Mike's mortgage blog Blog Home - Blog Archive

Blog Description

David Dodge says rates will stay low Until 2015 Tuesday, March 9, 2010 David Dodge Says Rates will stay low until 2015 (Nov 28th 2009) Interesting revelation from the former Governor of the Bank of Canada.  If you believe the latest article, it seems that it would be an easy decision to choose a variable rate over a fixed rate.  Economists and forecasters, base their statements on historic trends and what they know about local and international economies.  You should always make the best choice based on the best information available during your decision period.   If deciding to go for a variable rate mortgage, have no regrets if David Dodge's forecast was out to lunch, because so many unknowns can trigger a different outcome.  Simply be prepared to handle any contingencies.  That being said, if you enter into a variable rate program, make certain that you have the financial resources to weather a change in the market, either today or 3 years from now.  If you are buying a home and the current variable is very enticing, you really need to do the math...what happens if that rate doubles.  A 2.25% rate increase would double the current rate and you would be faced with a payment twice the size of the one you started with.  Ah, but I was told I could lock in a fixed rate if the prime starts to jump...too late to grab the low fixed rates offered earlier.  You will often have an option of staying the course and hoping it doesn't go up any further or choosing a fixed rate that you simply would not have considered earlier. David Dodge is a smart man and he helped Canada maintain it's strong financial position in the world.  You need to decide if David Dodge's prediction matches your financial ability. Examples-            On a $300,000 net mortgage, here are today's choices Best variable 2% (3 year term .25 under bank prime)     $1023.78/month (Principal and Interest) (lowest overall payment) 50/50 plan 3.2% (Half fixed and half variable, mitigating variable fluctuation risk, somewhat)   $1222.02/month (P&I) 5 year fixed 3.99%  (today's best limited time rate special)    $1362.24/month (P&I)  (lowest 5 year fixed rates payment) 10 year  fixed  5.4%  (Today's best 10 year rate special)   $1629.54/month (P&I) (Fact: The average historic rate is 7.5%) You choose the best plan based on your needs. posted by MIke Toporowsky at 8:50 am - 0 comments CLICK HERE to Add a Comment to This Post

Pre-Qualified vs Pre-Approved Saturday, March 6, 2010 The Difference between being Pre-Qualified and getting Pre-Approved There is a very important difference between being Pre-Qualified and Pre-Approved. Pre-Qualified is a planning step where you get the mortgage broker and lender to look at your application and they will let you know what your maximum mortgage limits are.  If you are not sure about what you can afford, it would be wise to see what types of mortgages you would be qualified for.  It is at this stage where you discuss any shortcomings, like credit, down payment or income requirements.   You may be required to take some planning steps.  The process may take some time, but you really don't want to pay more than you have to for your mortgage.  A poorly planned purchase can force you into taking a sub-prime mortgage, that is far worse than you expect. Even if you are pre-Qualified for your new mortgage you should always make your purchase "subject to financing", that way the bank can confirm the property falls into their lending guidelines. A Pre-Approved mortgage means the bank is holding an interest rate for you.  It does not mean you are guaranteed to get the mortgage, but they would have briefly looked at your application and decided that they would probably consider doing business with you.  To take advantage of the rate they are holding, you must complete the closing of your mortgage within the time-line of the Pre-Approval. The Lenders will always have the final say in whether or not a mortgage is finalized.  One really big advantage to using a mortgage broker is when the bank you thought Pre-Approved or Pre-Qualified you fails to complete their commitment, your broker can quickly change gears and move your business to a more friendly lender (you don't have to lift a finger). I invite your feedback posted by MIke Toporowsky at 1:19 pm - 0 comments CLICK HERE to Add a Comment to This Post

