folk. Schwartz is skeptical about larger RRSP catch-up loans if they entail taking on debt over multiple years. In this time of low interest rates and stock volatility, he’s not convinced the financial returns on such loans will cover their carrying cost. It’s worth noting you may be able to catch up on your RRSP without borrowing, if you also have a non-registered portfolio. You can “transfer-in-kind” securities to an RRSP (or a TFSA), but may have to pay capital gains tax if you have a profit on what the taxman views as a “deemed disposition.” Ideally, you find securities roughly the same value as when acquired. January 25, 2012 Garry Marr Financial Post A new round of mortgage rules from Ottawa could include tough new measures for calculating how the self-employed qualify for loans and tighten regulations for condominium buyers, according to two separate sources. Ottawa remains concerned about the possibility of an inflated housing market and wants to crack down on the practice where consumers self-disclose what they make when applying for a loan. In the case of the condominium buyer, the government continues to consider a proposal that would have 100% of condo fees count when assessing how much debt a consumer could afford. “None of this is happening just yet. The housing market has slowed down and the government wants to see what will happen next,” said one source. “If the spring market picks up, then we will see more changes to the rules.” Bank of Canada Governor Mark Carney said Sunday that some parts of the Canadian real estate market are “probably overvalued” and policymakers are monitoring to see if further steps are needed to cool it. “We see that in a number of real estate markets in Canada, valuations are at a minimum, firm; in others, they’re probably overvalued. So there are risks there. We’re watching it closely. We’re working with our partners, the federal government, the superintendent of financial institutions,” he said in an interview broadcast on Sunday on CTV. ” Measures have been taken. They’ve been effective. We’ll keep up that vigilance. If more needs to be done, I’m sure the appropriate authorities will take those measures.” Stated-income products have become very popular during this housing boom, allowing more banks to get involved in loaning to the selfemployed. “These are individuals that are self-employed, have great credit and won’t be able to validate their ability to pay if they are not showing their income on their notice of assessment,” said one source. He says those people with stated income could have to make an even higher down payment than the normal 20% that exempts consumers from buying expensive mortgage default insurance. The source said some self-employed are qualifying for loans based on the assumption they have a lot of write offs, like car payments and housing costs associated with home office costs. “They get to include that based on the assumption that self-employed people have an advantage from a tax perspective,” said the source. “The government is trying to figure how they would present this.” A source with one of the banks said the government is trying “zoom in” on marginal borrowers so it doesn’t get into a U.S. type of situation where they were not verifying income. “What banks are doing usually when it comes with self-employment is not dealing with declared income because nobody believes it. What they do is look at their behaviour and put more weight on it,” said the source, referring to how those consumers handle their debt. “With an employer, you can call and verify their income.” The labour market is roughly about 13% self-employed so new rules could have a major impact but the source indicated it does not mean those people would be shut out of the loan market. “It will be just more difficult for them. You are going to have to prove income in a more precise way,” he said. The suggestion the government might crack down on condo buyers is not new, having been scrapped last year in favour of tougher new rules on amortization lengths and refinancings. Most people in the real estate sector now believe amortizations will be reduced to 25 years after having been as long as 40 just three years ago. Brad Lamb, a Toronto real estate broker and condo developer, has heard the government is again considering including 100% of condo fees in calculating debt levels but doesn’t think it will happen. “The 25 year amortization is a no brainer, they should do it,” said Mr. Lamb. “It’s not smart to have loose lending rules. But the condo market is hot because of investors not speculators. These investors are coming [from around the globe]. This silly [condo fee] change will do nothing. These people are buying with cash.” January 24, 2012 By Paula McCooey, The Ottawa Citizen   If you have a queasy stomach, you may want to take a Gravol because the Ottawa real estate market may be in for a bit of a bumpy ride over the next few years. That's the prediction of two economists speaking at the Greater Ottawa Home Builders' Association economic forecast seminar this week. RBC economist Paul Ferley and TD economist Sonya Gulati say Ottawa and the rest of the country are not protected from the world's economic woes. "The Ontario housing market outlook is not immune to global financial market pressures," says Ferley. "The development in Greece and Italy may seem like someone else's concerns, but they do present a threat to the local economy." And with more than half of Ontario's economy relying on exports to the U.S., the province is "very much dependent on U.S. growth," he says. They both forecast the economic recovery across the country will be moderate and urge the province and individuals to practise fiscal restraint, particularly given that Canadian households are holding record debt levels, which will pose a massive problem when interest rates finally climb. Given the U.S. Treasury Board is expected to maintain lower rates until 2013, Canada is likely to follow suit. But once lending rates do rise, which will happen - as soon as next year, they say - that will pose an issue for families struggling to make ends meet. "We have to watch debt," says Gulati. "If there's a 1.5-percentage point increase in rates, that translates into $250 extra for the average household. That is significant for people on a tight budget." She estimates Canadian homes are overvalued by 10 per cent, so we should expect a price correction of around the same amount. She says home affordability will remain low and gradually deteriorate due to impending higher interest rates. "You can expect a gradual unwinding of home prices and sales activity," she says. January 23, 2012 It is truly astounding how many people lack the appropriate amount of insurance.  Continue reading to learn some interesting facts about disibility insurance. Click here to read about the mortgage insurance that is available for your new Mortgage Brokers City Inc. mortgage. January 20, 2012 Are more sellers taking the advice of their real estate agents and jumping into the market early this year?? This article shows early indications that they are heeding the advice of their agents.  These decisions are based on several factors including the recent reduction in mortgage rates. Click here to find out more about our best mortgage rates. January 19, 2012 Even though the most recent stats indicate a mild softening of the market, this article implies that Jim Flaherty is not going to be quick to intervene. Though mortgage rates are still quite low Flaherty cautions consumers not to make too many assumptions about how long the rates will remain low.  January 18, 2012 Click here to read the full article. January 17, 2012 "Buyer Beware"...  Though some lenders have dropped their 5 yr mortgage rates lower than ever before, be sure to read the fine print.  This announcement does not come without restrictions.  Explore all your options  first, to see what type of mortgage is best suited to you. To find out more about what rates are available to you, please contact us today.     January 16, 2012 Read on to see how having a low credit score can cost you real dollars and cents.  In this excellent article, the costs to client equated to more than $200 per month.  To check your own credit score, go to the Equifax website and order yours today. Click here to explore what factors influence your credit score. January 12, 2012 Thursday, Jan. 05, 2012 4:09PM EST Canada’s housing boom is among the most long-lived in the Western world at 13 years, but the next few years could chip away at the gains that have seen the average house increase in value by 85 per cent since 1998. In a report released Tuesday that said the Canadian housing market was the strongest in the developed world in the third quarter, Bank of Nova Scotia economists said “the slow pace of the global economic recovery, intensifying sovereign debt concerns, weak consumer confidence and high unemployment all continue to weigh on residential property markets” in 10 countries it tracks. The malaise has already set in – of the 10 countries studied in the third quarter, average inflation-adjusted home prices were below year-ago levels in seven of them, and above in three (including Canada, where prices are 4.8 per cent higher). The other countries to post gains were France at 4.4 per cent and Switzerland at 3.3 per cent. The sharpest declines, meanwhile, were seen in Ireland were prices were down 14.7 per cent. “Canada remained a notable outperformer, though activity here too shows some signs of cooling. Weak market conditions will likely persist well into 2012,” economist Adrienne Warren wrote. “While the combination of low borrowing costs and lower home prices have bolstered housing affordability, there is insufficient domestic momentum in the majority of advanced nations to support a significant revival in demand. An oversupply of housing and a more cautious lending environment also will hold back the recovery.” Merrill Lynch warned Monday that prices could correct by as much as 10 per cent in the next two years in Canada because of weakness in the economy, expressing particular concern about Toronto’s condo market. The Bank of Canada also warned the Toronto market looks overbuilt and could see prices drop. “The cycle of rising real home prices is long, lasting on average 12 years,” Ms. Warren wrote. “Italy’s boom was the shortest at 8 years, while Ireland and Sweden count 15 years. Canada’s ongoing housing boom is in its 13th year... Canada’s