Interest Rate Differential

Interest Rate Differentials (IRD)


Often a client needs an “idea” of how much their existing mortgage penalty might be before thye decide to refinance or do an “early switch” with pre-payment penalty.

If the penalty is based on a rate differential, here is a BASIC calculation to figure out a close amount…..

Based on a:

$200,000 with 3 years remaining on a 5 year term of 5.70%....

…because there are 3 years remaining, the current 3 year rate is used to calculate the differential.

If the lenders current 3 year rate is 4%, there is a difference of 1.7%. Because there’s still 3 years left, the principal is also multiplied by 3

$200,000 x 1.7% x 3 = $10,200 penalty

(remaining principle) (Difference btw rates) (# yrs remaining)

**This is an estimate and will change every time rates change. If the differential increases, the penalty will also increase.

Need advice? I'm happy to help. Call me today for your free, no obligation consultation. http://www.tmdc.ca/

Mortgage rates are poised to rise

Mortgage rates could be drifting up again soon, even if the Bank of Canada is standing pat for now, experts say.
Already over the last few months, variable-rate mortgages have started to climb, erasing much of the advantage they had over traditional fixed-rate mortgages, says Kerri-Lynn McAllister, community manager at RateHub.ca. McAllister says we can expect more of the same.
“A few months ago, there was basically a one per cent spread between fixed and variable. Now it’s .2 or .3,” said McAllister. “I don’t think they’re done. We’re still seeing banks increase their premiums.”
Part of the reason for the hike, says McAllister, is that with mortgage rates as low as they’ve been, banks have a harder time making money.
“That’s definitely a way to improve their margins,” McAllister said. “It also creates more incentive for people to move over to fixed rates. The fixed rates are definitely more profitable for them.
Even fixed rates could be in for a rise in the new year, suggests Joseph Haimowitz, principal economist at economic think tank Conference Board of Canada.
“I think they’ll probably rise slightly in anticipation of Bank of Canada hikes, especially if the Bank communicates its intentions clearly. No bank wants to lend out money at 4 per cent today if its costs are going to be at 5 per cent next week,” said Haimowitz.
He expects fixed mortgage rates could rise by up to .25 per cent by mid-2012.
Tuesday, Bank of Canada governor Mark Carney announced the Bank was keeping its key overnight lending rate at 1 per cent. That overnight lending rate affects the prime rate which banks charge their best customers. Prime rate at most banks is currently 3 per cent.
The days of deep-discount variable rate mortgages offering rates half a per cent or more below prime are gone for now, according to Robert McLister, editor of Mortgage Rate Trends.
“Is it gone forever? I don’t think so. But it’s gone for the foreseeable future,” said McLister. He predicted variable rates could rise by as much as .2 per cent over the next few months.

While the average posted rate for a 5-year fixed rate mortgage is 5.29 per cent, many banks are offering fixed rates as low as 3.25 per cent, says McLister. That compares very favourably to the average rate of 2.8 per cent for variable rate mortgages over the same 5-year term, McLister says.
“The spread is maybe half a point. That’s a historical anomaly,” said McLister.
One contrary note came from panel put together by ratesupermarket.ca, which suggested that fixed rates could drop over the next month, while variable rates will stay put
“With no quick fix on the horizon for the European debt crisis, the global economic outlook continues to be pessimistic causing downward pressure on longer-term bond yields. Couple this with decreased demand for home loans during the busy holiday season, and it is likely that fixed mortgage rates will stay low or even drop further over the next 30-45 days,” the panel said.

Allow me to find a Mortgage that is right for you! http://www.tmdc.ca/

Why Use a Mortgage Broker?

This article appeared in The Globe & Mail and hilights the benefits of using a Mortgage Broker. It's being able to offer the personal touch to my clients that I find satisfying.

Call me today and allow me to get you a great rate on your mortgage.

Canadians heed debt warnings and exhibit confidence in their ability to manage their mortgage: CAAMP

Canadian Association of Accredited Mortgage Professionals releases Annual State of the Residential Mortgage Market in Canada report


TORONTO, Nov. 9, 2011 /CNW/ - Canadians have heard the many cautions about carrying too much debt and are taking action to insulate themselves from future economic downturns, according to the seventh Annual State of the Residential Mortgage Market report by the Canadian Association of Accredited Mortgage Professionals (CAAMP), released today.

Highlights:

• About one-third (32 per cent) of homeowners with mortgages had some mortgage activity in 2011, with 23 per cent renewing or refinancing their mortgage.
• Fixed rate mortgages remain most popular (at 60 per cent), while 31 per cent have variable rate mortgages.
• Among those who renewed their mortgage in the past 12 months, 78 percent saw a reduction in their rate
• Among those who renewed or refinanced their mortgages in the last year, 21 per cent changed lenders
•  Levels of equity takeout have dropped in 2011 - only 10 per cent of mortgage holders took out equity in the last year, a 40 per cent drop from 2010

"Overall, our survey paints a picture of Canadians generally and homeowners in particular as very focused on their finances. They are planning ahead, aggressively paying down their mortgage in advance of any further economic jolt,"" said Jim Murphy, AMP, President and CEO of CAAMP. "Prudent is the word that best sums up how Canadians are feeling at this time."

Canadians secure in their own positions; skeptical about others
The 2011 survey found an interesting contrast between individuals' own debt levels and their feelings towards other Canadians' financial positions. Forty-six per cent of respondents agreed that "as a whole, Canadians have too much debt" and many believe that "low interest rates have meant that a lot of Canadians, who probably should not have, became homeowners over the past few years."


However, among those with a mortgage, most disagree with the statement "I regret taking on the size of mortgage I did" and a substantial number agree that mortgage debt is "good debt." Canadians also agree overall that "real estate in Canada is a good long-term investment."

And, despite being concerned about overall debt levels of Canadians, they believe that they personally have acted responsibly.

Canadians could weather a potential storm


Canadians have insulated themselves by shopping for the best interest rates with the help of a mortgage broker whose market share has increased. Among those who renewed a mortgage in the past year, the number who switched lenders was up to 21 per cent in 2011. At the same time, three quarters of Canadians who renewed or refinanced their mortgage this year saw a decrease in their mortgage rates. For a five year fixed rate mortgage, the average discount has been 1.46 per cent during the past year. And fewer Canadians have taken out equity, down to 10 per cent in 2011.

By comparing rates with different mortgage lenders, aggressively paying down their mortgages, and decreasing the amount of equity they take out of their mortgages, most Canadians appear to be in a comfortable position to weather the economic challenges ahead. In fact, eighty-four per cent of mortgage holders said they can handle an increase of $200 per month in their mortgage payments, and 78 per cent have at least 25 per cent equity in their homes.

"Despite less than positive feelings towards the economy, or maybe because of that, Canadians are showing a level of prudence in their decisions that is inspiring," said Murphy. "That suggests to us that there is no need for policy makers to introduce new measures that would reduce housing activity."

The report is authored by CAAMP Chief Economist Will Dunning and based on information gathered by Maritz Research Canada in a survey of Canadian consumers conducted in October 2011. For the full report
check out CAAMP

Economic Trends that affect you!