Experience vs. Cockiness Saturday, March 6, 2010 Experience vs Cockiness Earlier this month, single day house records fell nation-wide, as rates started to move up.  Fence-sitters were sent into buyer mode and prices on homes started to look pretty solid.  How long will it last and can it be sustained are great questions?  If I knew the future, I would be retired by now. There was one guy that I was sure knew the future, because he had an uncanny knack for being right. I learned a valuable lesson from my old boss Ray Murray, during my years at Beneficial Finance and that was..."There is no such thing as a guarantee in economic cycles". It was about 18 years ago, during a period where Edmonton's economy was stagnant and everywhere else in the province was increasing in value.  I was presenting him with a potential mortgage deal and was trying to convince him that the economy in Edmonton would suddenly catch up with the rest of Alberta, within a year.  There was very little equity in the deal I was supporting, but if the economy did what I thought it would do, the deal would be just fine.  Mr. Murray then put the challenge to me; He told me that if I would personally guarantee that the economy would increase by the following year, then I could do the deal. He wanted the guarantee in writing.  I knew that I was in no position to start guarantee that, because I did not have deep pockets like Beneficial. Then he asked me why I would ask to risk the investment money of others on something that I could not be 100% sure of myself.  I stewed about it for weeks and then forgot about it until one year later, when I was looking at the Edmonton housing prices.  They were actually down by 10% from the time I had the conversation with Mr. Murray.  I called him up and asked him if he was a soothsayer.  He says he honestly did not know what was going to happen, but after his 30 years in the business he was smart enough to know that there are no guarantees in economic cycles. "If I wouldn't invest my own money into it, why should I ask others to risk theirs".  That suddenly became my cornerstone philosophy. My lending decisions became a bit more conservative, but I never knowingly made a deal that would loose the investor any money. Ray Murray is retired now, but his down to earth business savy was not lost on me. He always saw me as an optimistic person and there is nothing wrong with that if you look at the deal from every possible angle.  Ray was also a stickler for sharp pressed creases in your suits and shined shoes.  I still prefer casual Fridays, but will always appreciate the valuable lessons from my own Yoda, Mr Murray. posted by MIke Toporowsky at 7:44 am - 0 comments CLICK HERE to Add a Comment to This Post

Interest Rate differential (early payout penalties for your mortgage) Thursday, March 4, 2010 Interest Rate Differentials and why they should concern you IRDs are a pre-payment penalty tacked on your mortgage payout, if you pay it off early. They are generally meant to discourage a mortgage holder from breaking a higher rate mortgage in favour of moving it to a lower rate. The lender is trying to protect its investment portfolio. I have included the formula for calculating IRDs and interest penalties below, however there have been some changes to some lender documents over the past couple of years that you should be aware of. In the past couple of years, some lenders have included the expensive IRD penalty in ‘all’ early payout scenarios. That even includes a bonafied sale of a property. Your mortgage broker should be able to advise you if your new mortgage is affected with this change. Imagine the grief if your employer asked you to move and your mortgage restricted you from selling your property until the renewal date. So make sure your mortgage strategy matches your potential needs. Most all mortgages in the past had a clause like. “your mortgage is open to early payout on payment of either an IRD or a 3 month interest penalty…whichever is greater; except on the proof of a bonafied sale of the property where the penalty would be 3 months interest”. Interest Rate differentials generally only apply when interest rates are low, because by definition they become non-effective when the rates rise higher than your current mortgage rate. Examples show readers how a complex concept or calculation works Sometimes, the best way to communicate information is to explain it and then give an example to show how it works in practice. In the following example, the costs of paying off a mortgage debt early, before the mortgage maturity date, are explained; readers are offered a step-by-step formula to use; and then, an example illustrates a “typical” situation. Costs of paying off all or some of your closed mortgage before the maturity date Costs of making a pre-payment The cost of paying off all or some of the remaining principal amount of your closed mortgage before the maturity date is the higher of these two amounts: (1) three months’ interest costs on the amount you want to pay or (2) the interest rate differential amount. This amount is the difference between your existing mortgage interest rate and the interest rate currently charged for a mortgage similar to yours, calculated for the remaining term of the mortgage less any discount you received on your existing mortgage. A mortgage similar to yours has a term that is closest to the remaining term of your existing mortgage. How to estimate pre-payment costs- Here is how you can estimate the cost of paying all or some of the principal amount of your mortgage before the maturity date. The result you get will only be an estimate. We use a precise formula that credits you for the amount of principal you would have paid off each month. 