residential real estate boom started several years later than many of its counterparts, with the economy still feeling the effects of the deep recession of the early 1990s and weak labour markets through mid-decade.” From the report: "The Canadian housing market remains an outperformer among advanced nations, with real home prices up 4.8 per cent y/y in Q3. While the sector’s continued buoyancy is impressive, monthly data through November suggest prices have leveled off since the spring, with conditions in the majority of local markets in ‘balanced’ territory. Ultra-low interest rates are still attracting buyers, but increased economic uncertainty combined with some recent slowing in the pace of hiring could dampen demand in the new year. In the United States, average inflation-adjusted home prices fell 7.5 per cent y/y in Q3, bringing the cumulative decline since the 2005 peak to over 30 per cent. Despite near-record affordability, persistently high unemployment, tight credit conditions and a lingering oversupply of unsold and foreclosed properties suggest a sustainable recovery could still be several years away. The French housing market remains the most resilient in Europe. Average inflation-adjusted home prices were up 4.4 per cent y/y in Q3, and are nearing pre-crisis record highs after a brief downturn in 2008-2009. Tight housing supply is underpinning prices, but these continuing gains appear unsustainable in an environment of high unemployment, government restraint and slowing regional exports. Switzerland’s housing market also remains relatively buoyant, with average prices up 3.3 per cent y/y in Q3. Ireland still holds title to the weakest residential market in our sample, with average inflation-adjusted home prices down 14.7 per cent y/y in Q3 and by a cumulative 44 per cent from their early 2007 highs. The steep and continuous price declines of the past four years have essentially wiped out a decade of price appreciation. U.K. house prices are declining again after a brief recovery in 2010. Real home prices have contracted on a year-over-year basis for the past three quarters, falling 6.7 per cent y/y in Q3. Spain’s deep housing slump continues, with average prices down 8.9 per cent y/y in Q3 and almost 25 per cent from their early 2007 peak. Prices have also recently dipped into negative year-over-year territory in Sweden, consistently one of the region’s better performing housing markets. In Australia, average inflation-adjusted home prices fell 5.7 per cent y/y in Q3. Even so, the slowdown follows strong gains in 2010, leaving prices near record levels. While domestic economic conditions remain relatively solid, some potential buyers have been sidelined by deteriorating housing affordability and a more uncertain global outlook. There is still no end in sight to Japan’s two-decade long property slump, with residential land prices down 3.3 per cent y/y in Q3." January 9, 2012 By Vito Pilieci, The Ottawa Citizen January 6, 2012 Ottawa’s unemployment rate held steady in December, ending three months of increases, according to Statistics Canada. The national statistics watchdog said the creation of 5,400 new jobs in the region helped to keep the unemployment rate at 6.3 per cent during the month. More than 697,800 Ottawa residents were employed during the month, up from 692,400 in November. According to Statistics Canada, 71.6 per cent of 745,000 eligible workers are actively seeking jobs. In November, 71.1 per cent of eligible workers were employed or seeking employment. The jobless rate bottomed out at 5.2 per cent in August. These numbers are adjusted for seasonal influences. Despite the federal government’s austerity plans, public administration added almost 6,000 jobs in December, growing to 116,000 from 110,900 in November. Nationally, the Canadian economy added fewer jobs than expected in December but still managed to bounce back from declines in the previous two months. Statistics Canada said Friday that 17,500 jobs were created last month, even as the unemployment rate edged up to 7.5 per cent from 7.4 per cent in November as more people entered the labour market in search of work, the agency said. The gains follow 54,000 job losses in October and another 18,600 in November. Economists had expected 20,000 jobs to be added in December. “Taking the string of the last few months together, Canada’s job market still looks soft, and a rising unemployment rate has been in contrast with the drop seen stateside, said Avery Shenfeld, chief economist at CIBC World Markets. “We may have less reason to feel smug about Canadian outperformance, at least in terms of the near-term growth trend.” December saw an increase of 43,000 in part-time work, while full-time employment declined by 26,000 positions. Most of those job gains, 3,800, were in the private sector, while public-sector employment fell by 17,300. “Over the past 12 months, employment growth totalled 1.2 per cent (199,000), with nearly all of the gains in the first half of the year,” Statistics Canada said. Ontario gained 15,700 jobs in December, reducing its unemployment rate by 0.2 percentage points to 7.7 per cent. Douglas Porter, deputy chief economist at BMO Capital Markets, said “while far from stellar, the modest job gain is a mild relief after two months of declines.” “The good news was that manufacturing was up 30,000, as the sector had shed almost 80,000 jobs in the prior three months alone. On the weak side, construction and finance and real estate posted double-digit drops,” he said. On Thursday, a survey by the Economic Club of Canada and Pollara Strategic Insights showed 70 per cent of Canadians believe this country is already in another recession, albeit a mild one Michael Marzolini, chairman of Pollara, said the survey unveiled “the most pessimistic findings we’ve had in 16 years.” “Canadians are more self-centred. They believe themselves under siege,” he said in releasing the poll results. Francis Fong, at TD Economics, said Canada’s unemployment rate is expected “to continue treading higher, likely to about 7.7 per cent, while job gains will average a paltry 10,000 per month, more heavily weighted to the second half of the year.” “Government hiring is likely to remain under pressure in the coming months and private sector hiring will likely be tested by further deterioration in Europe’s debt crisis.” January 6, 2012 January 5, 2012  03/01/2012 4:00:00 PM Mortgage Brokers News Housing prices will continue to rise in the short term even as Canada’s resale housing market tightened slightly in November, as sales rose in more than 50 per cent of markets while the number of listings declined, according to the Conference Board of Canada. Sales rose in 16 of the 28 markets the board tracks for its metro resale index, with seven of those markets posing a gain of more than five per cent over October’s number. Year-over-year sales rose in 15 areas, down from October, when 20 of the urban areas posted sales growth over 2010. “The supply of new listings fell in 23 of 28 markets in November, but still exceeded year-earlier levels in 20 jurisdictions,” the board said. “An easing in supply of listings, combined with slightly weaker sales gains, lifted the sales-to-listings ratio in November in 23 markets. This left four areas as ‘sellers’ markets, while 21 remain ‘balanced’.” The drop in listings resulted in higher prices in 17 areas month-over-month, while the year-over-year price was higher in 19 — with 16 markets recording growth of four per cent or more. The Conference Board predicts all but three of the 28 markets it tracks for the index will see some increase in housing prices in the short term — the Ontario cities of Oshawa, London and Windsor being the exceptions. Saskatoon and several Quebec markets — Gatineau, Montreal, Quebec, Sherbrooke, Trois-Rivieres and Saguenay — are expected to see the biggest increases in housing prices in the near term, the board said, predicting a seven per cent year-over-year gain. A five per cent gain appears to be in the cards for Victoria, Vancouver, B.C.’s Fraser Valley, Calgary, Edmonton, Regina, Winnipeg, Halifax and Newfoundland, the board said. It expects housing prices to rise three per cent in Saint John, as well as the Ontario centres of Thunder Bay, Sudbury, Toronto, Hamilton, St. Catharines, Kitchener, Kingston and Ottawa. January 4, 2012 Katherine Scarrow Globe and Mail Update Posted on Friday, December 30, 2011 6:19AM EST As global housing markets coughed and sputtered in 2011, Canada's barrelled ahead, even turning a few nervous heads along the way. In fact, recently the Economist branded Canada one of the nine countries where “home prices are overvalued by about 25 per cent or more,” and among the four where prices are in line with those in the United States "at the peak of its bubble." Is there really a cause for alarm? Are we doomed to ride this white-knuckled rollercoaster in 2012? Probably not, according to Benjamin Tal, deputy chief economist of CIBC. "The housing market of tomorrow will not be as exciting as the housing market of yesterday,” he said in an interview. While the current real estate market is overshooting, with home prices far higher than than they should be, we shouldn't expect a crash either, he explains. As long as interest rates remain relatively low and subprime mortgages kept at bay, the most likely scenario is that the market will plateau. “Prices are already softening, housing starts aren’t in the sky, MLS [multiple listing service] activity is starting to soften, so it suggests the market is already starting to level off, and that’s what we need,” he said. How will a more relaxed real estate market affect new homebuyers, investors and renovators in 2012? Here are Mr. Tal's predictions: 1. First-time home buyers Affordability and interest rates will be the major concerns in 2012. Prices will continue to be expensive, especially in urban centres like Vancouver and Toronto, since interest rates are likely to remain low for the time being. But rates won't stay low forever, which is why you should estimate mortgage payments based on interest rates that are 2 or 3 percentage points higher than current interesst rates, and if you cannot afford that, get a smaller mortgage and buy a less expensive house. Expect an end to bidding wars, or at least a temporary ceasefire. New home buyers will have the luxury of time in terms of looking at properties without being rushed into decisions. That’s the positive. The negative is that prices continue to be drastically higher than they were five or 10 years ago. 2. Investors and flippers If you’re in it to flip it – meaning you buy a home hoping the price will rise by just doing minimal changes – those days are over. In some pockets of the country, you may even see prices go down. 3. Renovators The cost of renovations will not increase significantly so long as interest rates remain at their current level, so it’s a good idea to take advantage of this time to finance these projects. For those looking to take on a second mortgage, remember to make sure you’re equipped to finance them if interest rates creep up. Variable-rate mortgages are still a good option for those who are able to withstand fluctuations in the market and "ride the ups and downs without getting a stomach ache."   