Mortgage rates may rise


Variable mortgage rates are already starting to creep up, and fixed rates could soon follow if Wednesday’s higher-than-expected inflation numbers turn out not to be a fluke, says mortgage expert Robert McLister.

Canada’s inflation rate hit 3.1 per cent in August, driven by rising food and energy prices, Statistics Canada revealed Wednesday. Even the so-called core inflation rate — which excludes food and energy — hit 1.9 per cent.

“Keep your eye on inflation. If the core rate goes above 2 per cent for a couple months in a row, then we’ll start to hear (Bank of Canada governor) Mark Carney talk about cooling things down,” said McLister.

Raising interest rates is a tool used by central bankers to slow down an economy, the thinking being that if borrowing becomes more expensive, less money is being spent, resulting in less economic activity.

Already, said McLister, the spread between fixed rates and variable rates has dropped to less than one per cent, as banks eliminate much of the discounting they give on variable rates.

Stay ahead of the game, sign up for our "rate alert"

Avoiding Credit Card Debt Before it Sneaks up on You

In this modern time where the economy has been such a challenge for everyday people like you and me to keep up, it’s easy to get into credit trouble when your credit bills begin to stack up. So if you are in the position to just start learning the ropes of the world of credit cards, there are a lot of things you can do to avoid credit card debt before it sneaks up on you and keep your nose clean, as they say.

This is an outstanding goal for you if you are just getting your first credit cards. If you know or talk to anyone who is battling tens of thousands of dollars of credit card debt, you know what a jail sentence it can be. Once that credit card debt gets that high, the time it will take even under the best of conditions to bring it down runs into the years if not decades. And for all that time, thousands of dollars of money goes down the drain to credit interest that doesn’t buy you any food, tickets to the movies or new clothes. It just goes away with no value to you at all.

But if you are new to the world of credit, getting a credit card is a good thing. But once you get one, keeping it under control is job one. You will find it amazingly easy to use a credit card once it comes. In fact, the retail world makes it difficult to conduct transactions any other way. You can pay for gas at the pump that way and even charge your groceries at the grocery store. And while all of these great uses for credit are helpful, you can end up with a whopper of a credit card bill at the end of the month. And if you don’t pay that bill off, that is the first step on a lifelong jail term in credit card debt jail.

So there are some guidelines you should follow to both use credit responsibly but also to keep building your credit rating which has a real value to you. Remember that what the credit card companies don’t tell you is that making a charge on a credit card is a loan. Even if you just charge ten bucks to go to the movies, you took out an unsecured loan to finance that movie ticket.

So once you start using a credit card, keep in mind that you will be paying back everything you run up on it. It is NOT free money. A good practice is to save every receipt every month and keep a running tally of what you have spent on credit. Now only can you use that to cross check your credit card, it keeps you honest because each time you add a charge to your credit card, you can update your tally so you know for certain that you will be able to pay it off when the bill comes.

Paying off the credit card each month is the number one best way to keep your credit problems under control. Now it isn’t a bad idea to let a little bit of the debt drift from month to month. This builds your credit history and credit rating which will pay you well down the road when you want to buy a larger purchase. But by staying on top of your credit and what is going onto your card, you will start out with the kind of habits that will lead to a life of good credit use without credit card jail. And that is a wonderful gift to give yourself early in life.

Interest rates expected to remain on hold

By The Canadian Press - August 09, 2011

OTTAWA - A pledge by the U.S. Federal Reserve to keep its key interest rate at a record low means interest rates in Canada will likely stay on hold as well.


BMO deputy chief economist Doug Porter says the Canadian central bank will likely keep its key overnight rate target at one per cent well into next year.

Before the recent financial turmoil, Porter says he had expected two quarter-point rate hikes by the Bank of Canada by the end of this year.

The Bank of Canada last raised its key overnight rate target in September last year.

The rate affects the prime lending rate at the country's big banks and influences the rates charged on variable rate mortgages and lines of credit.

OTTAWA - A pledge by the U.S. Federal Reserve to keep its key interest rate at a record low means interest rates in Canada will likely stay on hold as well.


BMO deputy chief economist Doug Porter says the Canadian central bank will likely keep its key overnight rate target at one per cent well into next year.


Before the recent financial turmoil, Porter says he had expected two quarter-point rate hikes by the Bank of Canada by the end of this year.


The Bank of Canada last raised its key overnight rate target in September last year.


The rate affects the prime lending rate at the country's big banks and influences the rates charged on variable rate mortgages and lines of credit.

Beware the pitfals of collateral mortgages

By Mark Weisleder
When you apply for a mortgage, you usually just ask about the term, amount, interest rate and monthly payment. Not many people understand the difference between a conventional mortgage and a collateral mortgage. Yet many banks are now asking borrowers to sign collateral mortgages — and it could result in them being tied to this bank, for life.

With a normal conventional mortgage you bargain for a set amount, rate and amortization. Say the property is worth $250,000 — you bargain for a $200,000 loan, at 3.5 per cent, a five-year term/25-year amortization, payments of $998.54 per month.
A conventional mortgage is registered against the property for $200,000. If all the payments are made on time, the mortgage is renewed on the same terms every five years and no prepayments are made, the balance is zero after 25 years.
Should another lender decide to lend you money as a second mortgage, there is nothing stopping them from doing so, subject to their own guidelines. Under normal circumstances the principal balance on a conventional mortgage goes only one way, down. In addition, banks will accept “transfers” of conventional mortgages from other banks, at little or no cost to the consumer.
A collateral mortgage has as its primary security a promissory note or loan agreement and as “backup,” a collateral security, being a mortgage against your property. The difference is that, in most cases, the mortgage will be for 125 per cent of the value of the property. In our example, the mortgage registered will be for $312,500. But you will only receive $200,000. The loan agreement will indicate the actual amount of the loan, interest rate and monthly payments.
The collateral mortgage may indicate an interest rate of prime plus 5-10 per cent. This will permit you to go back to this same bank and borrow more money from time to time, without having to register new security. The lender will offer you a closing service, to register the mortgage against your property, at fees that will be cheaper than what a lawyer would charge you. Sounds good so far, doesn’t it?
However, this collateral loan agreement has different consequences, which are usually not explained to the borrower.
• Most banks will not accept “transfers” of collateral mortgages from other banks, so the consumer is forced to pay discharge fees to get out of one mortgage and additional fees to register a new mortgage if they move to a new lender. Thus the bank is able to tie you to them for all your lending needs indefinitely because it will cost you too much to move.
• Lenders may be able to use the collateral mortgage to offset any other unpaid debts you have. Offset is a right under Canadian law that says a lender may be able to seize equity you have in your home, over and above the mortgage balance, to pay, for example, a credit-card balance, a car loan, or any loan you may have co-signed that is in default with the same lender. In essence any loans you may have with that lender may be secured by the collateral mortgage. Nobody goes into a mortgage thinking about default, but “stuff” happens in people’s lives and 25 years is a long time.
• Let’s say your house value is $200,000. A collateral first mortgage registered on the property is $250,000. The amount owing on the mortgage is $150,000. If you were to need an additional $20,000, but the lender declines to lend it for any reason, then practically speaking you won’t be able to approach any other lender. They will not go behind a $250,000 mortgage. Your only way out would be to pay any prepayment penalty to get out of the first mortgage and pay any additional costs to get a new mortgage.
• Let’s say your mortgage is in good standing but you default under a credit line with the same bank. The bank could in most cases still start default proceedings under your mortgage, meaning you could lose the house.
• Some lenders are offering collateral mortgages in a “negative option billing” manner. Unless you are informed enough to say you want a conventional mortgage, you will be asked to sign documents for a collateral mortgage.
One bank is only offering collateral mortgages.
I spoke with David O’Gorman, the president and principal mortgage broker with MortgageLand Inc. He tells me it is his duty under the law to ensure the “suitability” of any mortgage he arranges for a consumer.
He would be hard pressed to justify the recommendation of this type of collateral first mortgage to any consumer, without disclosing both verbally and in writing the points listed above, and he believes the consumer should have their own lawyer review everything before they sign.
Lending money to people without proper explanation of the consequences is wrong. The banking regulators need to look into this practice and stop it. In the meantime, do not sign any mortgage document without discussing it first with your own lawyer.