3 months’ interest costs (1) To estimate the three months’ interest costs Change your yearly interest rate from a percent to a decimal. For example, 6% = .06; 12% - .12. Multiply this number by the amount you want to pay. Then, divide the result by 4. The answer is the estimated three months’ interest costs. Step 1: _______ (A) - amount you want to pay _______ (B) - mortgage interest rate written as a decimal _______ (C) - A x B = C Step 2: _______ (D) - C ÷ 4 = D, estimated three months’ interest costs (2) To estimate the interest rate differential amount Interest rate differential Follow these steps to estimate the interest rate differential amount. interest rate differential Step 1: _______ (A) - annual interest rate on your mortgage _______ (B) - current annual interest rate for a new mortgage with a term that is closest to the remaining term in your existing mortgage (less any discount you received on your existing mortgage) _______ (C) - A - B = C, which is the difference between your existing interest rate and the current rate _______ (D) - amount you want to pay off Step 2: _______ (E) – number of months left until your mortgage maturity date _______ (F) - (C x D x E) ÷ 12 = F, estimated interest rate differential amount The estimate cost of paying off all, or some, of the principal amount remaining on your mortgage before the mortgage maturity date will be the larger number that results from the calculations in (1) and (2). It is strongly suggested that you contact your lender for an exact payout. Their payout may be done through a computer calculator and numbers may vary slightly. Example Here is an example to illustrate the cost of paying off a mortgage before the maturity date. Fiona and Henry have a mortgage for a 5-year term. The interest rate is 9 per cent. The original amortization period was 20 years and there are 18 years remaining. They still owe $100,000. They have inherited $100,000 and are thinking of using it to pay off their mortgage. They have used all the pre-payment options available to them this year. There are 36 months left before the mortgage maturity date. The current interest rate for a mortgage with a similar term is 6 per cent. Three months’ interest costs Step 1: $ 100,000 (A) - amount they want to pay . 09 (B) - mortgage interest rate written as a decimal $ 9,000 (C) - A x B = C (100,000(A) x .09(B) = $9,000(C) Step 2: $ 2,250 (D) - C ÷ 4 = D, ($9,000(C) ÷ 4 = $2,250(D) (estimated three months’ interest costs) Interest rate differential amount Step 1: 9% (A) - annual interest rate on the mortgage 6% (B) - current annual interest rate for a new mortgage with a term that is closest to the remaining term in their existing mortgage (less the discount received on their existing mortgage) .03 (C) - A - B = C, the difference between their existing interest rate and the current rate, written as a decimal $ 100,000 (D) - amount they want to pay off Step 2: 36 months (E) - number of months left until the mortgage maturity date $ 9,000 (F) - (C x D x E) ÷ 12 = F (.03(C) x 100,000(D) x 36(E)) ÷ 12 = $9,000 estimated interest rate differential amount In this example, Fiona and Henry estimate that it would cost them $9,000 to pay off their mortgage before the maturity date, since this amount is higher than the three months’ interest costs. When Fiona and Henry check with us, they would get the exact cost of paying off their mortgage early. In their case, the exact cost would be lower than their estimated cost. posted by MIke Toporowsky at 9:53 am - 0 comments CLICK HERE to Add a Comment to This Post

Is your mortgage Locked in...try a blend and extend Thursday, March 4, 2010 Is your mortgage locked in...try a blend and extend If you are locked into a long term fixed rate mortgage and would like to take advantage of rates that are currently much lower, you could ask your lender for a "blend and extend"?  Refinancing your mortgage, well before your renewal date, is not an option, because the interest rate differential penalty would be staggering. What I am talking about is a compromise solution that allows both borrower and lender to win...at least a little bit. For example, if you took out a mortgage 2 years ago, with a 5 year term at 5 percent annual interest and today's rate is 4 percent, you could ask for an early renewal.  If the bank is allowed to do this, they will certainly not purposely lose a guaranteed higher rate in favour of a lower rate.  Instead, they will offer you an option to average the 2 rates together and then renew for a new 5 year term. Why would the bank allow you to do this?  