January 3, 2012 Time Cestnick From Thursday's Globe and Mail Last updated Wednesday, Dec. 28, 2011 8:27PM EST Once again it’s time for my annual New Year’s resolution. That’s right, a single resolution. This year, I’m getting into shape again. I’m going to start by eating slowly in 2012. It’s not about slowing my metabolism. It’s about my kids. They eat so much that if I slow down my pace of eating, there won’t be anything left by the time I’ve finished my salad. That’ll do it. What about you? If you’re still thinking about your New Year’s resolutions, consider adding tax savings to the list. If you make just one change to your affairs annually to save tax, you’ll do yourself a world of good in a short time. Consider one of these ideas: 1. Create self-employment earnings. Self-employment is still one of the greatest tax shelters available. Why? Deductions. Operating a part-time business from home is all you need to do. This can open the door to deducting a portion of those things you’re paying for anyway, such as mortgage interest, rent, property taxes, home insurance, home repairs, utilities, vehicle repairs, gas, auto insurance, interest on a car loan or lease payments, computer costs and more. 2. Pay family members a salary. If you have self-employment earnings you can move income into the hands of a family member who is in a lower tax bracket by paying wages or a salary for work performed. If you’re an employee, speak to your employer about requiring you to hire your own assistant for your work. Our tax law will allow an employee to deduct salary or wages paid to an assistant provided your employer required you to pay for one. Hiring your spouse or a child who is in a lower tax bracket will keep the money in the family and will save tax dollars. 3. Make your interest deductible. If you’re paying interest costs that are not deductible, and have some cash or investments on hand, consider doing a “debt swap” to create a deduction for your interest. You can do this by taking some of your cash, or selling some investments to create the cash, and using the cash to fully or partially pay down your non-deductible debt. You can then re-borrow to replace those investments or that cash. As long as the new debt is used for an income-producing purpose you should be entitled to deduct your interest costs. 4. Extract cash from your company tax-free. If you own a corporation, consider paying yourself capital dividends, repaying shareholder loans owing to you, and returning “paid up capital” to yourself to access the cash in your company tax-effectively. Also, consider claiming a refund of “refundable dividend tax on hand” (RDTOH) by paying yourself taxable dividends. All of this may sound like a foreign language, but a visit to a tax pro, perhaps your friendly chartered accountant, will help. 5. Consider a leave of absence or sabbatical. You can defer tax by setting aside some money in a deferred salary leave plan (DSLP). You can then take a leave of absence or sabbatical in a later year and collect your deferred salary at that time. Speak to your employer about setting up a DSLP. A DSLP must be in writing and meet certain criteria, such as: No more than one-third of your salary can be set aside for the leave, your leave must be at least six consecutive months, the leave must begin no later than six years after the salary deferral begins, and following the leave you must return to work for a period at least as long as the leave. There are other details that must be looked after as well, so your employer will need to seek advice on this. 6. Create pension income for the credit. If you have eligible pension income you’ll be entitled to claim the pension tax credit. If you and your spouse each claim the credit, this could fully or partially shelter the tax on $4,000 ($2,000 each) of pension income. It’s not going to make you wealthy, but it’s all part of building up tax savings year after year. You can create eligible pension income by, for example, converting part of your registered retirement savings plan to a registered retirement income fund to create $2,000 of RRIF income annually. You can also provide your spouse with eligible pension income by reporting up to half of certain pension income in his or her hands. December 29, 2011 Jeremy Torobin  OTTAWA— From Monday's Globe and Mail Last updated Monday, Dec. 26, 2011 6:48PM EST For debt-addled Canadians across the country, 2012 will be a crucial test of whether they can rein in their borrowing in another year of super-low interest rates. After Boxing Week caps off a holiday spending spree that by many measures outstripped the previous year’s, households will be back to the unpleasant reality of an uncertain economic climate, stagnant wages and the risk that global threats like the European crisis cause job losses at home. But experts say spending money helps people calm their nerves, even when they’re nervous about their financial burdens, so there’s no guarantee Canadians will hunker down, other than those who have literally exhausted their capacity to borrow. That’s why Bank of Canada Governor Mark Carney, who is expected to keep his main interest rate at 1 per cent for at least another year after 15 months at that level, spent this December much as he did in 2009 and 2010: flagging the dangers of taking on debt that will be less manageable when rates rise, and urging households to start living within their means. While he is mainly concerned about the most vulnerable 10 per cent of households, and says debt is not yet a “clear and present danger” to the economy, he still considers it the No. 1 domestic risk. And no wonder: The debt-to-income ratio rose to a record 153 per cent in the third quarter, according to Statistics Canada. That compares with 146 per cent in 2010 and exceeds the level in the U.S. and the U.K., where families are working to rebuild wealth lost to housing crashes. Canada is inching closer to the 160-plus threshold that got the U.S. and the U.K. into so much trouble four years ago. A sudden negative event such as a surge in unemployment, a drop in house prices – which many analysts say are roughly 10 per cent higher than they should be – or rising interest rates could land up to two million Canadian households in trouble. And, regardless, the more people spend on interest payments, the less they have to spend on everything else, crimping the consumer spending that accounts for most of the economy at a time when prospects for exports over the next year or two are shaky. Still, economists point to an encouraging sign: Though debt loads grew in 2011, they did so at the slowest pace in almost a decade. Mortgage debt, the vast majority of all consumer credit, rose at about a 7-per-cent annual pace, down from 12 per cent two years ago, and credit-card debt growth, aside from the usual holiday-shopping season spike, has also moderated. The debt-to-income ratio has risen largely because incomes are gaining at a slower pace than debt loads are. Jeffrey Schwartz, executive director of Consolidated Credit Counselling Services of Canada Inc., said that in the past year, more of the most vulnerable Canadians – people devoting at least 40 per cent of their incomes to debt-servicing costs – have started to regain control by coming to groups such as his for help. The question is whether this vigilance can be sustained, with some economists predicting no change in interest rates until late 2013. “The test will be the next 12 to 24 months, how we behave in the low interest-rate environment and whether we are able to resist the temptation,” said Benjamin Tal, deputy chief economist at CIBC World Markets. “If next year house prices are up 12 per cent, and mortgage activity and credit is up 15 per cent, I will be very concerned. Interest rates will eventually rise, and we would be in a much more vulnerable position than we are now.” Analysts speculate that at some point this year, Finance Minister Jim Flaherty may step into the mortgage market to tighten eligibility requirements for the fourth time in three years. Most, however, see this as unlikely until the European debt crisis stabilizes. Craig Alexander, chief economist at Toronto-Dominion Bank, said that without the mortgage measures already taken, the debt-to-income ratio would have soared past 160 per cent. The latest crack was last winter, when Mr. Flaherty announced that Ottawa would no longer insure mortgages with 35-year amortizations, essentially reducing the limit on insured mortgages to 30 years, and cut the maximum amount Canadians can borrow when refinancing their mortgages to 85 per cent of the value of their homes from 90 per cent. Ottawa also pulled government guarantees on lines of credit secured by homes. Many economists – and Ed Clark, TD’s chief executive officer – say further cutting the maximum length on federally insured mortgages to 25 years would be prudent, and that such a move wouldn’t necessarily hurt the economy or the housing market. For now, though, even as Mr. Carney and Mr. Flaherty emphasize they are closely watching debt growth, they continue to rely on moral suasion to cajole consumers, and banks, into showing restraint. In a Dec. 12 speech, Mr. Carney argued Canada has a limited window to cut its reliance on unsustainable, “debt-fuelled” consumer spending. As investors around the world pour capital into Canada, he warned, too much is being used to fund household borrowing instead of building the economy’s productive capacity, and he urged businesses to boost investment to fill the “noticeable gap” in the economy as households cut back. That sort of long-term thinking is music to the ears of economists like