U.S. Default & Canadian Mortgage Rates

We’ve all heard about the impending fiscal calamity south of the border. The issue, of course, is whether lawmakers in the U.S. will increase the $14.3 trillion debt ceiling by August 2 (or thereabouts) so the U.S. can pay its bills.


That’s got many Canadians concerned about how this mess will impact interest rates north of the border.

From the looks of things, it’s not quite panic time. The odds are good that U.S. lawmakers will come to an 11th hour agreement if you believe what yields in the $13.5 trillion dollar treasury market are telling us. The benchmark 10-year U.S. note has remained calm, barely moving in the last few weeks. Most other credible sources, including the Bank of Canada’s Mark Carney, also expect a resolution by the deadline.

That said, the outcomes at this point are completely uncertain for two reasons: 1) There’s no assurance that Republicans and Democrats will come to terms in time; and 2) a default is totally without precedent in the U.S.

TD’s chief economist Craig Alexander writes, "The impact on Canada could range from a hiccup in our base-case economic outlook, to one in which we are thrown back into a recession that could have a global reach."

If the U.S. can’t meet its obligations on time, TD senior economist James Marple says simply: “We have no idea how bad it could be.”

Neither do we. Nonetheless, we’ve taken our best guess at two of several possibilities and their potential implications:

Possibility #1: The debt ceiling is raised on time

The good news: A crisis would likely be averted (for now). A Democrat/Republican compromise buys time for the U.S. to figure out how to stem its red ink. This predicament might even provide enough incentive to make headway towards balancing the U.S. budget (which would have a downward influence on North American interest rates long-term).

The bad news: The world has been lastingly reminded that U.S. government debt is not as “risk-free” as once thought. The rating agencies may give the U.S. a limited amount of time to put forward a credible deficit reduction plan. If it doesn’t, America’s haloed “AAA” debt rating could eventually be cut. That could shock financial markets and put us back in crisis mode.

Potential Interest Rate Impact: A Democrat & Republican debt deal would likely entail a slashed U.S. budget. That could slow the economy and weigh down yields. Rates could be further influenced by:

1.A ratings cut:

◦If the debt ceiling plan is deemed too risky by the market, ratings agencies could cut America’s debt rating, driving up yields up in the short term. The rate spike could be severe in the short term but probably not extreme in the long term (given the liquidity of the American debt market and the U.S. dollar’s primary reserve currency status).

◦We seen TV analysts speculate that the short-term impact would be a 50+ basis point spike in long-term U.S. rates.

◦U.S. yields might then settle down to roughly a 25 basis point premium over today, suggests Blackrock Analyst Rick Reider.

◦Canadian and U.S. bond yields are 95% correlated. As a result, our treasuries would likely reflect a portion of that increase (at least in the short term). That would boost fixed mortgage costs here by some fraction of a percent.

2.Budgetary progress:

◦If the U.S. eventually tabled a balanced budget, yields could drop back down (somewhat similar to how they did in Japan after its 2002 ratings cut).

Possibility #2: The debt ceiling is not raised in time

The good news: In simple terms, there are two types of government default: default on debt obligations and default on non-debt obligations (wages for government employees, the military, social security, etc.). The most crucial priority in the short-term is making principal and interest payments to holders of U.S. treasuries. Fortunately, the U.S. can still pay bondholders for a period of time. That means an actual “debt default” would likely be averted, hopefully long enough to permit a resolution.

The bad news: As the U.S. Treasury states, an impasse after Aug. 2 would merely be “default by another name.” The U.S. would undergo a severe fiscal shock with most of the government shutting down. America’s debt rating might very well be cut, thus driving up yields (and hence fixed mortgage rates). Canada’s economic outlook could be downgraded as well since we’re such a huge trade partner with the Americans.

Potential Interest Rate Impact:
•Long-term U.S. rates would soar in the short-term.
•Canadian rates could follow in sympathy, but to what degree is unknown. (Longer-term bonds lead fixed mortgage rates)
•To battle the economic contagion, the Bank of Canada would leave our overnight rate lower than it otherwise would. That would likely keep variable mortgage rates low.
•In the short to medium term, default could spark a rocketing loonie (versus the U.S.) and put the brakes on the Canadian/global economy. That would exert downward pressure on rates over time.
•Canadian rates might also be helped by asset rotation out of U.S. treasuries and into Canadian bonds. As more people buy Canadian bonds it lifts bond prices and lowers yields (and fixed mortgage rates).

*******

If another economic crisis does ensue, the odds favour variable mortgage rates over longer-term fixed rates.

If you’re a homeowner or prospective mortgagor who is concerned by all this, the best bet is to wait until next week and see how things play out. Then speak with a mortgage professional.

--------------------------------------------------------------------------------

Bank of Canada hints rate hikes are coming sooner rather than later

By Craig Wong, The Canadian Press

OTTAWA - The Bank of Canada signalled Tuesday that it will look for an opportunity to raise interest rates sooner rather than later to keep inflation in check as the Canadian economy continues to grow.