Remember, currently they are lending the 5 year mortgages at 4% so by taking your existing rate and reducing your interest, they now extend their earnings from their investment with you and will benefit from a longer earning cycle. You benefit by having a lower rate and a lower payment with the same principal reduction and schedule as before.  If your strategy is a long term ownership of the property, this proposal works well. Not all lenders will do this, because sometimes the way a mortgage is funded will dictate the lender's flexibility.  You can get your broker's advice before you talk to your lender, but is usually fairly simple to approach your existing lender to discuss the option directly. Have you experienced a Blend and Extend...share your stories posted by MIke Toporowsky at 6:56 am - 0 comments CLICK HERE to Add a Comment to This Post

Builder Mortgage discussion Tuesday, March 2, 2010 Builder mortgage discussion Feel free to respond with questions if you are about to embark on the adventure of building your own home (or having one built for you). There are dramatically different ways of financing your brand new build. 1) You can save and build it yourself.  Don't laugh, I know a few folks who built their new home over time. They bought material when they could afford it and completed their own construction.  They have to meet building code and pass inspection, so this is obviously not going to be everybody's method of getting their dream home built.  If you find yourself running short of cash, you will most likely need to use a private mortgage firm (arranged by a mortgage broker).  Banks have a strict policy regarding the finance of partially built homes and while they will do the financing when the home is complete, you need to get a temporary private construction mortgage to help you get the home finished. 2) You can find a builder who will build you a home from their blueprint selection.  In some cases the builder is well established and will build the home for you, with as little as 5%-10% deposit (up front).  Before you put down your deposit, you need to get pre-approved for your mortgage.  The construction might take up to a year, so the rate is not necessarily going to be the one available today.  You don't want to place your deposit and then try and find a mortgage, because if you can't get the financing you need, you forfeit your deposit and the builder sells your home to somebody else.  Most banks will pre-approve you for your mortgage, but you will need to lock in your rate 120 days prior to completion. There are a few bank branches who will hold today's rate for 12 months. However, if the construction goes into overtime, you will get the rate that exists at the time of completion. 3) You can choose to have your home custom built.  You now need to contact your mortgage broker to discuss the need for both construction financing and completion financing.  If you plan on using high ratio financing through CMHC (minimum down payment) you will need to involve the bank's underwriters before construction begins. They have many rules that they need to follow to stay qualified under CMHC guidelines.  Schedules for building and timetables for draws are strictly adhered to. The bank may automatically include completion financing at the end of the construction period. This does simplify the process for all concerned. 4) You can do a self-build through the bank.  In this case, you need to get your financing arrangements done before you put the shovel to the ground. That means construction financing and completion financing.  The difference here is the CMHC rules are going to place you under the same timetable as a regular builder. So line up your trades and make sure you have an experienced construction supervisor looking after the build schedule. You will also need to get your own Home warranty insurance.  All new home construction needs new home warranty type insurance and it will probably cost you close to $2500 for the one time premium. All new home builders are faced with this expense too.  The New Home Warranty folks will want to have their inspection team view the project periodically.  Once the construction is at least 95% complete, CMHC will allow the bank to fund your long term mortgage (completion mortgage). 5) You can finance the construction loan through a private mortgage lender. The advantage is a lack of red tape and some flexibility on the construction schedule.  Private lenders can let you draw down as you need funds. Some only charge for the outstanding funds (some charge for all funds from day one). If you use a private lender, you can avoid a CMHC premium. If the cost of building is $300,000 (including lot) and the final value of the home is $400,000, you're sweat equity is 25%. You can now qualify for a conventional completion mortgage and avoid any CMHC premiums. The downside is that the private mortgage rates are higher and they will charge you a lender's fee. The broker will also need to charge a broker fee, because private lenders normally do not pay a finder's fee to the broker.  