Mr. Alexander, who argue Canadians must do more to shift their behaviour while they still can. While most of the attention has been focused on lower-income households, however, Mr. Alexander noted that Canadians near retirement have also piled up debt. “Whenever interest rates rise, it will be a shock to a lot of people, and I think it’s going to be a national shock, because they’ve been low for so long,” he said. “But that might be a 2013 story or, more important, a 2014 story.” December 28, 2011 Jonathan Chevreau Dec 24, 2011 It’s been a crazy year in the markets, with government profligacy at the fore from the world’s largest economy (the U.S.) to the fragile group of nations embracing the euro. It may seem daunting for average Canadians to cope with but the new year offers a chance to wipe the slate clean and return to financial sanity — at least at the individual level. We have concentrated on wills, insurance, debt, savings and investing. Get your act together on these five fronts and 2012 could turn out to be a positive year, however insane things get politically and economically. Wills A good place to start is your will. Without one, the province decides who gets everything you own, says Toronto-based estate lawyer Barry Fish, co-author of Where There’s An Inheritance. Without a will, there will be no executor who can act immediately upon your death, no guardian for minor children and your kids will take their full inheritance at the age of majority. Cutting costs with a “will kit” can be penny wise but pound foolish. After you die, you won’t be around to explain what you meant. “We review many home made wills that are missing important clauses, are not signed or witnessed properly, and often use imprecise language that can lead to a family war,” Fish says. For example, one do-it-yourselfer’s will said “ I leave all my antiques to my sister and everything else I own is to be equally divided between my brother and my sister.” This language is more ambiguous than it may appear. “A court might have to interpret the validity of your brother’s argument that your expensive lamps from the 1950s are not  really antiques,” Fish points out. Bottom-line is wills are not one-size-fits-all documents. They must be tailored to your own life situation. The needs of single people are markedly different from married couples with children. Insurance Like wills, life insurance is one of those must-haves if you’re married with children, or even just contemplating starting a family. For young people just starting out, basic 10-year term insurance will do the job, says financial planner and chartered life underwriter Paul Philip. “It’s very cheap initially but the downside is it gets very expensive later.” Most policies are guaranteed renewable and convertible so if you’re happy with the price on, say, a $1 million policy, the insurer can’t deny coverage later. You have the right to convert to permanent insurance later in the event your health changes and you become otherwise uninsurable. Permanent insurance provides both an investment and an insurance component and ultimately may provide useful tax and estate planning advantages. Philip, of Toronto-based Financial Wealth Builders Inc., doesn’t focus on property and casualty insurance but suggests homeowners use the same insurance provider for both their car and home insurance. He suggests considering raising deductibles on both policies and using the premiums saved to bump liability insurance from $1-million to $2-million. The additional liability coverage can be set up as an “umbrella” and floats between your home and car, providing you dual duty. “My thing is to get more than one turn from a dollar if it can be done.”  If you’re paying for full replacement of goods on your home policy, you need to document your possessions. An easy way to do it is to shoot a 5-minute walkthrough of your home with the video function of a smartphone or cellphone. Debt  If there’s one thing the experts agree on in this post financial crisis world, it’s the problem of debt, both of individuals and of governments. In Financial Recovery in a Fragile World, tax guru Evelyn Jacks and her co-authors devote the first 25% of the book to detailing how the sovereign debt crisis in Europe, Japan and even the United States is unlikely to leave Canadians unscathed. We may not be able to control macroeconomic risks like inflation, interest rates or stock volatility but we can take steps to get our personal financial house in order. The best defence is to get liquid and eliminate as much debt as possible. In his just-published Crushing Debt, chartered accountant David Trahair lays out the reasons why Canadians should “drop everything and pay off debt.” I couldn’t agree more and believe we shouldn’t even think about retiring while still encumbered by consumer or even mortgage debt. Trahair devotes a chapter to how Canadians can extricate themselves, whether slightly extended on credit cards or so hopelessly mired in debt that insolvency is on the horizon. Simplest is to stop spending and pay off existing debt, renegotating with your creditors and/or consolidating all debts with lower-interest debt like a line of credit. The second way is to pay off at least outstanding principal with the help of a Debt Management Program offered by credit counsellors. Third is a consumer proposal, where you pay off only a portion of principal owing to creditors and the most extreme is outright bankruptcy, a last resort that nevertheless won’t help wipe out your mortgage or car loan. Savings  Once debt is eliminated, the next two steps are saving and investing. Investing is the glamour topic that gets all the media attention but without saving, there can be no investing. Saving is simply a matter of spending less than you earn and directing the surplus into a savings account that removes the temptation to spend it. David Chilton dedicated the entire first half of The Wealthy Barber Returns to raising awareness of the poor savings levels of Canadians and how they must improve. Almost his very first words there are “you’ll have to learn to spend less than you make.” And the magic words that will help you pull that off? “I can’t afford it.” Chilton has always espoused the notion of “Pay Yourself First,” which means setting up a pre-authorized chequing arrangement so that 10% or more of your paycheque automatically is siphoned off into savings (and ultimately investments) before you’re tempted to spend it. This automatic savings approach is also the heart of a series of books by U.S. author David Bach: The Automatic Millionaire. Investing Finally, we come to investing, which we’ve deliberately placed last to emphasize the importance of the other four seemingly more mundane measures. Normally, your first savings will be in interest-bearing vehicles like GICs or savings bonds. With interest rates still near 50-year lows, it’s hard to build wealth for the faraway future this way. By all means, establish an emergency cushion of savings in “safe” liquid vehicles like GICs or money market funds, enough to carry you through six months in the event of job loss. The best place to shelter such a fund is the new Tax Free Savings Accounts or TFSAs, launched by Ottawa in 2009. But don’t be fooled by the “S” in TFSA. Like the RRSP, the TFSA is an excellent place to start investing for the long term by including slightly riskier securities like dividend-paying stocks or investment funds that will ultimately give you more growth and protection against future inflation. As of January 2012, you can contribute another $5,000 to a TFSA (and your spouse can too), bringing the total to $20,000 per person, or $40,000 for a couple. BMO Retirement Institute head Tina Di Vito says if you can’t come up with a lump-sum to invest today, consider making monthly contributions. “You’ll be surprised how quickly and painlessly you can accumulate a substantial amount of money. You’ll also benefit from dollar cost averaging by buying into the market during both the ups and downs rather than trying to time the market.” TFSAs are ideal for young people in low tax brackets and also for low-income seniors who don’t want to see their GIS benefits clawed back. The vast majority between these extremes will want to invest in both TFSAs and RRSPs, particularly RRSPs if they’re in the top tax brackets. That’s because RRSPs cut your taxable income and should create a tax refund come April. TFSAs don’t but one day in the far future when you’re retired, you’ll love the tax-free income TFSAs will generate. So next time a friend asks about your finances, you can reply “We’re not out of the woods yet, but we’re well on our way.” December 24, 2011 Julian Beltrame The Canadian Press   OTTAWA—Canada’s annual inflation rate remained relatively strong at 2.9 per cent last month as Canadians continued to pay considerably more for food and gasoline than they had 12 months earlier. Statistics Canada said food rose sharply by 4.8 per cent in November from last year, as consumers saw double-digit increases for such basics as fresh vegetables and bread, while meat rose a healthy 6.2 per cent. The monthly overall gain in food was the highest recorded since July 2009, the agency said. Meanwhile, gasoline also continued to be a key driver of annual inflation, rising 13.5 per cent in November from 12 months earlier. Gasoline price inflation is on a downward track after peaking in May at close to 30 per cent. On a month-to-month basis, Canadians actually paid 2.3 per cent less for gas in last month than they did in October. The continuing high cost of gasoline helped push the transportation component up 5.7 per cent, although that was less than the 6.7 per cent gain recorded in October. Overall, Statistics Canada said that prices rose in all eight major components it tracks and in every province in Canada, with the highest rate — 4.1 per cent — recorded in Newfoundland and Labrador. Still, the Bank of Canada has repeatedly stressed that it is not worried about inflation even though it has remained above the bank’s two per cent target for more than a year. The bank’s core inflation index, which tracks underlying price pressures by excluding volatile items such as energy and some foods, was also north of target at 2.1 per cent in November. But in its most recent report on the state of the economy, the central bank said it expects overall inflation to decline to one per cent by mid-2012 as gas continues to decline. There’s little in