The central bank kept its overnight rate target at one per cent but noted that the U.S. economy has grown at a slower pace than expected and Europe faces a growing credit crisis — both potential drags on the domestic economy.
Despite those threats, the bank said it believes Canada's economy remains on track to grow this year, which observers said likely means a rate hike as early as October .
CIBC World Markets chief economist Avery Shenfeld said the bank's decision to drop the word "eventually" in reference to the timing of its next rate hike suggests it will move before the end of the year.
"The underlying message is that rate hikes will be coming sooner than eventually," Shenfeld said.
"The surprise is really for those who thought that the Bank of Canada would be waiting until 2012 to begin hiking rates, because I think here the message is directed at those dovish observers and indicating that we will probably be moving sooner than that."
The suggestion that rates in Canada will rise in the near term helped push the loonie up 0.88 of a cent to 105.17 cents U.S. — the highest close since the end of April.
Canadian economic growth slowed in the second quarter, but the central bank said it expects to see an acceleration in the second half of the year.
Overall, the Bank of Canada expects the economy will expand by 2.8 per cent in 2011, compared with its call in April for 2.9 per cent growth. The outlook for 2012 and 2013 was unchanged at 2.6 per cent and 2.1 per cent respectively.
Shenfeld said the central bank will likely wait to see if its economic outlook is on track before moving to raise rates.
"The key is the Bank of Canada has to see evidence that its projection for a re-accelleration in economic growth is actually taking place," said Shenfeld, who currently expects the central bank to hold rates in September and move in October.
BMO Capital Markets senior economist Michael Gregory said the case of a rate hike was building, noting that household spending in Canada remains solid.
"We are sticking to our call for October and December rate hikes this year," Gregory wrote in a note to clients.
However TD Bank economist Sonya Gulati said she continued to expect the Bank of Canada to keep rates on hold until its first meeting in 2012.
"We think that they are going to time it more to when the (U.S.) Fed is going to start to increase it, which we think is going to be March of next year," she said.
"In previous communications, the governor has indicated that the rate spreads between the two countries is something he's keeping a close eye on and that there has to be a working gap between the two for the countries to go forward, given how high the Canadian dollar is."
Gulati said TD expects the Bank of Canada will increase its overnight rate target in one-quarter percentage point intervals starting in January to two per cent before pausing to assess the situation and then increasing the key rate again to three per cent by the end of 2012.
A full update on the central bank's outlook for the economy and inflation is expected when the Bank of Canada publishes its monetary policy report on Wednesday.
The central bank said in its statement Tuesday that the U.S. economy continues to be restrained by the consolidation of household balance sheets and slow growth in employment while fiscal austerity measures in Europe also restrain growth.
"Widespread concerns over sovereign debt have increased risk aversion and volatility in financial markets," the central bank said in its statement.
Read More...

What is a Mortgage?

Every homeowner knows what a mortgage is but do you?

Many people have heard that term on movies, television shows and commercials but don’t really know what it really means.


To put it simply, it’s a loan where you are using your house as collateral. The difference between this and a normal loan is that your house becomes your backup just in case something happens and you are unable to continue payments.


Mortgages come in many different forms depending on what you are looking for with regards to financing.

Some examples are the fixed rate and adjustable type. These differ in how the payments are set up and whether or not each payment will be influenced by current interest rates across the country.


There are also commercial loans if you are planning on buying an apartment complex or other type of real estate that has the potential to make you money.


Before you decide to buy a home, it’s very beneficial to do as much research as possible. You should try to learn about each different type of mortgage and what the payments actually consist of.


Do they change each month Should you put a lot of money down before setting up payments It can be very complicated and stressful for almost anyone due to the sheer ending cost of it all.


Owning a home is a dream for many people and you will want to make sure you are well educated on home ownership. Call me for all your home ownership advice. 

Rate drops ignite client preference for fixed

By Vernon Clement Jones


Brokers are finally seeing a change in consumer appetite for risk after the second chop to fixed rates in two weeks.

“Up until a couple of weeks ago, we were still seeing 50 per cent of our clients coming in looking for fixed and the other 50 per cent looking for variable-rate mortgages,” Dan Mass, owner of Verico Canada First Mortgage, told MortgageBrokerNews.ca. “But that’s now changed, we’re seeing 80 per cent now looking for fixed and only 20 per cent looking for variable since the fixed rates started dropping.”

RBC set off another chain of falling rates last Friday by shaving 0.1 percentage points off its posted five-year fixed, taking it to 5.49 per cent. Over the weekend, TD Bank, Scotiabank, BMO and Laurentian followed suit, with most broker channel lenders having now effecting the changed. Their collective move follows another 10-basis-point chop last week, although the most recent price cut also applies to the posted and special rates on one-, two-, three- and four-year loans.

Lenders are now pointing to falling yields on government bonds across a range of terms as impetus for the rate decrease. The decline actually runs counter to what most economists had predicted for the remainder of 2011. It also comes as consumers react to media speculation about a possible hike in the Central Bank’s key Overnight rate. That move won’t come this week, said Central Bank Governor Mark Carney Tuesday. Still, the narrowing gap between fixed and variable rates is expected to send many homeowners to their lenders looking to lock in and join the more-than-60-per cent of Canadian homeowners who have opted for the security of a fixed-rate mortgage.

Mass’s observations reflect that change only in part. The boom in business many brokers were looking for as the gap between variable and fixed narrowed hasn’t yet materialized, he said.

Still, another broker is predicting that increase in activity may come this fall as the banks near their year-ends and look to stir up more business.

“I think there’s still more room for lenders to drop their fixed rates before hitting the floor,” said Corey Romyn, an agent and COO for Taurus Mortgages in the Toronto area. “We’ve seen that in the last few years, especially when volumes are down for most lenders, as they are this year.”

But there is a limiting factor at play. The buyers may be attracted by the rates, Romyn told MortgageBrokerNews.ca, but may ultimately find themselves frustrated by the dearth of houses for sale

Bankruptcy: A Matter of Pride

Bankruptcy is a financial technique in which you declare that you cannot repay your creditors now or see a way to repay them in the future. Depending on your income and the amount of money you owe, an individual may declare chapter 7 or chapter 13 bankruptcies. However, in either case, bankruptcy is a fairly public affair. Your name and address will be published in at least one of the local newspapers for all of your friends to read, and your neighbors will see movers coming to repossess some of your items. For many people, the worst part of bankruptcy isn’t losing the money; it’s losing pride and dignity.

The first way to deal with this is to realize that most of your friends and family have gone through money problems at one time or another in their lives. Although they may not have resorted to bankruptcy, there is certainly no question that only the very lucky do not feel drowned by debts at one point or another. Simply put, people will understand. Even though you may feel like everyone is snickering at you behind your back, the truth is that most people are actually empathizing with you.

Also realize that not everybody will realize you’ve declared bankruptcy. Most people do not take the time to read the newspaper that carefully, and even though word does travel fast, it is not a topic that most people will bring up because it simply is not that interesting. You might feel like you’re the headlining news, but in actuality, most people probably didn’t even know about it.

It is important to continue with the process, even if people do find out. If you are embarrassed, simply understand that so are all of the people in this country who are going through the same thing. You are not alone. In fact, you may be able to get counseling to help you go through the bankruptcy process. You may be surprised at how many people have declared bankruptcy and gone on to be very successful.

If bankruptcy is the best thing for your family and your financial situation, it is most important that you continue with the declaration. Take care of yourself first, then worry about what other people have to think. The most important thing is not what your neighbors have to say, but instead what you are doing to get yourself back on track financially so that your future will be brighter.

Mortgage borrowers show confidence, says CAAMP

Many Canadians are aggressively reducing their mortgages by making lump sum payments, increasing monthly payments and reducing amortization periods, revealing confidence and financial flexibility in a stable mortgage environment, says the Canadian Association of Accredited Mortgage Professionals (CAAMP).

The association’s spring survey report is a bi-annual review of the Canadian mortgage market authored by CAAMP chief economist Will Dunning. The report is based on information gathered by Maritz Research Canada in a survey of 2,000 Canadian consumers in April 2011.
Some highlights from the report:
* Twenty-two per cent of mortgage borrowers increased their payments during the past year, 18 per cent made a lump sum payment, nine per cent did both and 27 per cent who renewed increased their payments;
* For mortgages repaid in the last 20 years, one-third were paid off early;
* For the first time, CAAMP has identified that home equity lines of credit (HELOC) represent 22 per cent of all mortgages, making these lines of credit a $215 billion industry;
* On average, Canadian homeowners have $222,000 in home equity, equal to 66 per cent of the value of their homes;
* During the past year, homeowners borrowed $26 billion in additional equity from their homes. Fifteen per cent of homeowners withdrew equity, averaging $30,000;
* Investments (28 per cent) replaced debt consolidation (19 per cent) as the number two use of home equity takeout. Home renovations remain number one (36 per cent).
“Prudent management of their mortgage debt has paid off for Canadians,” says Jim Murphy, president and CEO of CAAMP. “By taking advantage of low interest rates, we have been paying down our mortgages. As economic confidence returns in Canada, many survey respondents have told us they now feel comfortable using some of that equity to improve their homes and to invest,” says Murphy.
Of an approximate 9.45 million homeowners in Canada, an estimated 1.87 million hold a mortgage and a HELOC; approximately 770,000 have a HELOC only with no mortgage and approximately 3.83 million have a mortgage only. About three million Canadians have no debt on their homes.
Canadians hold $2.10 trillion in home equity and appear generally comfortable. Quebec and Atlantic Canada lead the way in equity comfort levels (81 and 82 per cent respectively). In contrast, homeowners in Manitoba and Alberta have lower levels of comfort with their current equity positions (31 and 29 per cent respectively).
While the CAAMP spring survey report reflects a positive outlook by mortgage borrowers, Dunning cautions that the pace of the economic recovery will remain modest in 2011 and 2012. “Mortgage credit will continue to expand by about $80 billion (7.8 per cent) in 2011, down from its peak of 13 per cent in 2008, but nevertheless a healthy increase,” Dunning says.
Article coutesy of REM

How to score the perfect mortgage

Rachel Mendleson - The Globe and Mail

In this excerpt from the MoneySense Guide to Buying and Selling Your Home, a book in the "Best of MoneySense" series, writer Rachel Mendleson cuts through the jargon and explains how to find the mortgage that's right for you.

Lauren Chender likes to shop around. So when she and her husband were trying to figure out what kind of mortgage to get on their first home, she took to the Internet and began comparing the interest rates posted on various bank websites. But as the Toronto resident did more research, she discovered that it might be possible to get even lower rates through an independent mortgage broker, or by speaking with a financial institution’s mortgage department directly. Even when she found a good rate, she discovered that the tough decisions just kept coming. Should she go with a variable or fixed rate? What about the amortization period? “It’s overwhelming,” says Chender, who wound up using a broker to secure the mortgage on her semi-detached Victorian. “There was a lot to know.”

Chender is hardly alone. Despite the fact that how you finance your home will have a significant impact on everything from what you can afford to how long you’ll be in debt, the complexity of mortgages can make it difficult to arrive at an informed decision. But by understanding what’s at stake, you can cut through the jargon and weigh the options to find a mortgage that’s right for you.

Perhaps the most important thing to consider when thinking about how to finance your home is what taking out a mortgage really means. As Rob McLister, editor of Canadian Mortgage Trends, explains, “Mortgages are definitely among the cheapest money you can borrow, simply because they are secured by quality assets.” But they are also a tremendous responsibility, and something that can greatly increase what you end up paying for your home. While an interest rate of 4 per cent on a $200,000 loan may not seem like a lot today, that changes dramatically when you consider that repayment will likely be spread over decades.

With that in mind, the first step to choosing the right mortgage is identifying the lender whose terms work best for you. While prospective home buyers often begin with their financial institution, your search shouldn’t stop there. As Sarah Daniels, a Vancouver-area realtor, points out, “The lenders are in competition for you.” She advises using a mortgage broker, who will “shop you around” to all the lenders, free of charge. (Mortgage brokers are paid a finder’s fee by the lender. There’s no charge to the home buyer for a pre-approval and no obligation.) And whether you opt for a broker or not, a second opinion never hurts. “It always helps to get one or two other quotes to keep everyone honest,” says McLister.

It’s a good idea to get pre-approved for a mortgage before you start house hunting. That way, you can get a sense of your budget, and avoid falling in love with a property you can’t afford. To give you a pre-approval, lenders factor in your income, type of job and credit history. They also take into account how much you have to put toward a down payment, and any other debts you may have. The amount you are pre-approved for is the upper limit of what the lender will allow you to borrow. Add that to your down payment, and you’ve got the total amount you have to put toward a home. If you have bad credit, are self-employed or want to borrow more than what a bank or credit union will approve, you may want to consider using an alternative lender. But while second- or third-tier lenders (examples include Equitable Trust and Aaron Acceptance Corp.) have looser requirements, the mortgages they issue come with higher interest rates (sometimes much higher), so they are not generally recommended for first-time buyers.

The specifics of the mortgage you select will depend on what makes the most financial sense, as well as your personal preference. One important decision is whether to go with a fixed rate of interest, which is locked in for the entire term of the mortgage (usually five years), or a variable rate, which can change depending on market forces. In today’s low interest rate environment, “variable rates are initially cheaper upfront,” says McLister.

The risk is that they could rise far above the fixed rate later in the term, increasing your monthly payments. You’ll also have to set the amortization period, which is the theoretical length of time you have to pay off your mortgage in full, assuming you never move. Bear in mind that while a longer amortization (as of March 2011, the maximum for an insured mortgage in Canada is 30 years) may give you a bigger mortgage or lower monthly payments, it’ll also mean paying more interest in the long run. If you want the flexibility to make additional lump-sum payments outside of your scheduled monthly (or bimonthly) payments, this must be stipulated in your mortgage. And beware that if you break your mortgage before the term is up, you’ll have to pay a penalty–usually three months’ interest for variable-rate mortgages, more for fixed-rate mortgages. (This doesn’t apply for open mortgages, which are mainly for homeowners who plan to sell within a few months.) Mortgage insurance is one of the extra costs to buying a home that can be easy to overlook. But if you are putting less than 20 per cent down, your lender will require that you purchase an insurance policy to protect them in case you don’t hold up your end of the deal. Calculated on a percentage of the total mortgage, your insurance premium will depend on how well qualified a borrower you are, and can amount to thousands of dollars.
As Daniels observes in her book, for a $450,000 mortgage, even the most qualified borrower who gets the lowest rate (which she sets at 1.5 per cent) would be on the hook for an additional $6,750 in insurance.

If you’re lucky, your family may offer to help with financing. But it’s important to understand how the contribution factors in. A family gift is considered a traditional source of down payment, which is ideal. It will increase the size of the mortgage you can get or allow you to pay for a greater proportion of your home up front. But if the family help is a loan, your down payment is considered to be non-traditional, which, if you’re putting down less than 20 per cent, will result in slightly higher insurance premiums.

When your mortgage is up for renewal, it may be tempting to simply sign on the dotted line, and accept whatever package your lender offers you. However, not shopping around can cost you. “The bank relies on people just to sign the renewal agreement at posted rates. As soon as you do that, you’ve lost thousands of dollars by not negotiating,” advises Vancouver mortgage broker Alma Pasic. Don’t be surprised if you need a refresher course. “It’s like you’re doing it for the first time, because everything has changed,” she says. “It’s hard to keep up–even for us.” RACHEL MENDLESON Sidebar: Cost Cutter If you can live with the uncertainty, a variable-rate mortgage has historically saved home buyers money over a term of five years or more. A 2008 study led by Moshe Milevsky, a professor at York University’s Schulich School of Business, found that variable rates would have saved Canadian borrowers money on a five-year term more than 77 per cent of the time between 1950 and 2007, and chopped a year off the amortization period. By taking on a more predictable, fixed-rate mortgage, you are offloading risk to the lender, and that comes at a price. You might sleep easier, though.

Excerpted from MoneySense Guide to Buying and Selling Your Home (Rogers Publishing Limited, $9.95). The book is available at bookstores and newsstands or online at http://moneysense.ca/myhouse

Low interest rates seen sticking around

MARTIN MITTELSTAEDT - Tuesday's Globe and Mail
Interest rates have recently being going somewhere unexpected: down.

At their trough last week, the yields on 10-year U.S. Treasuries, the benchmark North American rate, touched 3.11 per cent, the lowest level in six months and more than half a percentage point below their February peak.

Yields on 10-year Government of Canada bonds have fallen, too, and are now virtually identical to their U.S. counterparts.

The sliding rates have surprised many market watchers. With the United States government bumping up against its debt ceiling, inflation ticking upward, and a growing debt crisis in Europe, most expected interest rates to be increasing.

While predicting the future for rates is notoriously difficult, some observers believe that the current low-rate environment may continue for a while. If so, it will mean pain for savers, but good news for borrowers.

A drop in interest rates is equivalent to a sale on the price of money, and corporations are already rushing to take advantage of the easy lending conditions, even if they’re in no immediate need of funds. A case in point is Google Inc., which has $37-billion (U.S.) in cash and marketable securities on its balance sheet, but raised $3-billion from a bond issue last week anyway. Mortgage rates have fallen, too – good news for homeowners looking to refinance.

But lower rates have not turned out so well for some of the market’s savviest players, including Bill Gross, the founder of Pimco, the world’s biggest bond fund. Earlier this year, he sold his U.S. Treasuries, because he thought interest rates were poised to rocket higher, which would drive down prices of bonds.

It’s difficult to fault his logic: only a few months ago, the case for higher interest rates seemed so compelling.

Governments around the world are carrying bloated deficits and massive borrowing needs. In the United States, politicians have yet to agree on any clear path to deficit reduction, despite more than $1-trillion in annual red ink. Meanwhile, oil has been trading consistently around the $100-a-barrel level, thereby lifting inflation, another bond-market negative.

And the U.S. Federal Reserve is no longer putting its thumb on the scale. In less than six weeks, it is going to end its program of quantitative easing, under which it is buying $600-billion in Treasuries to goose the economy. Many bond-market followers believe the Fed’s massive buying binge has been propping up Treasury prices and keeping yields artificially low.

So what has been pushing rates lower in recent months?

A weaker-than-expected recovery is the major culprit. “The global economy, and the U.S. economy in particular, is not on quite as solid a recovery track as people were imagining in the very optimistic days of six months or so ago,” observes Peter Buchanan, senior economist at CIBC World Markets.

A slew of recent statistics underlines that weakness, ranging from the poor state of U.S. home sales to the slowing pace of U.S. manufacturing growth. Meanwhile, the Japanese economy, the world’s third-largest, is shrinking and creating a further drag on global commerce, although few foresee a double-dip recession.

“We’re looking ahead toward a bit of a cooling in economic growth,” said Paul Dales, senior U.S. economist at Capital Economics, who foresees output in the U.S. rising about 2 per cent this year.

That level of growth won’t be “anything to celebrate but it’s nothing like the recession we saw previously,” he said.

Another factor driving rates lower has been the early May rout in commodities, which dampened some of the worry on the inflation front. In addition, the recent sluggish performance of the stock market suggests that investors are getting nervous and growing more willing to buy super-safe government bonds.

Mr. Dales believes the current trends have room to run, and that rates will surprise to the downside.

He predicts U.S. 10-year Treasury yields could slip to 2.5 per cent in the low-growth, less inflation-spooked environment he foresees ahead.

If growth continues to be slow, lower rates might be staying around for a while.

Mr. Buchanan says the most likely scenario, given the poorer economic outlook, is for the Fed to hold off on raising rates until 2013. He believes the yield on Treasuries will rise gradually, instead of falling further, getting back to 3.4 per cent by the end of this year and to 4 per cent by the end of 2012. http://www.theglobeandmail.com/report-on-business/economy/interest-rates/low-interest-rates-seen-sticking-around/article2032075/

It’s not Bank of Canada’s job to guide markets on rates

STEPHEN GORDON - The Globe and Mail

The Bank of Canada is scheduled to make its next interest rate announcement on May 31, and my understanding is that the consensus of opinion among private sector analysts is that interest rates will remain unchanged, because there was no explicit warning of an increase in its April 12 decision.
This consensus of opinion may turn out to be well-founded -- but not for that reason. Recent reports confirm what Bank officials have said several times: the Bank of Canada believes that it under no obligation to provide guidance about short-term interest rates. Governor Mark Carney has already noted that one of the contributing factors of the financial crisis was the private sector’s overconfidence in its ability to predict central banks’ behaviour.
Central banks do not seek to create surprises for their own sake, and they will do what they can to reduce uncertainty when doing so does not conflict with their policy goals. But providing direction for private sector short-term forecasts for interest rates is not a policy goal in itself.
Curious games can occur when central banks seek to avoid surprises -- monetary policy can become effectively outsourced to financial market analysts. For example, if the consensus opinion is for no rate change, then the central bank may feel obliged to fulfill that expectation rather than risk an interest rate ‘surprise’, even if the monetary authority’s analysis points to an interest rate hike.
To read more......

Debt Consolidation: An Alternative to Bankruptcy

Bankruptcy is when a person or business officially declares the inability to pay back creditors the money that was previously borrowed. This should only be done as a last resort, because bankruptcy will affect every aspect of your life. It will also affect your ability to get loans, mortgages, and credit card in the future. However, for some people, declaring bankruptcy means finding freedom once again. It wipes your slate clean so to speak, and you can start over again with your credit.


However, there are a number of things you should try before you declare bankruptcy. One of these things is debt consolidation. Deb consolidation cannot help everybody concerned with money problems, but for some, it is just the boost needed to keep them from declaring bankruptcy.

Debt consolidation is basically taking all of your loans and paying them off using one large loan. You then have one monthly bill to pay instead of a number of smaller bills. This can save you money in the long run. Why? The one large loan will usually have a secured lower fixed interest rate. This is especially advisable if you are considering declaring bankruptcy because of high credit card debts.

Credit cards have very high interest rates—usually much higher than any other kind of loan. If you miss just one month of paying your card in full, you may never get back on track for paying off the balance. This can really start to add up if you find that you have more than one card. If you are far into debt, you can probably not get an unsecured loan from a financial institution, like a bank. However, you should be able to get a secured loan. A secured loan uses your house, car, or other possessions as collateral. With a lower interest rate, you can start making headway into your debt instead of simply making the minimum monthly payments. This will help you to avoid bankruptcy.

Consolidating your debts may not be the best choice for everyone. In fact, in some cases, bankruptcy is really the best way to get back on the financial fast track. However, it is important to realize that you have choices. If you don’t have to declare bankruptcy, avoid it and you will find that your life will be financially easier to handle in the future. It depends on your unique situation. Talk to a financial professional if you want more help learning about debt consolidation.

Roseman: Why we're so uneasy about our money skills

By Ellen Roseman

A federal task force made 30 recommendations on how to boost Canadians’ money management skills. But in the three months since the report’s release, not much has been done.

I’m happy to see a non-profit group take up the cause.
ABC Life Literacy Canada has announced a national awareness campaign, called Financial Literacy Week, to run from Oct. 30 to Nov. 5 this year.
“We want to shine a spotlight on math skills,” says Margaret Eaton, president of the group, which has 10 employees and a $1.6 million budget, with funding from the TD Bank Group for its financial literacy work.
“Numeracy is really important, but most Canadians don’t feel comfortable with it.”
To prove its point, ABC Life Literacy has released an Ipsos Reid online poll that shows little confidence in many areas of personal finances.
Just three in 10 Canadians (28 per cent) strongly agree that their math and money management skills help them plan for a secure financial future.
Six in 10 (62 per cent) say they can use help with money management skills. That goes up to almost three-quarters (73 per cent) of 18-to-34-year-olds.
Four in 10 (38 per cent) say they aren’t putting any money away each month for long-term savings.
Just over a third (36 per cent) are saving $200 a month or less. The average amount devoted to long-term saving is $211 a month.
Four in 10 (38 per cent) say their household doesn’t follow a budget.
Of those who follow a budget, only 12 per cent say they never exceed it. Three-quarters (77 per cent) usually stay within budget, 10 per cent rarely do and 1 per cent never do.
“Budget” was a term very familiar to 67 per cent of respondents and somewhat familiar to 27 per cent. “Interest” and “minimum payment” had similar profiles.
Less well known were the different types of registered plans designed to save or defer tax.
RRSP (registered retirement savings plan) was very familiar to 53 per cent and somewhat familiar to 30 per cent.
RESP (registered education savings plan) was very familiar to 28 per cent and somewhat familiar to 29 per cent.
Only 21 per cent of the 1,022 adults surveyed feel strongly confident about teaching money, savings and budgeting to other people.
Another 49 per cent feel somewhat confident teaching others about money, while 30 per cent aren’t confident at all.
The widespread feeling of unease with money management skills shouldn’t come as a surprise.
Product choices are more varied and complex, thanks to competition and financial engineering. This leads some people to put trust in advisers who don’t deserve their trust.
Governments keep changing the tax rules, depriving some people of benefits they should get. The tax-free savings account, for example, is confusing and subject to errors.
There’s little information about personal financial management taught in Canada’s schools. This leaves young people defenseless against non-stop sales pitches for spending and credit.
Households feel besieged by the rising cost of living. The recent spike in gasoline prices leaves them frightened and unsure. It’s no wonder they’re not saving for their long-term future.
And as the survey shows, people who feel shaky about managing money aren’t comfortable trying to teach others how to do it.
ABC Life Literacy has been around for 20 years, focusing on reading skills. It now realizes that an understanding of mathematical concepts is crucial in today’s society.
It runs courses and publishes books designed for people with low levels of financial literacy and numeracy (Grade 3 to Grade 6).
A promising initiative is its Good Reads book series for those who struggle with longer volumes. Easy Money, a 96-page book by TV debt diva Gail Vaz-Oxlade, has sold 22,000 copies at $6.99 online. See www.grassrootsbooks.net.
“People are thirsty for information,” Eaton says. “We want to be the catalyst for other groups.”
Boosting money skills is a mammoth task. For one week this fall, let’s hope to see many organizations show their commitment to get the job done.
Ellen Roseman writes about personal finance and consumer issues. You can reach her at eroseman@thestar.ca.

Canada's economy creating more full-time, and better paying jobs

By Julian Beltrame, The Canadian Press



OTTAWA - The Canadian economy is not only creating more jobs, it's creating better jobs according to one of the country's major banks.


CIBC's latest employment quality index shows that 60 per cent of new jobs created over the past year would qualify as high-paying, quality jobs.


The bank says there's been an increase in full-time and paid employment, as opposed to self-employment, over the past 12 months — helping push the employment quality index up 2.7 per cent.


The sharp improvement has come about because many of the 283,000 jobs created in the past year have been in relatively high-paying sectors, including manufacturing, finance, construction and the public service.


Previously, the new jobs created since the end of the recession in the summer of 2009 have tended to be part-time and in lower-paying service industries.


"This (quality) measure is roughly back to the pre-recession levels," said economist Benjamin Tal. "This is a much better performance than a similar measure in the U.S., where the quality of employment index continues to soften despite some improvement in the pace of job creation."


Canada's employment record since the end of the recession has been among the strongest in the industrialized world with over 500,000 new jobs added since July 2009. That's about 80,000 more than was lost during the 2008-2009 recession.


By contrast, the United States remains about six million jobs shy of its pre-crisis levels.


But despite the full rebound in the jobs market, the complaint had been that many of those new jobs were not of the same quality as the jobs that vanished. Some economists derided them as service industry McJobs, or part-time, or "forced self-employment" by those who create their own form of employment — usually lower paying — because they can't find regular work.


Over the past 12 months, that trend has started to reverse. Almost all the new jobs have been in paid employment, not self-employment.


As well, growth in full-time jobs has outnumbered part-time by more than two-to-one, and well-paying jobs in manufacturing, construction, the financial sector and government have outnumbered low-paying jobs three-to-one.


The question is whether the new and better composition of job creation will continue. There is some evidence it might not, says Tal, noting of the 58,000 new jobs added last month, two-thirds were part-time.


"It's clear that governments will not be hiring in the future and the housing market will not be as strong," undercutting two of the sectors that have been producing high quality jobs, Tal explained.


However, the export sector, which tends to generate higher-paying jobs, is expected to be a leading engine of growth going forward and may be sufficiently robust to take up the slack.


The improvement in the quality of jobs has been good for the economy, the report states, since higher pay puts more money in the pockets of homeowners to spend on consumer goods.


"The impact of job creation on income growth and thus spending is currently more notable than it was in early 2010," Tal said, which will put pressure on the Bank of Canada to hike interest rates in the second half of the year.


Canada's economy also got a thumbs up Monday from the Organization for Economic Co-operation and Development, which forecast Canada would continue to be at the forefront of the global economic recovery.


In its May report on composite leading indicators, the OECD put Canada alongside China as countries with a "regained momentum in economic activity."


Economies in the U.S., Germany and Russia are improving. Overall, the international think-tank says most European countries will experience a slower or stable expansion. Some, like Italy, Brazil and India are pointing to slower growth relative to their trends.

Rent or buy? Do the math

William Hanley, Financial Post


A young couple who have been renting in our modest Toronto condo building recently bought a home a couple of miles away in a nice old neighbourhood with the aim of starting a family. The house is a big, detached fixer-upper and the renovation costs will be extensive.

In moving up to the rungs on the property ownership ladder, our young friends are committing themselves to a quantum leap in monthly expenses: They came up with a substantial down payment; they are taking on a mortgage payment, property tax bill and other expenses almost twice as large as their $1,600 rent; and they are spending a large amount on the renovation and other costs associated with buying a house.

It is a story that has unfolded millions of times in Canadian history and one that will continue to unfold because home ownership is deeply ingrained in our culture, a cornerstone of getting established and getting on our way in life. People will make great sacrifices and otherwise twist themselves out of financial and emotional shape to buy into the dream.

They willingly become what we used to call “house-poor,” paying well over the one-third of household income that many professionals believe should be the threshold.

Over the past decade, owning has been a financial success for most people, with prices rising almost in a straight line, with low, low interest rates feeding into the equation and with homeowners’ equity subsequently bounding higher.

And yet, if it has been just about as good as it gets for so long, perhaps conditions are going to deteriorate at least somewhat, with prices likely to stabilize or retreat a little and with interest rates set to rise modestly at least.

Our friends and other buyers this spring will know that Canadian house price gains have been flattening out. The Teranet-National Bank House Price Index for February published this week showed house prices gained just 0.1% from January for a 12-month gain of 3.8%. It was the eighth consecutive month of deteriorating gains.

While the forecast of a 25% drop in house prices over the next few years by one widely quoted economist seems far-fetched under present circumstances, a pattern of smaller gains likely signals a flat to slightly lower market.

So, is it time to revisit buying versus renting? For most of the 30% of Canadians who rent their accommodation it’s simply not an option. Getting their hands on a significant down payment and having the flexibility to meet higher payments if rates rise is difficult at best.

But some people with the wherewithal to buy a property might want to keep renting, keep saving and investing, and keep their options open. Other long-time owners might even want to consider selling and renting, thereby locking in their tax-free gains.

If you wish to see how the math works, visit United Mortgage Group’s Rent vs. Buy Calculator website. Even your technodunce reporter could plug in some numbers and come away with worthwhile conclusions.

A two-bedroom condo in our building might sell for $400,000. Let’s say you have a $100,000 down payment, a mortgage rate of 4.5% over five years, a $672 monthly condo fee, $200 a month in property taxes and other expenses of, say, $100 month.

Let’s also say that a two-bedroom might rent for $1,600 a month in the building, other costs might total $100 a month and the rent might rise 2% a year over five years.

All other things considered, the purchased condo would have to appreciate 2.33% a year, selling at $441,571 to match the gain made by renting a similar property in the building and investing the difference in outgoings at a conservative 2.5% a year.

The other way around, an owner could sell for $400,000 — with net proceeds of about $375,000 — and rent for $1,600 a month. The $375,000 could pay a conservative net return of, say, $10,000 a year. That $1,600 a month plus $100 in expenses would add up to $20,400 a year.

But deduct the net investment return of $10,000 a year and the condo fees of $672 a month, property tax of $200 and other expenses of $100 (for $11,664 a year), and the monthly rent for the former owner is basically paid. Or the former owner could invest the $10,000 a year and still end up paying only about $728 a month more than he was when he was owning.

Of course, this is just the rough math, which doesn’t take into account other factors, such as pride of ownership, the sense of place and the strong probability of building equity.

But geez. If I could live in the building basically for what I’m paying now in fees, taxes and insurance (by deploying my $10,000 a year investing return), and have my $375,000 to “invest” in winters in Waikiki and nice overnighters in Niagara-on-the-Lake, well then ….

It’s a thought, but only that. They’ll probably carry me out of here feet first from our condo, the equity in which may one day be needed to help us out in one of the emergency situations that can arise in older age.

Meantime, it wouldn’t hurt for everyone to do some math and determine what’s best financially for them — renting versus buying. And then, of course, throw the math out the window and succumb to the emotional tug of home and hearth.

Canadian consumers expected to remain cautious as interest rates set to rise

By LuAnn LaSalle, The Canadian Press

Higher food and gasoline prices and hefty debt loads likely to be made worse by interest rate hikes will impact consumers' buying habits going forward, say those who track retail spending.
It's going to be tough for consumers who have depended on a low interest rate environment, said TD Bank economist Francis Fong, adding that rates are expected to go up this summer.
"The rising interest rate environment, this high household indebtedness situation — that's all going to impede the ability of consumers to spend going forward," Fong said Thursday from Toronto.
Statistics Canada said retail sales increased 0.4 per cent in February to $37.3 billion, giving retailers some relief after declining sales at the start of the year.
Consumers filling their tanks with higher-priced gas, along with those buying furniture and clothing, pushed sales higher in February.
But Fong said consumer spending will no longer be the same driving force going forward as it has been throughout the economic recovery.
The Retail Council of Canada said consumers are "still hanging back a little bit," especially now that they have to spend more of their incomes on food and gas.
"Clearly, if they're going to have spend a little bit more on basic necessities, they may pull back a little bit on the nice-to-haves, but not on the need-to-haves," said spokeswoman Anne Kothawala.
Consumer confidence is soft and that mirrors spending, she added.
"Gas and food prices are actually very closely related. It costs more to transport goods," Kothawala said.
Statistics Canada said the largest contributor to February's increase in retail purchases in dollar terms was gasoline sales, which increased 1.3 per cent.
Gasoline prices have been surging along with crude oil, which began rising sharply in February with the outbreak of unrest in Libya, an OPEC member that accounted for about two per cent of the world's crude output before civil war there.
As of Thursday, the Canadian average price compiled by GasBuddy.com was 129.6 cents per litre, up from about 118 cents per litre at the end of February.
But lower retail sales in Quebec — a 0.8 per cent decline — contributed the most towards the dampening of national retail sales, Statistics Canada said.
"The decline reflected, in part, lower sales of new motor vehicles in the province," the federal agency said. "This was the second decline in retail sales in Quebec following six consecutive monthly gains."
Quebec also increased its provincial sales tax to 8.5 per cent in January, up a percentage point.
Sales at clothing and clothing accessories stores were up 2.5 per cent, offsetting a decline in January. Sales at furniture and home furnishings stores grew 2.1 per cent in February, helped by gains in real estate sales.
Prof. Ken Wong of Queen's University business school said once consumers pay down debt and spend more money on food and gas, there isn't much left for anything else.
"You have to ask yourself what can be delayed and what can't be delayed," Wong said of consumer purchases.
"We cannot rely on interest rates remaining as low as they are as long as they have been going forward," said Wong, who teaches business and marketing strategy.
Geographically, retail sales in February gained in six of 10 provinces, powered by Ontario where sales increased 0.7 per cent after two consecutive monthly declines.