If the build is efficient and you get everything built on schedule, you will still save money. Due Diligence items to do before signing the construction contract... -Check with the Better business bureau to see how they rate your builder, or contractor. -Quickly interview the neighbours to see what their opinion of the area is. They might point out a parking nightmare problem or loud noise issues. -Check the internet for any news stories about your new neighbourhood or builder -If you have time, have your lawyer review your construction contract before signing.  All contracts are slightly different and you want to know the pitfalls. - Make certain your financing is approved (or pre-approved for a completion mortgage). - Private construction draw payment schedules are usually negotiable. Let your broker know what kind of payment schedule works for you.  Most of the time interest is brought current when the next draw is taken. - Make sure your accounting allows for a 10% construction holdback. Once the project is inspected and complete, these funds can be released by the lender's lawyer.  - If you run into overtime on the build, most lenders will give you a time limit and then complete the construction themselves. This cost either comes out of the holdback or is tacked on to the total mortgage.  posted by MIke Toporowsky at 9:41 am - 0 comments CLICK HERE to Add a Comment to This Post

Credit education in our Schools Tuesday, March 2, 2010 Credit Education in our Schools Soap box time... The most financially influential score of your life is your credit bureau risk analysis score.  You would think that there would be some kind of mandated high school course that helps guide us through the real life credit jungle.  Your high school grades may get you into college and they might get you a better starting salary, but your Beacon/FICO score helps determine your interest rate or worse, whether you even get your mortgage.  It is very evident that most of us are trying to educate ourselves the best way we know how...on the internet. This information should have been taught to you as a life skills course, so that you didn't have to learn from your first second and third bad credit experience. Do you recognize yourself doing any of these... making a large payment, but not every month. after your roommate fails to pay the phone bill you gave him money to pay, you simply blame him for the unpaid bill. The car is a lemon, so if I don't pay for it they can come and get it. You get the picture...innocent enough but they could have been handled different. What this does is create a picture that does not disappear for 7 years on your credit bureau. Every bank you apply to will be asking the same questions, every time you apply...totally avoidable if you knew the real consequenses. Inactive credit, even inactive collections will not affect your Beacon score after 2 years of remaining dormant, but the bank will still see them and question them until their 7 years is up.  How do I prepare for the bank application credit test?  Relax, there is no test, but here is what the bank grades you on before they lend you their money. So you might be able to plan in advance. 6 C's of credit Credit:  The banks look at... How you paid your bills. Any late payments, how long your credit is established, how large your credit limits are, how much you owe against your credit limits. Any collections or judgments against you or bankruptcy type history (Orderly payment of debt, consumer proposal etc). Character:  How solid is your career? How often do you change jobs or residence? Whenever they can, a bank will interview landlords, employers and yourself to see if you are compatible to their lending criteria.  Banks also have a "Know your customer" policy, so if you are established with a chequing or savings long enough and get to know the people at your branch, it helps to establish a credit trust rapport. Capacity:  How much do you make?  Can you afford the repayment of the loan? You might think you make enough money, but the bank has a formula that they calculate your Total Debt Service capacity. Your credit and Character might be fine, but if you don't meet this calculation, you are still not going to qualify. Conditions:  What are the circumstances of your deal?  Are you borrowing to get ahead...for things like your RRSP, purchase a home, renovating, purchase a car, leverage for another investment.  Or are you borrowing to shore up your credit, for things like lowering your payments, paying off taxes, paying out collects.  