November’s report that will likely to detract from that sentiment. Aside from food and energy, most price increases in November were tame. Shelter costs rose 1.5 per cent, although fuel oil, which is related to the energy component, was still 24.4 per cent higher than 12 months ago. Consumers also paid 4.4 per cent more for car insurance. However, home mortgage and interest costs fell 1.1 per cent, natural gas declined 2.7 per cent, video equipment dropped 12.4 per cent, women’s clothing slimmed by 2.1 per cent and furniture cost 2.1 per cent less. On a month-to-month basis, inflation was a tepid 0.1 per cent in November from October, the agency said. December 20, 2011 Preet Banergee  Last updated Tuesday, Dec. 20, 2011 9:39AM EST   We often hear about the income gap. But what about the debt gap? Some people have no debt and some people have debt up to their eyeballs. It has nothing to do with numeracy (how good one is with numbers). After preparing many financial plans, I can tell you that this phenomenon cuts across net worth. It doesn't matter much if someone earns $40,000 or $400,000, some people have a tendency to use too much credit. Stephan Meier and Charles Sprenger's study, Present-Biased Preferences and Credit Card Borrowing, finds that people who are present-biased (desire immediate consumption) have significantly higher amounts of credit-card debt. The study controls for income and other social factors, not to mention the well-documented evidence that people tend to under-report their total debt levels. Their research cited an average of $3,027 in non-mortgage debt a person, but when you look only at people who carry balances on their credit cards this number almost doubles to $5,799. Someone who wants the latest iPhone the day it’s released is obviously more likely to borrow money to finance the purchase. And they may not place an equal importance on future ramifications. With the holidays stepping into high gear, many people break their spending rules with the simple justification, “It's Christmas!” or whatever holiday they celebrate. This is a similar line of thinking as “You only live once!” Those four words are usually uttered moments before doing something you know is stupid. Suspending the requirement to balance your cheque book occurs for other occasions as well. A promotion at work, a new job, getting married. The list is endless, with some offences clearly worse than others. But the point is that these once-in-a-while splurges are justified with emotions, not math. This is exactly the present bias described in the study. If you happen to be one of those people who lives and spends in the moment, you have to learn how to handle your bias. Think back over the course of the year and figure out how much “extra” money you spent on indulgent expenses. Add it up and divide by 12. This is your new monthly savings amount. Set it up with your bank to withdraw it automatically every month. This new (somewhat draconian) plan will mean that for the next year not only will you have a cash-flow drain from the automatic savings, you will still have to pay off the debts from last year (and who knows how many previous years carried forward). But welcome to the real world where past choices catch up with you. You can choose to fix it now, and that might mean delayed gratification for a year or two, or you can roll the dice and see what happens when interest rates start to rise. Earning interest is better than being charged interest, and in the long run it means you can actually buy more. Because it's true. You only live once. So don't screw it up. Some things to consider: Canadian debt levels have swollen faster than our waistlines will over the holidays. Come January, consider building a debt plan to go with your new workout routine. Number of credit cards in circulation in 1977: 8.2 million Number of credit cards in circulation in 2010: 70.3 million Total sales and cash advances on credit cards in 1977: $4.04-billion Total sales and cash advances on credit cards in 2010: $308.98-billion Source: Canadian Bankers Association From a survey of 1,000 Canadian homeowners with household income over $50,000: 56% do not, or do not intend to, have a debt-repayment plan with an ultimate pay-off date 65% did not shop for better interest rates on their mortgage through different providers 55% do not plan to work with an adviser to get advice on debt management 43% do not plan to consolidate credit into a single low-interest rate December 20, 2011 By Michael Oliveira, The Canadian Press TORONTO - Most Canadians still aren't pulling out their phones to check their bank account balances and pay bills but experts and users alike expect a whole lot more will be doing so in 2012. "We definitely see there's been humongous growth on the banking front on the phone platform," says Bryan Segal, vice-president of the digital measurement firm comScore. Canadians are among the world's leaders when it comes to embracing online and mobile banking, according to comScore. Last year, Canada ranked as the top country for online banking usage, with almost 65 per cent of our Internet users going on the web each month to check their accounts. More recently, comScore estimated there were about 13.3 million Canadians regularly doing online banking, compared to 63.6 million in the U.S. On a per capita basis, our online banking customer base is about twice as large as south of the border. Now that online banking has become familiar and comfortable for plugged-in Canadians, mobile is expected to grow. Segal says about 13 per cent of Canada's mobile users now access their banking on their phone on a monthly basis, which is roughly on par with the U.S. market and ahead of the European Union. Given that comScore recently pegged the Canadian mobile market at 20.1 million customers strong, that suggests we're nearing three million Canadians using mobile banking. "About 22 per cent of those people actually access their bank accounts on a daily basis," Segal adds, "for 36 per cent it's at least once a week, and for 41 per cent it's once to three times throughout the month." In March, 77.5 per cent of Canadian mobile banking users were on a smartphone, with most using an iPhone. TD Bank (TSX:TD.TO - News) and RBC (TSX:RY.TO - News) had the biggest chunk of the market, with 26.7 per cent and 25.7 per cent of mobile banking users, followed by CIBC (TSX:CM.TO - News) with 17 per cent, Scotiabank (TSX:BNS.TO - News) with 13.2 per cent and ING Direct with 9.8 per cent. ING conducted a survey in October to gauge interest in mobile banking and found about half of Canada's smartphone users expect to use their phone to check their account in the next year or two. Of those in the 18 to 34 age bracket, 64 per cent saw themselves using mobile banking. ING said it handled over 200,000 fund transfers and one million balance inquiries on its mobile platform in the previous 18 months. According to a survey by the Canadian Wireless Telecommunications Association, the biggest reason users are avoiding mobile banking is security. About 52 per cent said they had security-related concerns, while 24 per cent said they simply found online banking easier than mobile banking. December 16, 2011 Helen Morris, Nest Egg As temperatures head down to their seasonal norm, we’re turning up the heat at home. That means higher bills, but having an energy-efficient home can keep heating costs under control. EnerQuality designs and operates five “green” building standards for the construction industry in Ontario. “These focus on the design and construction of the home,” says EnerQuality president Corey McBurney. “[We are concerned with] building a better home that requires less energy to perform and performs better. In practice, Energy Star for New Homes, which concerns itself exclusively with energy consumption, is by far the most popular [green home category]. We label over one in five new homes a year in Ontario and of those, 95% are Energy Star.”  Mortgage insurers Genworth and the Canada Mortgage and Housing Corporation (CMHC) offer incentives to borrowers who buy energy-efficient homes but who have less than a 25% down payment. “A client that purchases a new-construction home that is EnerGuide rated 80 or above or an Energy Star home in Ontario, may receive a rebate of 10% of the [mortgage insurance] premium excluding taxes,” says Jason Neziol, vice-president of regional sales in Ontario for Genworth Financial Canada. “If they decide to take a 30-year amortization instead of a 25-year, the client would typically pay 20 extra basis points,” Mr. Neziol says. “We will rebate that full amount to the [qualified] client when the house closes. If a client takes a $300,000 mortgage at 5% down and a 30-year amortization … they would receive $1,425 back.” The benefits are also available to high-ratio borrowers who improve the energy efficiency of an existing home. “The client can purchase a home and do renovations to increase its energy efficiency,” Mr. Neziol says. “They have to move the EnerGuide rating five points to a minimum of 40.” With just 20% of new homes in Ontario attracting a green rating, energy-efficiency credentials are not, evidently, at the top of all buyers’ lists. “A lot of people look at what they can do that won’t cost a lot of money and afford a quick pay-back,’” says Gary Siegle, regional manager of Invis, Alberta South and Saskatchewan. “The green mortgage rebate is a sweetener to get you there, but it is not a quick payback” on the full cost of the renovations. Beginning Jan. 1, Ontario will have one of the most rigorous building codes in North America: “With Energy Star, we are taking an already fairly high baseline and making it that much more efficient,” Mr. McBurney says. “Usually about 25% more efficient.” Green-certified buildings that meet a higher standard and provide longer-term savings attract consumers, Mr. McBurney says, but acknowledges that North American’s relatively low energy costs make it less of a priority for some. “The reality is I pay more to operate my BlackBerry on a monthly basis than I do to heat my home in the middle of winter,” he says. “As long as energy prices in Canada remain as low as they are, people are likely to continue on with their busy lives rather than  make energy efficiency in their homes a priority.” December 15, 2011 The credit burden of Canadian consumers is climbing as they take on more debt amid stagnating incomes. The ratio of debt to personal disposable income, the key measure of where a consumer stands, hit 152.98 per cent in the third quarter from 150.57 per cent in the prior quarter, Statistics Canada said Tuesday. It’s the third quarter in a row that debt has increased. The report comes a day after Bank of Canada Governor Mark Carney reiterated that household debt is the No. 1 domestic risk in the country, as debt burdens have surpassed levels of both the United States and the United Kingdom. “Credit growth continues to outpace the growth of disposable income, while the continued financial market turmoil has weighed on the asset side of the balance sheet,” noted David Onyett-Jeffries, economist at Royal Bank of Canada. About 10 per cent of Canadian households are vulnerable to an adverse economic shock according to central bank estimates, meaning they could face trouble once interest rates start to rise. Mortgage credit rose to $1-trillion in the quarter and other consumer debt to $448-billion, the statistics agency said. Household net worth in the quarter fell by 2.1 per cent, marking the second straight decline, as stock values more than offset the gains in house prices. Per capita household net worth tumbled to $180,100 in the quarter from $184,700 in the second quarter, the agency said. “This marked the sharpest quarterly reduction in stock prices and per capita household net worth since the fourth quarter of 2008.” December 13, 2011 Christine Dobby, Financial Post · Dec. 8, 2011 With the eurozone on the precipice of collapse, the United States grappling with its own debt issues and even China slowing down, what does 2012 hold for the global and Canadian economies?  CIBC World Markets Inc. released a handful of economic forecasts Thursday. Here are five key developments to look for in the year to come:  A hurdle for Canada’s unstoppable real estate market?  Benjamin Tal, CIBC’s deputy chief economist, said data on household debt and the health of the residential real estate market suggests a levelling off in prices in the next year or two with a more dramatic drop down the road.  “Further out, the most likely scenario is that the eventual increase in interest rates will lead to a modest decline in prices, probably in the magnitude of 10% to 15%,” he said.  But Mr. Tal said absent a trigger like the sub-prime mortgage crisis that triggered the recent U.S. housing market meltdown, a violent market correction is likely not in the cards for Canada.  Sluggish global growth in 2012 and not much to look forward to  “Excepting Europe, we’re not destined for recession, but global growth will barely top 3% next year, and 2013 won’t be a whole lot better, well below the bounteous 5% pre-recession pace,” said Avery Shenfeld, chief economist at CIBC.  The United States could defer its first round of budget tightening by extending tax measures for another year, he said, noting that if it does, “it will be feeling an even tougher fiscal squeeze in 2013.”  Meanwhile, Europe may have clawed its way back up somewhat by 2013 but growth there is still likely to be “lacklustre,” Mr. Shenfeld said.  The dark side of austerity measures  Apart from the pain felt by pension-holders, taxpayers and other stakeholders, harsh austerity measures being implemented across Europe may not be a silver bullet for return to growth.  “The myth that shrinking government brings an automatic offsetting boost to private sector spending is simply that — a myth,” Mr. Shenfeld said.  “The countries in Europe that have been first to tackle budget deficits through tax hikes or spending cuts have paid the price in growth.”  2011 GDP growth in countries that have tightened their belts already, including the United Kingdom, Spain, Greece, Ireland and Portugal, hovers at around 0.7% while other European Union nations had GDP growth closer to 2%.  “What helped Canada survive fiscal tightening in the 1990s — an ultra-cheap currency, strong growth outside our borders and falling bond yields — isn’t on the menu for Europe or the U.S. in 2012,” Mr. Shenfeld said.  Canadian growth stuck at 2%  Mr. Shenfeld predicted a pace of growth of about 2% over the next two years for Canada, which, as an open economy, can’t avoid the effects of a global economy on pause.  “Domestic fundamentals should guard against recession risks, but we will need a big lift from interest-sensitive domestic spending to keep the economy growing at even a 2% pace through 2013,” he said.  Although home building in Canada survived the recession, business construction and equipment spending will be in the spotlight over the next several years, Mr. Shenfeld said.  “Spending in energy, aluminum smelting, shipbuilding facilities and other private sector megaprojects will provide at least some antidote to the retreat underway in public sector capital spending as the recession’s stimulus is wound down,” he said.  He predicted exports would suffer, feeling the pinch from global economic slowing, but oil patch prices should hold up enough to facilitate ongoing capital spending in that sector.  The loonie takes a dive?  With weak global growth expected to continue to drive sentiment Mr. Shenfeld predicted the resource-linked Canadian dollar “has room to slide further in the coming months, until the crisis fires in Europe are quenched.”  He forecast the loonie dipping to US$0.92 before the currency regains support on diminishing fears of global crisis.  At noon on Thursday the Canadian dollar stood at US$0.9813. December 9, 2011 OTTAWA — Housing starts in the capital plunged in November as builders scaled back from the frenzied pace they had set over the past two years, according to Canada Mortgage and Housing Corp. The housing market watcher said the number of homes started in Ottawa in November fell to 553, a 40.4-per-cent drop from the 928 starts recorded in November 2010. CMHC had been warning that builders would begin scaling back in late 2011 as consumer confidence slumps and demand for new homes begins to taper. Despite the drop in overall home starts, single family homes remained in demand. “Builders have responded to the recent surge in demand at sales offices by breaking ground on 289 new single-detached homes. This way singles posted the best month in two years and surpassed all other dwellings combined,” said Sandra Pérez Torres, senior market analyst at CMHC. However, the pace of construction for high-density multiple dwelling units, including condominiums, dropped off in November. High-density units have been responsible for much of the growth in Ottawa’s housing sector in 2011 because they are particularly attractive to first-time buyers and baby boomers. Construction on multiple family dwelling units dropped to 264 units, a 60-per-cent decline compared to the 660 started during the same month last year. Overall the pace of construction in Ottawa in 2011 is lagging about 11.4 per cent behind 2010, according to CMHC. Builders have started construction on 5,231 homes during the first 11 months of 2011. During the same time frame in 2010, builders began construction on 5,904 homes. Nationally, the trend was similar. Canadian housing starts fell in November as construction of multiple-unit buildings declined. The seasonally adjusted annual rate of starts was 181,100 units last month, down from 208,800 units in October. Economists had expected activity to ease to 200,000 unit in November. “Housing starts declined in November, reaching a level which is more consistent with the rate of household formation,” said Mathieu Laberge, CMHC’s deputy chief economist. “The decrease in housing starts was due to a moderation in the multiples segment.” The seasonally adjusted annual rate of urban construction fell 14.4 per cent to 158,900 units in November, CMHC said. Single-unit activity rose 3.5 per cent to 63,600 units, while multiple-unit starts dropped 23.3 per cent to 95,300 units. Urban housing starts were down 30.6 per cent in Ontario, 13.4 per cent in the Prairies and 3.6 per cent in British Columbia, the federal housing agency said. However, urban starts were up 8.3 per cent in Atlantic Canada and 3.2 per cent in Quebec. Rural starts, on a seasonally adjusted annual basis, totalled 22,200 units in November, down from 23,100 units the previous month. In a separate report Thursday, Statistics Canada said new home prices rose 0.2 per cent in October, following a similar increase the previous month. The major contributors to the October increase were the metropolitan regions of Toronto and Oshawa, and Edmonton, while the biggest declines were in Victoria and Saskatoon. December 8, 2011 Christine Dobby  Nov 30, 2011 – 7:06 PM ET The Canadian economy was not as bad as first feared in the third quarter. In fact, it was much better than almost anyone had hoped. Fuelled by record monthly output from the oil-and-gas and mining sectors and overall export strength as temporary headwinds drifted away, third-quarter economic growth shot past expectations. Statistics Canada said Wednesday that gross domestic product for the period rose by an annualized 3.5%, beating economists’ more moderate average prediction of 3.0% growth and the Bank of Canada’s forecast of 2.0%. In September alone, the economy grew 0.2% from August, falling just short of a 0.3% increase economists predicted.   