The banks look more favourably at your application if it is for a positive purpose. Collateral: This would be the quality of the bank's security. If you are buying a home, is it in a good neighbourhood etc.? If you are buying a car/truck, they type of vehicle will determine the length of time the bank will finance the vehicle (affecting the monthly payment).  A new vehicle can be financed longer. Capital:  This is a little known item that will affect your borrowing decision every time.  If you have Liquidity, the bank will take your application more seriously.  Liquidity is available money (savings, chequing, RRSPs, Shares, Stocks, Bonds, Inheritance, cash gift from parents. etc)  and Capital=Money is KING! If you have available money the lending officer knows you have the ability to make your loan payments and your lending officer knows you have demonstrated the discipline to save. I'll get off my soapbox now, but I hope this helps you to better understand the world of credit, that you should have been taught  before you were sent out into the real world. posted by MIke Toporowsky at 8:30 am - 0 comments CLICK HERE to Add a Comment to This Post

Bank of Canada Rate Holds Steady Tuesday, March 2, 2010 Bank of Canada Rate holds steady OTTAWA -- The Bank of Canada reiterated on Tuesday its conditional pledge to keep its key-lending rate at a record low until July, but modified its view on inflation by indicating the risks to its outlook are "roughly balanced" as opposed to tilted to the downside. That was the one significant change in its scheduled interest-rate announcement, and analysts might interpret this as a first step by the central bank to ready markets for an interest-rate hike. For nearly a year, the central bank has pledged to keep its benchmark rate at 0.25 per cent until July in an effort to pump up economic growth, on the condition that inflation would not hit its preferred two per cent target until mid-2011. The central bank's mandate is to set its key policy rate at a level to achieve two per cent inflation. In previous statements, the central bank had suggested inflation risks were titled downward because of the possible need to engage in quantitative easing, in which the Bank of Canada would flood financial markets with cash in an effort to spur lending and combat deflation. But through the statement, the central bank might be indicating deflation is no longer a concern. "The bank judges that the main macroeconomic risks to the inflation projection are roughly balanced," it said, with upside risks being stronger-than-projected growth, while a protracted recovery and strong Canadian dollar flagged as downside risks. The change in the inflation outlook emerged after Statistics Canada reported that the economy grew at a five per cent annualized rate in the fourth quarter of last year - blowing past market expectations for a four per cent gain and the central bank's original 3.3 per cent forecast. Economists say the fourth-quarter performance has set the stage for another robust gain, of perhaps four per cent or more, for the first three months of 2010. Recent data indicate that both the headline and core inflation rates have moved much closer to the two per cent level than the central bank had expected. Under the bank's forecast, the two per cent level would not be reached until the third quarter of next year. "Core inflation has been slightly firmer than projected, the result of both transitory factors and the higher level of economic activity," the central bank said in its one-page statement. "The outlook for inflation should continue to reflect the combined influences of stronger domestic demand, slowing wage growth, and overall excess (economic slack)." In its economic outlook in January, the central bank said stubborn unit labour costs along with increases in property taxes and other administered prices accounted for the recent "stickiness" of core inflation. Michael Gregory, senior economist at BMO Capital Markets, said prior to the release of the rate statement that "the longer this (inflation) stickiness persists, the more likely it might also reflect an overestimation of the size and impact of the output gap," which measures the amount of economic slack in the marketplace. Other economists, most notably at National Bank Financial, have argued the central bank has overestimated the amount of slack in the economy, and that recent economic data suggest spare capacity is being absorbed at a faster pace than anticipated. The bank has said it expected the output gap to close in the third quarter of 2011. A large amount of excess production capacity suggests a lack of consumer demand, and gives producers little to no pricing power. Meanwhile, the central bank also acknowledged that economic activity has been "slightly higher" than its own projections, with the five per cent gain in the fourth quarter powered by "vigorous domestic demand" and a recovery in exports. "The underlying factors supporting Canada's recovery are largely unchanged - policy