The growth during the quarter comes as a welcome change after a revised 0.5% contraction in the second quarter. Net exports staged a decided recovery as external pressures like the fallout from the Japanese natural disasters in March were no longer a factor. But the devil is in the details as flagging domestic demand and weak business investment lurked beneath the report’s strong headline growth. A close look at the data has economists forecasting only modest growth — in the range of about 2% — in the coming quarters and predicting the Bank of Canada will remain on hold with interest rate hikes. Here’s what stood out from Wednesday’s report: EXPORTS The driving force behind the uptick in GDP for the quarter, exports grew at an annualized rate of 14.4%, up from a pullback of 6.4% in the previous quarter. Paul Ferley, assistant chief economist at Royal Bank of Canada, said that factors that weighed on Canadian exports in the second quarter — including the Japanese supply-chain disruptions as well as wildfires in Northern Alberta that led to shutdowns of oil sand production facilities — were resolved in Q3 and contributed to the increase. But, he cautioned, “The boost to third-quarter growth provided by the reversal of these factors is not expected to continue to the same extent into the fourth quarter.” As the global economy stalls and prospects for a quick turnaround look increasingly grim, economists predict it will could spoil the Canadian export party. HOUSING Canada’s unstoppable real estate market was another bright spot during the quarter. Residential construction shot up 10.9% annualized, following on comparatively modest increases of 1.6% in Q2 and 6.7% in Q1. “After quarters of booming housing starts data, the residential construction bonanza finally translated into the GDP numbers,” said Emanuella Enenajor, economist at CIBC Economics. The expansion in this sector came from all three major components including fees and transfer costs related to resale transactions, new housing construction and renovation activity. “Continued strength in new-home sales has elicited more and more new housing construction, particularly in the high-rise condo market,” said David Madani, Canada economist for Capital Economics. He noted that a reported increase in housing starts bodes well for further strong growth in this category next quarter. CONSUMER SPENDING Canadians slowed their spending on goods and services during the quarter, raising red flags for economists concerned about sluggish domestic demand. Personal expenditures grew at an annualized rate of 1.2%, down from an expansion of 2.1% in the previous quarter. “A slowing pace of income growth owing to tepid hiring and weaker wage dynamics will likely continue to put downward pressure on consumption activity,” Ms. Enenajor said. BUSINESS INVESTMENT Business investment actually contracted during the quarter with a decrease of 3.6% annualized, down from last quarter’s 14.6% increase. “Weak business investment is a worry, as it has been an important source of growth since early 2010 and replaced personal spending as the main source of domestic growth,” said Charles St. Arnaud, an analyst with Nomura Global Economics. He noted that this, coupled with the fact that personal spending is likely to remain weak, “Could mean that domestic demand stays weak over the next few quarters, as global uncertainty remains high.” FINAL DOMESTIC DEMAND The combined slowdown in consumer spending and business investment was a drag on final domestic demand, which rose only 0.9% in the third quarter, down from a 3.1% gain in Q2. The other component, government expenditures, was flat in the quarter as government stimulus spending continues to slow to a trickle. “Note that the pace of final domestic demand has been consistently slowing since 2010, weakening from around 6% to its current sub-1% pace,” Ms. Enenajor said. December 8, 2011 Published on December 6, 2011 Canada's robust housing market is expected to continue into 2012 despite economic concerns from outside its borders, according to a new report from the Re/Max real-estate sales organization. The real estate organization said in its housing outlook Tuesday that the market A "defied logic" and outperformed expectations in 2011. "The trend is expected to carry forward into 2012 as Canadians continue to demonstrate their faith in homeownership, despite concerns over the European debt crisis and its impact on the global economy," the firm added. Home prices are expected to have risen in 23 of the 26 local markets that it tracks with about 460,000 homes expected to change hands this year. That's up three per cent from the 447,010 units reported in 2010. "Instead of responding to economic concerns both here and abroad with a retreat in sales and prices, residential real estate markets actually experienced an upswing in the volatile third and final quarters," said Michael Polzler, executive vice president, Re/Max Ontario-Atlantic Canada. "While clearly not impervious to the impact, Canadian consumers are intent on making their moves now, in advance of higher housing values and rising interest rates down the road." The forecast comes at a time when central banks in Canada and the United States are keeping their key lending rates low to counter the economic drag caused by the European debt crisis. The assurance of relatively low borrowing costs has probably given home buyers confidence while rising home values have kept new listings at a healthy level. Stable employment has provided some assurance to owners and buyers alike, although they have also been monitoring the darkening economic clouds. Re/Max expects that sales and prices will continue to grow next year, but at a more moderate pace, with sales rising about one per cent over this year to 464,500 units in 2012. It expects Calgary, Saskatoon and Halifax-Dartmouth will likely lead the country in unit sales in 2011, with the volume increasing by five per cent. The Greater Toronto Area, St. John's, N.L., Saint John, N.B., Moncton and Regina are expected also see more sales next year, about three per cent above 2011. Consistent with other data, Re/Max said the Canadian housing market picked up steam as the year went on _ helped by low interest rates and rising prices. Many economists had expected the Bank of Canada would begin raising its key interest rate by the middle of 2011 but that didn't happen. The central bank has kept interest rates low to stimulate the economy by making it less costly for businesses and consumers to borrow for their purchases. That has also kept buyers competing for homes, sending the average home price up seven per cent this year to $363,000 this year, according to Re/Max's predictions. By year-end 2012, it expects the average price in Canada will increase another two per cent to $371,000. "The economic underpinnings support ongoing demand, particularly as job creation efforts continue and unemployment rates edge down further," says Elton Ash, regional executive vice president, for Re/Max in Western Canada. "Nationally, we remain on an upward track, and the confidence consumers have demonstrated in housing over the past decade will prove well founded once again next year," he said. "Overall, we're seeing an extension of the homeownership cycle, and it's great news for housing." The Canadian Real Estate Association upwardly revised its housing forecast for 2011 and 2012 in November. The industry association is now projecting sales this year will be up 1.4 per cent from 2010, half a percentage point better than the previous forecast. CREA expects there will be slightly fewer units sold next year than in 2011, but the 0.5 per cent decline is an upward revision. The association is now forecasting 453,300 home sales countrywide this year, up from 446,915 in 2010. The forecast for 2012 is 451,200 homes sold. December 6, 2011 The Bank of Canada kept its overnight interest rate at 1% on Tuesday, predicting that Europe’s recession would be “more pronounced” than previously thought but giving no suggestion of an impending rate cut. “Conditions in global financial markets have deteriorated as the sovereign debt crisis in Europe has deepened,” the central bank said in announcing it was keeping its key interest rate on hold for the “medium term.” “Additional measures will be required to contain the European crisis. The recession in Europe in now expected to be more pronounced than the bank anticipated in October.” Last month, Bank of Canada governor Carney told a Montreal business audience that the central bank sets monetary policy “in the real world, where shocks are a fact of life.” Those shocks have continued as European leaders struggle to tame the region’s debt crisis, which began in smaller economies – such as Greece, Spain and Ireland – and now threatens to spread to stalwarts Germany and France, unthinkable only a few months ago. On Monday, the leaders of Germany and France agreed to a plan to tighten fiscal policy among the 17 nations that share the euro currency. Those proposals will be presented to the European Union at a summit Friday in Brussels. On the same day, however, rating agency Standard & Poor’s threatened to downgrade domestic ratings across most of the eurozone. That was met with a blunt response from German Economy Minister Philipp Roesler, who said his country “will not be influenced by . . . the short-lived verdict of one rating agency.” Meanwhile in Canada, gross domestic product grew by 0.9% between July and September, or 3.5% on annualize rate. The third-quarter jump followed a 0.5% contraction in the second quarter. The central bank says growth in the second half of 2011 “is slightly stronger than the bank projected in October.” “Household expenditures have more momentum than had been expected and business investment remains solid.” While third-quarter GDP was better than expected, Canada’s employment picture remains cloudy. The country lost 18,600 jobs in November and the unemployment rate edged up to 7.4% from 7.3%. The Bank of Canada’s key interest rate has been at 1% since September 2010, with policy-makers attempting to avoid another recession by encouraging spending by businesses and consumers. “With the target interest rate near historic lows and the financial system functioning well, there is considerable monetary stimulus in Canada,” the bank said in its Tuesday statement. Canada’s annual rate of inflation eased to 2.9% in October from 3.2% the previous month. Still, that marked the 11th straight month that the overall consumer price index was above 2%, the Bank of Canada’s target within a range of one to 3%. The core inflation rate, which factors out volatile items including some food and energy products, now stands at 2.1%, down from 2.2% in September. “Although total CPI inflation has been slightly higher than projected, the bank continues to expect the inflation rate to decline as a result of reduced pressures from food and energy prices and ongoing excess supply in the economy,” the Bank of Canada said Tuesday. However, the bank said it would “continue to monitor carefully economic and financial developments in the Canadian and global economies, together with the evolution of risks, and set monetary policy consistent with achieving the 2% inflation target over the medium term.” The Bank of Canada’s next interest rate decision will be announced Jan. 17, followed the next day by an updated outlook for the economy and inflation. December 6, 2011 Patience is a virtue – one that benefits your personal finances, researchers have found. A new study shows impatient people have lower credit scores. Economists, working at the U.S. Federal Reserve’s Center for Behavioral Economics and Decisionmaking at the time of the research, recruited 437 low-to-moderate income participants to examine the psychological factors that explain why people default on their mortgages. The participants were asked to fill out a questionnaire, in which they were required to make choices between smaller immediate rewards or bigger rewards later. They also gave researchers access to their credit scores. Impatient participants, those who chose the immediate rewards, had poorer credit scores. “Conceptually, it does make sense that how people discount the future, i.e. how impatient they are, affects their decision to default on their loans,” researcher Stephan Meier, who is now at Columbia University, said in a press release. “Individuals accumulate debt and then have to decide whether to repay the money or use the money for something else?” He noted that while people don’t always default on a loan deliberately, some may resort to “strategic defaulting,” making decisions based on having more money now and face the consequences later. Patience is a quality embraced by some of the world’s most financially savvy. December 5, 2011 After years of whipping out their credit cards and tapping into lines of credit, there is further evidence that Canadians are thinking twice before taking on more consumer debt. A quarterly analysis from credit bureau TransUnion showed that the average Canadian’s non-mortgage debt was $25,594 in the third quarter of 2011. That is down $9 from $25,603 in the previous quarter but $431 higher than $25,163 a year ago. While the quarterly drop might not sound impressive, it marks the third-consecutive quarter that debt loads have either declined or remained about the same following 26-straight quarterly increases. TransUnion’s report pointed to a deceleration in total debt increases, which basically means Canadians are taking on more debt at a slower pace. Thomas Higgins, TransUnion’s vice-president of analytics and decision services, said the latest data suggests “Canadian debt loads are stabilizing.” He attributed the slowdown to global economic uncertainty. “In the third quarter alone, Canadian consumers witnessed major stock market declines, the European debt crisis and continued high unemployment,” Mr. Higgins said. The latest TransUnion report comes on the heels of new analysis from Canada Mortgage and Housing Corp. that shows the rate at which Canadians are racking up new mortgage debt has also slowed. Policy makers like Bank of Canada Governor Mark Carney have been warning Canadians about excessive debt loads and their ability to repay the money they owe once interest rates rise from their current lows. The average Canadian household has debt that is 150 per cent of income, and mortgage debt accounts for the largest chunk of credit that Canadian consumers hold. Outside of mortgages, Canadian household debt levels have surged as consumers rely more on their credit cards and lines of credit. Lines of credit, which have lower rates than credit cards, now account for more than 40 per cent of all Canadian non-mortgage debt, TransUnion said. TransUnion's data showed that average Canadian credit card debt fell 2.65 per cent from a year ago but rose 0.59 per cent on a quarterly basis as the holiday season approaches. But Canadian lines of credit debt rose 4.5 per cent from a year ago and 0.79 per cent on a quarterly basis. While debt delinquencies have remained relatively stable, both increased unemployment rates and the upcoming holiday shopping season may weigh in over the upcoming months, TransUnion noted. December 2, 2011 For an explanation, Canadians can look to the European sovereign-debt crisis, according to the latest Housing Trends and Affordability report by RBC Economics.   The report found the average housing cost of a standard two-storey home was 48.8% of the median pre-tax income, down 0.6% from the previous quarter. “It appears that developments related to the (debt) crisis likely provided some benefits in the form of lower interest rates,” said the report, authored by chief economist Craig Wright and senior economist Robert Hogue.   The authors noted fixed mortgage rates on a five-year, posted basis eased 5.3% in the third quarter from an average of 5.6% in the second quarter.   “This ran counter to expectations of generally rising interest rates just prior to this summer’s latest bout of global anxiety,” said Wright and Hogue. Vancouver, which has the worst affordability of any Canadian city, saw the cost of owning a two-storey home drop to 94.4% in the third quarter, down 0.8% from the previous quarter.   The most affordable option in a major city nationally was a condo in Edmonton, with the ownership cost at 20.9% of median income in the city, and down 0.3% in affordability. Only one city remained more affordable than the average since the index began measuring the Canadian market in 1985 – Calgary.   Detached bungalows in Calgary were at 37.6% of income this past quarter, compared to the city’s average of 40.2; standard two-storey homes were at 38.2% compared to the average of 40.8%; and standard condominiums were at 38.2% last quarter compared to a 40.8% average for the city.   The RBC report noted a 3.7% increase in jobs in Calgary this year was creating momentum in the market, and may eventually decrease some of the affordability. The most affordable region remained Atlantic Canada.   “Faithful to its reputation, Atlantic Canada’s housing market continues to show everything in moderation,” said Hogue. “When considering the prospects of owning a home, households in the region continued to face some of the lowest homeownership costs in Canada. In short, housing on the east coast is affordable.” December 2, 2011 OTTAWA — Canadian homeowners are doing a good job of paying off their mortgages early, according to the Canada Mortgage and Housing Corp., which released its third-quarter results Tuesday. While mortgage repayments can be spread out over 30 years, the CMHC reports that the average amortization period for mortgages insured by the national housing agency is under 25 years, and the loan-to-value ratio of those homes was 80% or less. As of Sept. 30, the outstanding loan amount per household for all homeowner loans was $159,740, slightly above the figure for the previous year. “CMHC analysis shows that a substantial percentage of CMHC-insured high ratio borrowers are ahead of their scheduled amortization,” the agency said in its report. “Accelerated payments shorten the overall amortization period, reduce interest costs, increase equity in the home at a faster rate and lower risk over time.”  The agency says its mortgage arrears rate is 0.42%, in line with industry trends. Rules brought in by the federal government in March, in response to historic levels of household debt, which reduced amortization periods on certain mortgages, and limited the amount that can be borrowed when a house is refinanced, cut refinancing activity by 31% from last year, the CMHC said. The agency’s homeowner purchase mortgage insurance showed a year-over-year decrease of 12%. “The level of household debt remains a concern but there are encouraging signals,” it says. “There has been a significant deceleration in the growth of mortgage credit since March, particularly in recent months, impacting the growth rate of total household credit. Growth in personal loans, lines of credit and credit cards has levelled off in recent months.” The agency notes general economic conditions have been favourable in 2011, with stable mortgage rates, a healthy housing market and a declining unemployment rate. “Overall arrears levels and arrears rates have been improving and (mortgage insurance) claims volumes have been lower than expected,” it said. “Given current economic forecasts, it is expected that trends will improve moderately going forward, although both downside and upside risks remain.” While housing sales have slowed since January, the CMHC expects sales for the year to fall within a range of 423,600 to 470,100 units, and next year’s sales to be somewhere between 406,100 and 509,000 units. Prices should “modestly grow as market conditions are expected to remain in the balanced market range,” it said. The agency notes it keeps an eye out for bubbles, but so far it sees “little evidence of over-valuation” in the Canadian housing market. November 29, 2011 Tara Perkins Globe and Mail Update Last updated Tuesday, Nov. 29, 2011 12:15PM EST The rate at which Canadians have been racking up new mortgage debt has slowed in recent months, lending credence to the theory that the country’s housing market will hold up, Canada Mortgage and Housing Corp. suggests. The crown corporation released its third-quarter financial results Tuesday, offering a new glimpse into the country’s mortgage market. “The level of household debt remains a concern but there are encouraging signals,” it said. The growth of mortgage debt has significantly decelerated since March, particularly in recent months, it said. The growth of personal loans, lines of credit and credit cards has also levelled off recently. But the largest debts that Canadians hold are their mortgages, and so the trend in that area is helping to reduce the growth rate of total household credit. At the same time, CMHC says is analysis suggests house prices are in line with demographic changes and economic growth. “CMHC, in consultation with the Bank of Canada and the Department of Finance, is continuing to refine models and techniques used to help identify risks of house price bubbles,” it stated. “At the moment, there is little evidence of a significant over-valuation in the Canadian housing market overall, although some centres warrant close monitoring.” CMHC expects housing markets to stabilize next year, and house prices to grow modestly going forward. Finance Minister Jim Flaherty took action earlier this year to reduce the growth of mortgage debt, including tightening up the rules surrounding mortgage refinancing, and decreasing the maximum length of insured mortgages from 35 years to 30. (Canadian mortgages must be insured if borrowers have a downpayment of less than 20 per cent). CMHC says that the refinance activity it’s seeing, which initially fell by nearly 40 per cent, is still down 25 per cent compared to the level it was at before the new rules came into effect. The overall level of mortgage insurance that’s being sought from the crown corporation dipped by about 10 per cent initially, but has since recovered. November 29, 2011