stimulus, increased confidence, improved financial conditions, global growth and higher terms of trade," the bank statement said. It added that "persistent strength" in the Canadian currency and the "low absolute level" of U.S. demand would continue to act as "significant drags" on economic activity. The central bank's next statement on interest rates is April 20, and two days later it will release its updated economic forecast. Meanwhile, the governor, Mark Carney, has scheduled two speeches this month in which he may provide further guidance as to how the bank would behave as its conditional pledge comes to an end. © Copyright (c) Canwest News ServicePost Content posted by MIke Toporowsky at 7:34 am - 0 comments CLICK HERE to Add a Comment to This Post

Feds pressured to increase rates Monday, March 1, 2010 OTTAWA -- Pressure on the Bank of Canada to move early on raising interest rates mounted Monday after data on fourth-quarter gross domestic product suggested the economy is roaring its way out of recession after recording the fastest pace of growth in nearly a decade. The central bank could provide hints of a change Tuesday morning when it releases its latest statement on interest rates. Its plan for almost a year has been to conditionally keep its benchmark rate at 0.25% until July in an effort to pump up economic growth after the great recession. Data from Statistics Canada suggest the emergency-level rates have worked their magic, perhaps faster and better than anticipated. The economy expanded 5% in the final three months of 2009, blasting past market expectations for a 4% gain — and the bank’s own 3.3% forecast — and setting the stage for robust growth this quarter. It is also the fastest pace of quarterly economic growth since late 2000. Further, the data were solid across the board, with personal consumption and net trade contributing to the performance. Third-quarter data were also revised upward, with growth of 0.9% as opposed to the original 0.4% reading. This comes on top of January inflation data that indicated price increases have moved closer to the central bank’s 2% target earlier than envisaged. “With growth being stronger than expected and inflation sticky … we remain of the view that the Bank of Canada has the full green light to hike as emergency conditions have passed and with it justification for sticking to the zero lower bound on rates,” said economists Derek Holt and Karen Cordes from Scotia Capital. Yanick Desnoyers, assistant chief economist at National Bank Financial, said a rate hike could come as early as next month, when data might show the output gap — or the amount of slack in the economy — is narrowing faster than the central bank expected. He added the headline GDP data might be underestimating how quickly economic slack is being absorbed. For instance, gross domestic income – or the sum of all wages, corporate profits and tax revenue – climbed by 8.5% in the quarter, the best showing since 2005. And that follows a 4.5% gain in the third quarter. Sheryl King, chief economist and strategist at Bank of America/Merrill Lynch Canada, said she expects a rate hike in June, based on a belief the central bank will want to see through its conditional pledge for as long as possible. Among the data points she said she found most encouraging was a 4% gain in real wage growth – defined as gains in household income excluding transfers from governments. The last time there was growth in this category was prior to the recession. “This signals that risk taking and organic growth is coming back in Canada,” she said. Of course, not all analysts believe the data will push Bank of Canada governor Mark Carney to veer off course. Douglas Porter, deputy chief economist at BMO Capital Markets, said the data surely raises the odds of a July rate rise but anything earlier than that remained remote. Analysts at TD Securities also shared a similar view. Also, the data contained one key blemish – a 9.2% drop in machinery and equipment investment by Canadian companies, which does not bode well for efforts to boost abysmal productivity levels. The GDP data attracted investors, as the Canadian dollar gained a full US1¢, to US96.01¢, on the possibility of an early rate hike. Canadian growth should remain robust as the global recovery takes hold. Business surveys released Monday indicated manufacturers continue to lead the recovery, with factory activity expanding last month across Asia, the United States and Europe. posted by MIke Toporowsky at 3:40 pm - 0 comments CLICK HERE to Add a Comment to This Post

50/50 Split Mortgages Sunday, February 28, 2010 What is a 50/50 Split Mortgage and why should you be asking questions? Gary Marr, Financial Post Published: Saturday, June 13, 2009 Don't handcuff your mortgage Take a few important moments to read about the 50/50 Wi$e Mortgage Would you like to pay an extra $300 per month on your mortgage? Not likely. That hasn't stopped a number of Canadians, with the deal of a lifetime on a variable-rate mortgage, from switching over to a more expensive fixed-rate product and paying the extra freight. A fear of rising rates is driving the rash decision. But if you've finally managed to pin your banker to the ground, why on Earth would you let him off the mat? More than 28% of Canadians have a variable-rate product tied to prime, according to the Canadian Association of Accredited Mortgage Professionals (CAAMP). If you negotiated a deal before October of last year, chances are you are now borrowing money for as little as 1.35%. That's based on deals that at one point saw the banks giving 90 basis points off prime. Prime is now 2.25%. The average sale price of a home last month in Canada was $306,366. Based on a 25% downpayment and a 25-year amortization, your monthly payment would be $962.61 at 1.35%. Convert that to a fiveyear fixed-rate term and you're probably going to have to consider a 4% mortgage rate and a monthly payment of $1,289.04. Rates are rising fast. Most major banks upped their five-year rate by 40 basis points this week, although discounters were still offering 4% this past week. "It's not a mass rush yet, but we are starting to see ... people locking in. But variable rates are still so good," says Joan Dal Bianco, vice-president of real estate-secured lending, TD Canada Trust. She stops short of questioning why a consumer would pull out of these "deals" that are no longer available on the market. Try to get a variable-rate mortgage today and the best you can probably hope to get is 60 basis points above prime, or 2.85%. The landscape changed dramatically in October during the credit crunch. As the Bank of Canada lowered rates, the major banks reluctantly lowered prime because of the massive amount of customers with variable-rate products negotiated under the old, higher terms. "Bonds yields are going up rapidly and people are starting to realize the rates are going to go up," Ms. Dal Bianco says. Throw in the fact the Bank of Canada used the weasel word "conditional"(on inflation rates)when it promised not to raise rates until June, and you can understand why some people think today's record-low prime rate might not hold. But if you're someplace between 60 to 90 basis points below prime, the rate is going to have to go up pretty fast to justify locking in today at 4%, even though that is just slightly above the all-time low hit last month for a five-year term. "I don't understand why you would lock in," says Jim Murphy, chief executive of CAAMP. "Sure, if they start to rise, but [Bank of Canada governor Mark] Carney says they won't rise, so you've got another year at that prime-minus rate." Don Lawby, chief executive of Century 21 Canada, says even when rates do start to increase, they are not going to jump significantly right away. You are not going to get 4% on a fixed rate again, but double-digit rates seem unlikely. "The only logic two locking in would be for someone very sensitive to any rate change and they just want to be secure," Mr. Lawby says. But at what price? If you're using the "feeling secure" logic, why not go for the 10-year fixed-rate product? Rates on that product can be locked at 5.25%, ridiculously low by historical standards. Yet fewer than 10% of Canadians consider a 10-year product. There are some compromises you can make. For starters, there is nothing to prevent consumers from having a blended mortgage at most Canadian banks. Some banks will let you take half your outstanding debt and lock it in. Diversity is preached for stock portfolios, but few people seem to adhere to the same philosophy when managing their debt. Consumers might want to take their cue from business. Few companies would want all of their debt coming due at the same time -- it presents too much risk. The other option is knocking down principal: Make payments based on a 4% rate and have that extra $300 go straight to your principal every month. The bottom line is if you've got a deal on your mortgage, why would you give it back? Dusty wallet Double check your credit card statements. DW is in a bit of a skirmish with Visa over a taxi cab bill. Of course, DW is too cheap to use cabs, but does succumb to them to get to and from airports on vacation. Last trip, the family took an airport limousine and paid the $56 charge. Guess what? The same amount was billed a month later. So far, the taxi cab company has yet to produce a second receipt. In the interim, DW had to pay the second $56 charge. posted by MIke Toporowsky at 2:31 pm - 1 comments CLICK HERE to Add a Comment to This Post

uk mortgage said... Tuesday, February 16, 2010 @ 11:10 pm This is a wonderful article. The things given are unanimous and needs to be appreciated by everyone. ------------------ Ana uk mortgage

Mike Toporowsky AMP
Real Mortgage Solutions
Email: