Financial Update: Monday May 31, 2011

• TSX +32.07 to 13,829.66 (Reuters)

• DOW + to 12,441.58 closed for Memorial day

• Dollar +.02c to 102.34c USD

• Oil +$. to $100.59USD per barrel closed

• Gold +$ to $1536.30 per ounce closed

• Canadian 5 yr bond yields markets -.00bps to 2.32.
The spread (based on the MERIX 5 yr rate published rate of 3.99%) is at the top of the comfort zone at 1.67. At the other end, the spread on the 5yr Unpublished special of 3.79% is 1.47, mid comfort zone.

Market Update: Monday May 30, 2011

• TSX +21.69 to 13,797.59 (Reuters) 

In a broad-based advance led by mining stocks amid rising prices for metals. But the TSX was held back by another earnings disappointment from the banking sector with RBC. All except National came in below analyst expectations for earnings.

• DOW +38.82 to 12,441.58
New York markets were higher amid investor disappointment with the latest pending home sales data. The number of people who signed contracts to buy homes in April plunged 26.5 per cent from a year earlier. But balancing that data was another report showing consumer sentiment in the U.S. rose in May as expectations improved. The University of Michigan's consumer sentiment survey increased to 74.3 in May from 69.8 in April.

• Dollar +.14c to 102.32c USD

• Oil +$.36 to $100.59USD per barrel
A weaker U.S. dollar pushed oil higher. A weaker greenback usually helps boost oil prices, which are denominated in U.S. dollars, as it makes oil less expensive for holders of other currencies.

• Gold +$13.50 to $1536.30 per ounce

• Canadian 5 yr bond yields markets -.01bps to 2.32.
The spread (based on the NEW MERIX 5 yr rate published rate of 3.99%) is at the top of the comfort zone at 1.67. At the other end, the spread on the new 5yr Unpublished special of 3.79% is 1.47, mid comfort zone.

Market Update: Friday May 27, 2011

• TSX +156.35 Fri to 13,751.47 (Reuters)
The index was dragged down by lower financial stocks after TD Bank and CIBC delivered quarterly results that narrowly missed analyst forecasts and moved into positive territory late in the afternoon thanks to strength in the energy and tech sectors.

• DOW +8.10 to 12,402.76
Data showed more Americans applied for unemployment benefits last week, a sign the American job market remains weak. Claims rose by 10,000. The consumer spending component of the GDP report was particularly disappointing, revised down from a 2.7 per cent gain to a 2.2 per cent gain

• Dollar -.08c to 102.18c USD
Further signs of U.S. weakness helped send the Canadian dollar down

• Oil -$1.09 to $100.23USD per barrel .

• Gold -$3.90 to $1522.80 per ounce

• Canadian 5 yr bond yields markets -.06bps to 2.33.
The spread (based on the NEW MERIX 5 yr rate published rate of 3.99%) is at the top of the comfort zone at 1.66. At the other end, the spread on the new 5yr Unpublished special of 3.79% is 1.46, mid comfort zone. If this trend holds, it bodes well for fixed rates.  .

Market Update: Thursday May 26, 2011

• TSX +156.35 Fri to 13,751.47 (Reuters) 

Signs of greater U.S. demand lifted oil prices and energy stocks while BMO was the first of the banks to deliver a solid earnings report

• DOW +38.45 to 12,394.66

• Dollar -.19c to 102.26c USD

• Oil +$1.73 to $101.32USD per barrel 

Prices turned positive after data showed that U.S. crude inventories rose much less than expected last week. Oil also received a boost after Goldman Sachs , J.P. Morgan and Morgan Stanley said prices will rise later this year as the Libya conflict hits global supply.

• Gold +$3.40 to $1526.70 per ounce 

Rising worries about the European government debt crisis helped send bullion prices higher for a fourth day

• Canadian 5 yr bond yields markets -.03bps to 2.39. 

The spread (based on the NEW MERIX 5 yr rate published rate of 3.99%) is at the top of the comfort zone at 1.60. At the other end, the spread on the new 5yr Unpublished special of 3.79% is 1.40, at the bottom of the comfort zone.

How To Score the Perfect Mortgage

For many who are looking to buy a home obtaining a mortgage is a must. Most probably start by googing different interest rates figuring out what banks are offering. Banks don't always have the best rates. For more advice and a series of better rates, many opt for a mortgage broker at least that's what Lauren Chender did, according to a recent article in The Globe and Mail. But finding a good rate doesn't put an end to the decisions - variable vs. fixed? 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.”

Pre-Approved

The mortgage process can be daunting but it is wise to get pre-approved before you start house hunting you can get an idea on your budget. In order to get pre-approved, 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.

Lenders

When looking at lenders, prospective buyers often look to banks but then utilize a mortgage broker to help you shop around for a competitive rate with other lenders (another opinion never hurts).

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.

Mortgage Renewal

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.”

Overall it helps to do your research first and shop around rather than just stopping at your first choice. There are many options right now in today's market, you might as well take advantage of them.

More on this topic:

How to Score the Perfect Mortgage

Market Update: Wednesday May 25, 2011

• TSX -57.15 Fri to 13,595.12 (Reuters)

o As most TSX sectors backed off amid another flare-up of worry over the European debt crisis. The TSX played catch up to losses that piled up on stock markets around the globe after S+ P's lowered its outlook on Italy's A-plus sovereign-credit rating from stable to negative last Friday. But the main concern centres on whether Greece will restructure its debt, a scenario that ratings agency Moody's said would constitute a default, which could badly hit the other debt-laden European countries.

• DOW -25.05 to 12,356.21

o On the economic front, the U.S. Commerce Department said new-home sales rose 7.3 per cent last month to a seasonally adjusted annual rate of 323,000 homes. It is the second straight monthly gain. However, a normal housing market would mean a pace of about 700,000 new-home sales a month.

• Dollar -.32c to 102.45c USD

• Oil +$1.89 to $99.59USD per barrel

o Helped along as the greenback weakened somewhat and by word from Goldman Sachs Group Inc. - it is turning "more bullish" on raw materials. Goldman Sachs suggested buying oil, copper and zinc, reversing last month's call to sell commodities.

• Gold +$7.90 to $1523.30 per ounce

o Nervous investors sought a safe haven for a third straight day.

• Canadian 5 yr bond yields markets -.02bps to 2.42.

The spread (based on the NEW MERIX 5 yr rate published rate of 3.99%) is now mid comfort zone at 1.57. At the other end, the spread on the new 5yr Unpublished special of 3.79% is 1.37, well below the comfort zone.

Canadian Mortgage Industry Stands Apart from the U.S

Joe Taft, CEO of RBC Wealth Management, stated there are three factors that differentiate Canada from the US when referencing the Canadian economy - business practices, regulatory environment and the management cultures at financial institutions.  He adds “Canadian home mortgages are not deductible against your income, so there isn't an implicit subsidy of mortgage finance and housing ownership the way it was in the U.S. Most of the mortgages in Canada are also held on the balance sheets of financial institutions. They originate and hold, as opposed to originate and distribute the way it happens in the United States. The consequence of that is that underwriting standards were, in retrospect, a lot more rigorous and more prudent than they were in the United States."

Delving deeper into the the differences in culture, Peter Maris, CFP and Principal at Resource Financial Group stated Canadians “(they) are more conservative as a nation than we are and a lot less greedy.” He continues “They don’t have adjustable-rate mortgages… 90% of the banks hold their mortgage to maturity, whereas in the U.S. a loan is originated and then sold off as soon as possible to get it off their books.”

More on this topic:

How Canada Beats the US – The Street

Bank of Canada Rate Hike on Hold, RBC

According to a team RBC Economics, The Bank of Canada’s plan to raise interest rates and exit its stimulus program has been delayed to September due to renewed uncertainty about the fiscal crunch in Europe and its potential spillover effects into Canada. “Combined with already-present downside risks to domestic growth in the second quarter, the Bank of Canada is likely to remain on the sidelines longer than we previously thought,” said Dawn Desjardins, assistant chief economist with RBC in a note to clients. “Complicating the outlook are global developments with the European sovereign debt crisis bringing fiscal and debt rating concerns to the forefront for investors. In the United States, economic surprises have been to the downside.”

More on this topic:

BoC Rate Hike on Hold Until September, RBC - Financial Post

In The News

Low Interest Rates Sticking Around

Sliding interest rates have surprised many market watchers as they've been watching interest rates drop. “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,” according to Martin Mittelstaedt, Globe and Mail Correspondent.  Many speculate when interest rates will rise however no one can

More on this topic:

Surprise Low Interest Rates Seen Sticking Around – The Globe and Mail

How to Prepare for larger mortgage Payments:

Are you ready for higher interest rates? Watch Rob Carrick, The Globe and Mail, and Jeff Schwartz, Executive Director for Credit Counseling Services of Canada speak about ways in which you can prepare yourself for a rise in interest rates.

Watch the video

Market Update: Tuesday May 24, 2011

 • TSX +27.18 Fri to 13,652.27 (Reuters) closed Monday

• DOW -93.28 Fri/-130.78 Mon to 12,381.26

Closed at their lowest levels in a month on Monday.  Perhaps a sign of increasing doubt of whether equity markets can withstand recent weakness in global manufacturing and demand.

• Dollar -.51c Fri to 102.77c USD closed Monday. The Euro also hit a two-month low against the U.S. currency Monday.

• Oil -$2.40 Mon to $97.70USD per barrel.

Dropped more than 2 per cent Monday as the dollar strengthened.

• Gold +$15.56 to $1512.40 per ounce

• Canadian 5 yr bond yields markets -.09bps to 2.44. The spread based on the MERIX 5 yr rate published rate of 4.19% is above the comfort zone at 1.75.

Canadians Confident in investment opportunities for Recreational Properties

The majority of Canadians who have either purchased or who intend to buy recreational property in the next 24 months believe that buying a vacation home is a good long-term investment, according to a nationwide survey of Canadian attitudes towards recreational property ownership commissioned by Royal LePage Real Estate Services. "Canadians' confidence in recreational property values is mirroring what we have been seeing in Canada's urban centres," said Phil Soper, president and chief executive, Royal LePage Real Estate Services. "This spring, the horror stories from some fundamentally flawed international housing markets that had dampened demand for cottage-type living during the recession era, are being shrugged off. Canada's traditionally buoyant recreational property market appears to have found its groove once more."

How serious are the recreational buyers?

• 35% stated they were likely to reduce personal spending throughout the year by making financial and lifestyle changes in order to purchase a recreational property.

• Will higher interest rates affect the majority of these people? I don’t think so, 57% said that the expectation of interest rates rising will not affect their desire to purchase a recreational property; 55% of respondents aged 35-54 and 70% of respondents aged 55+ said an expected rise in interest rates would not affect their desire to purchase a recreational property.

• 51% expect to rent out the property to off-set the mortgage

• 92% see the recreational property as a way to bring the family closer together

Across the Country: Recreational Property Buyers at a Glance:

Quebec

73% of those surveyed in Quebec listed quiet as the most important feature of a recreational property, which is more than 20% higher than the national average 51%

Quebecers like to reside the closest to their recreational properties, with 40 % of respondents saying they would be willing to drive less than one hour to reach a vacation home. Fourteen % use, or intend to use, their properties more than once a week, more than any other region and eight % higher than the national average of 6%.

Ontario

The three most important attributes of a recreational property according to Ontario residents are four-season use (47%), quiet (45%) and rental potential (26%).

With Canada's strengthening economy and an expected rise in interest rates, 46% of prospective recreational property buyers in Ontario want to buy before a potential increase in rates.

Sixty-one % of Ontarians polled are most likely to purchase a cottage on a lake in the next 24 months. This is higher than the national average of 57%.

Alberta

According to Albertans polled, the three most important features of a recreational property are four-season use (50%), quiet (45%) and proximity to amenities (41%).

Nearly all (97%) of respondents from Alberta either somewhat agree or strongly agree that a recreational property is a great way to bring family together.

British Columbia

According to respondents from BC, the most important features of a recreational property are four-season use and quiet (tied at 43%) and proximity to amenities and rental potential (tied at 31 %).

Eighty-five % of respondents from BC either somewhat agree or strongly agree that a recreational property is a great way to bring family together (seven % below the national average of 92 % and lowest in the country).

"We are seeing more buyers purchase properties with the intent to offer them as rentals. This cost-offset strategy may allow younger families to acquire a cottage earlier in their lives than they would otherwise, and others may be able to buy in a region that would have been out of their reach, price-wise. The purchase motivation for most is not financial planning. It remains lifestyle driven - satisfying the needs and wants of their family," said Soper. "In fact, 92 % of those we polled agreed that a recreational property is a great way to bring family together."

More on this topic:

CanadianBusiness – Canadian Confident in the investment potential of recreational properties

Canadian’s putting more Cash Towards Homes

With the fear of interest rates rising more and more Canadians are opting to put more cash towards their homes, RBC stated May 20, 2011 according to The Globe and Mail. “Interest rates will likely soon start to rise again, leading to a period of steady increases in home ownership costs. This, in turn, will contribute to a flattening in Canadian housing demand going forward,” said Mr. Hogue in a statement. “We could experience some turbulence this spring and summer, given that new tighter mortgage lending rules in March and April likely shifted home buying activity to earlier in the year.”

One commenter pointed out that while home ownership is a great thing for people with the resources to do it, but it can be very stressful if you are maxed out and struggling to make the payments. If your home is eating up over 50% of your income how are you going to afford to retire, put your children through university, etc. 

More on this topic:
Globe and Mail – Canadians Putting more Cash towards home

Financial Update: Friday May 20, 2011

IN THE NEWS –

Home Ownership Harder Across the Country?

The rising trend of home ownership throughout the later part of 2010 came to an end during the first quarter of this year, according to RBC’s Housing Trends and Affordability Research Report released today. The majority of Canadian markets experienced weakened affordability in the first quarter of 2011, with the most noticeable cause being housing affordability (with Vancouver being a key component). "Despite the latest erosion in affordability, provincial levels generally continue to stand near their long-term averages, suggesting that owning a home remains affordable or, at worst, slightly unaffordable across Canada - with Vancouver being a notable exception," said Hogue.

RBC's housing affordability measure for a detached bungalow in Canada's largest cities is as follows: Vancouver 72.1% (up 3.4 percentage points from the last quarter), Toronto 47.5% (up 0.8%), Montreal 43.1% (up 2%), Ottawa 39% (up 0.4%), Calgary 35.9% (up 0.9%) and Edmonton 31.5% (up 0.5 %)

Housing Trends throughout the Country

RBC Economic Research Report: Housing Trends and Affordability report, First Quarter of 2011

Ontario Remains Steady

"Ontario's housing market has reached a cruising speed since the end of 2010 and seems to be on a sustainable path so far this year. The demand-supply equation has remained balanced for the most part, but has firmed just enough to give the sellers a slightly stronger hand," said Robert Hogue, senior economist, RBC. "The provincial market will likely face some headwinds in the coming months, however, as stricter mortgage lending rules and an expected rise in interest rates weigh on home buyer demand."

More on this topic:

Ontario’s housing affordability steady

British Columbia the Least Affordable

“Demand for housing in British Columbia continued on the road to recovery in early 2011 at a pace that slightly exceeded the growth in the number of properties put on the market," said Robert Hogue, senior economist, RBC. "As a result, the slight tightening of supply of homes for sale boosted the pricing power of sellers and negatively impacted affordability."

Brisk activity in the Vancouver area lifted British Columbia's home prices in the first quarter for all three housing categories, with detached bungalows increasing by 3 %, standard condominiums by 4.6 % and standard two-story homes by 5.5 %. Home price increases outpaced household income gains and caused first quarter affordability measures for B.C., which capture the proportion of pre-tax household income needed to service the costs of owning a home, to move higher across all housing types (an increase represents a deterioration in affordability).

More on this topic:

British Columbia’s housing the least affordable in Canada

Alberta remains stable and attractive

"The Alberta market continued to be stuck in low gear in the first quarter of 2011. Sales of existing homes and construction of new housing units showed very modest increases," said Robert Hogue, senior economist, RBC. "While market conditions have become more balanced in recent months, owning a home doesn't seem to be getting more expensive in the provincial market at this stage. Affordability levels are still looking quite attractive."

More on this topic:

Alberta’s Housing Affordability remains steady and attractive

Saskatchewan Shows Improvement

"The Saskatchewan housing market cooled a little in the early months of this year, following solid performance in the second half of last year," said Robert Hogue, senior economist, RBC. Housing affordability in Saskatchewan showed some improvement in the first quarter of 2011, according to the latest Housing Trends and Affordability report released today by RBC Economics.

More on this topic:

Saskatchewan’s Housing Affordability shows improvement

Manitoba Remains Steady

Manitoba's housing market continued to remain steady throughout the beginning of 2011. Housing affordability remains attractive in the province, with little change registered in the first quarter. "Mounting homebuyer demand continued to be met with an equal-sized increase in homes being put out for sale," said Robert Hogue, senior economist, RBC. "This sense of balance across Manitoba kept property value appreciation under control."

More on this topic:

Manitoba Housing Affordability remains steady

Atlantic Canada Affordable

"The rise in property values in Atlantic Canada in the first quarter contributed to eroding this region's long-standing affordability advantage relative to most other Canadian markets," added Hogue. "Even still, the region's affordability levels remain among the most attractive in the country." Increased demand for homes helped to restore some pricing power to sellers in Atlantic Canada and led to home prices rising between 2.0 % and 3.8 %, depending on the housing type. Brisk home resale activity was led by sizeable gains in St. John's, which further reversed some of the notable declines that occurred in the middle of 2010. "A continued rebound in housing market activity in the region has heated up property values a few degrees in the early part of 2011," said Robert Hogue, senior economist, RBC.

More on this topic:

Atlantic Canada Housing Affordability remains affordable

More on this topic:

RBC Housing Trends and Affordability Report

CanadianBusiness: Rising Home Prices Eroding Housing Affordability

Market Updates:

TSX -11.45 to 13,607.25 (Reuters)

o As commodity prices gave up ground and economic data reminded investors of the fragility of the U.S. recovery.

• DOW +41.28 to 12,595.81

o Positive employment data helped send New York markets higher as the Labour Department reported the number of people applying for unemployment benefits fell sharply for the second straight week, down 29,000 to a seasonally adjusted 409,000

• Dollar +.27c to 103.30c USD

• Oil -$1.34 to $98.76USD per barrel

o The latest inventory data from the U.S. showing signs of higher demand, was followed by data showing that a widely-watched gauge of future economic performance disappointed.

• Gold -$3.40 to $1492.40 per ounce

• Canadian 5 yr bond yields markets -.01bps to 2.53. The spread (based on the MERIX 5 yr rate published rate of 4.19%) is above the comfort zone at 1.66.

High-flying Stock Market Better for Brokers?

 Mortgage Brokers are re-claiming market share as wealthy clients are only cautiously considering big banks due to increases at the stock market, according to Vernon Clement Jones, Mortgage Broker News. 

“In the last week, we’ve just had two of the biggest deals of my career,” Mark Herman, an agent and team leader for Mortgage Alliance Mortgages Are Marvelous Inc. in Calgary, told MortgageBrokerNews.ca. “One was a new purchase for $1.525 million, with five per cent down, and the other one was for a $750,000 line of credit on a $1.5 million purchase. High-end mortgage business for brokers in Calgary has picked up like we’ve never seen.”

More on this topic:

High-flying stock market sends business to brokers – MortgageBrokerNews

Is RIM Dead?

According to Henry Blodget, CEO and editor-in-chief of Business Insider (and previously a Wall Street analyst) “RIM is dead”. “But now, Research In Motion’s amazing run appears to be over. The company has lost its lead in the smartphone market, and its market share is falling rapidly. And many long-time addicts like me have switched to iPhones or Android phones."
A couple of the reasons for decline in RIM:

• Their products are no longer the best on the market there are now major players in the market with Apple and Android.
  
• The smartphone market has become a “platform game”; blackberry has fewer app developers than Apple or Google for android.
• Security and Microsoft Exchange integration aren't as important as they once were.  Companies are now allowing employees to choose their device of choice. "Once dismissed as consumer toys, are now being adopted by enterprises, and that’s bad news for RIM."

 

It's interesting, on CanadianBusiness.com, there is a poll asking reader if they "still believe in RIM".  According to the poll results this morning 76% of readers still see hope and believe in RIM.  Have your say and vote now.

More on this topic:

RIM is Dead – Canadian Business

Financial Update: Thursday May, 19, 2011

IN THE NEWS –

Dollar Edges Up Guardedly with Oil Price

Canada is a major exporter of resources and commodities therefore its currency is often influenced and linked to their fluctuations in prices. Oil has slumped in the past two weeks and the commodity-linked Canadian dollar weakened alongside it, according to Reuters Canada. “The currency may be vulnerable as oil prices are likely to stay volatile on concerns about economic recovery in the United States and unresolved sovereign debt issues in the euro zone.”

More on this topic:

Dollar edges up guardedly with oil price - Reuters

Harper Signals Continuation of Economic Policies

"Although a number of changes have been necessary and desirable, the new ministry is fundamentally about stability and continuity," Harper told reporters after emerging from the swearing-in ceremony at Rideau Hall.

More on this topic:

CTV – Harper signals continuation of economic policies

Market Updates:

• TSX +166.19 to 13,607.25 (Reuters)
  Chalked up a solid gain as investors bought up resource companies and other stocks that have been beaten down recently, while signs of higher demand sent oil prices surging.
  
  
• DOW +80.60 to 12,560.18
  Also up sharply after the Federal Reserve released minutes that showed that officials at the central bank are not planning to tighten monetary policy soon.
  
  
• Dollar +.21c to 103.03c US
  
  
• Oil +$3.19 to $100.10USD per barrel
  Amid a crude supply report that provided signals of higher demand
  
  
• Gold +$15.80 to $1495.80 per ounce Precious metals also benefited from a weaker U.S. currency
  
  
• Canadian 5 yr bond yields markets +.07bps to 2.54. The spread (based on the MERIX 5 yr rate published rate of 4.19%) is above the comfort zone at 1.65.

Young Homeowners Optimistic about Being Debt-free

More than 40% of Canadian homeowners aged 30 -39 expect to be debt-free by the end of their forties, according to Manulife Bank of Canada’s quarterly Debt Freedom Survey.
 
“When people buy their first home, they have the best of intentions to pay off their mortgage and other loans, and are optimistic about their financial future,” said Doug Conick, President and CEO of Manulife Bank of Canada. “However, even carefully laid financial plans can be thrown off track by unexpected life expenses, such as home repairs, family illness, or job loss. Debt-freedom is possible, but it requires a commitment to financial discipline, and for many people, some professional advice on how to plan finances for the long term.”  
This survey polled 1,000 Canadian homeowners between ages 30 to 59 with household income of more than $50,000.

Highlights from Debt Survey:

   • Approximately 70% of respondents rank being debt-free among their top financial priorities.

   • 64% of those aged 50-59 either expect to carry debt into their 60s, don’t know when they’ll be debt-free, or expect they won’t ever be debt-free

• 71% of those in their 50s manage their debt and day-to-day finances with no outside advice, compared with 63 per cent for the 40-49 age group and 57% for the 30-39 group

• A third of respondents believe their knowledge of personal debt management to be “above” or “well-above average”, compared with just 10 per cent who characterize their knowledge as “below average” or “well-below average”

• Those 30-39 have 3.8 separate loans outstanding, compared with 3.1 for those in their 40s, and 2.7 for the 50-59-year-olds.

• Among common financial priorities, all groups expressed the lowest level of satisfaction with their level of debt and the highest level of satisfaction with their ability to manage day-to-day expenses.

• 41% of all respondents report having at least one credit card with a balance that isn‟t paid in full each month

• 76% of all respondents report having mortgage debt outstanding, including 57% of those in the 50-59 age category

• The number of loans outstanding decreases over time, however even those in the 50-59 age group have, on average, nearly three separate loans outstanding

More on this topic:

Manulife – Debt Survey

Manulife – Young homeowners optimistic about when they’ll be debt-free

Financial Update: Wednesday May 18, 2011

IN THE NEWS:

Home Prices Continue to Climb

The Canadian Real Estate Association stated that home prices were up 8% when comparing to last year. This is now the third straight month in which the average price of a home rose 8%. Some experts are warning this is primarily a result of strong investor demands and surging multimillion-dollar property sales in areas of Vancouver.

In Toronto, the first quarter showed that condo rent was up 0.8% from $2.11 per square foot compared to $2.09 a year ago. According to a condominium monitoring report from Urbanation Inc., more than 50% of condominiums purchased in the last year were by buyers who do not intend to occupy their units but rather plan to rent.

More on this topic:

Financial Post – Home prices continue climb

Financial Post – Home Sales Plunge as Mortgage Rules Bite

Mortgage Rules Push Home Sales Down 14%, April 2011 vs. April 2010

A rush of buyers eager to get into the housing market before new rules took affect caused a surge sales in March which caused sales to drop in April. "Changes to mortgage regulations that took effect in April 2011 likely sidelined a number of first-time home buyers," CREA's chief economist Gregory Klump said. The combination of lower sales and higher prices means in a nutshell that there are fewer buyers now than there were last year but those who buy are paying more.

More on this topic:

CBC – Mortgage rules push home sales down 14%

Market Update:

• TSX +49.71 to 13,441.06 (Reuters) led by mining and financial stocks despite indications of a slowing economy in the United States.

• DOW -68.79 to 12,479.58
  o Poor economic data reinforced the impression of a slowing economy in the United States after the Commerce Department said construction of new homes fell 10.6 per cent in April from March to a seasonally adjusted annual rate of 523,000 homes. That’s down nearly 25 per cent from one year ago and less than half the 1.2 million homes per year that economists consider a sign of a healthy market. The U.S. Federal Reserve said also that the output of factories, mines and utilities was weaker than expected in April as a parts shortage due the Japanese earthquake led to a drop in auto assemblies

• Dollar +.17c to 102.82c USD

• Oil -$.46 to $96.91USD per barrel
  o Crude has been heading lower for two weeks amid investor concern that slowing U.S. economic growth could undermine demand

• Gold -$10.60 to $1480.60 per ounce

• Canadian 5 yr bond yields markets -.03bps to 2.47. The spread (based on the MERIX 5 yr rate published rate of 4.19%) is above the comfort zone at 1.72.

Canadians Believe Interest Rates will Rise, CAAMP Spring Survey 2011

61% of Canadians believe interest rates will rise to some degree throughout 2011, according to CAAMP’s spring 2011 survey. 7% believe interest rates will increase quite dramatically and only 3% believe interest rates will fall. Are Canadians ready for an interest rate increase? How prepared are they? “Increased mortgage interest rates…will bring stresses for Canadian mortgage borrowers, but a very substantial majority of them are prepared,” stated CAAMP’s Chief Economist, Will Dunning.

Interest rates will always fluctuate, but there are many ways to ensure you’re prepared.

1. Do your homework

Prepare yourself; dig out your mortgage documents. Find out what type of mortgage you currently have and be aware of the terms and conditions. Specifically, find out what rate you’re paying now, the term of the mortgage (i.e. the length of the contract if you have a fixed mortgage rate), and the amount left on the mortgage.

2. Best Rate

If you’re refinancing or looking for a new mortgage make sure you research different options. Ask for a better offer and make sure you compare the market. Compare mortgage rates offered by banks, brokers, specialty lenders and credit unions. Talk to a professional, they may have access rates that aren’t published. A service like this will help you determine the benchmark for a competitive mortgage rate and also put you in touch with the broker or lender offering that rate.

         • Try to get a better rate now

If your mortgage is up for renewal in the next few months, speak to a professional about getting a new rate now. Some lenders will allow you to renew early by blending your existing mortgage with a new mortgage of a longer term. This might cost you a small administration fee, but it could be worth it in the long run.

         • Lock in a low rate 

If you’re on a variable rate mortgage and you’re concerned about rate increases, it might help ease stress by locking in a fixed rate. You’ll pay a premium for the security of static monthly payments, but it might be worth the peace of mind. This decision is based on your personal risk profile. If you’re a new home buyer, but haven’t yet found your dream home, get pre-approved so you can lock in a rate. Most pre-approvals will hold your rate for up to 120 days at no charge. This will give you some breathing room as you hit the open houses.

3. Pay Down you Debt and Don’t Live Beyond Your Means

Decrease the amount of money you’re borrowing will help alleviate the stresses of increased rates as well as piece of mind. This may seem unrealistic, but even small changes will help you pay down your mortgage faster. There are many options such as: changing to a bi-weekly rapid payment schedule, make a lump sum payment or double up on your payments one month. Any of these options will help you save on interest and leave you mortgage free years sooner.

Overall it pays to get professional advice, very few will understand the pros and cons of the mortgage options. A professional may also know of rates and which you may not know about. Everyone is in a different situation and has different needs and expectations.

More on this topic:

CAAMP – Stability in the Canadian Mortgage Market – Spring 2011

Financial Update: Tuesday May 17, 2011

IN THE NEWS:

Canada is Not Safe From World Debt

According to Mark Carney, Bank of Canada governor, “Canada’s fiscal strength is an advantage, but the country still will feel the impact of debt problems in other parts of the world.” The governor gave no hint about his own long-term plans for interest rates in Canada which suggested he will not hike the policy rate on May 31.

More on this topic:

The Record – High Debt in U.S. and other countries will impact Canada as well, says Carney.

Home Sales Decline Due to New Rules?

The Canadian Real Estate Association blamed new mortgage rules for taking first-time buyers out of the market, as it reported sales slipped 14% in April compared to 2010. The new rules brought in by the federal government, which took effect at the end of March, eliminated 35-year amortizations as a financing option. “Changes to mortgage regulations that took effect in April 2011 likely sidelined a number of first-time home buyers,” said Gregory Klump, the association’s chief economist.

More on this topic:

Globe and Mail – New Mortgage Rules Crimp Home Sales

MARKET UPDATE:

• TSX +14.19 to 13,391.35 (Reuters) Investors attempt to rally following a string of losses in recent days gave in to further worries that recent strength in commodity prices is on the wane.

• DOW -47.38 to 12,548.37

• Dollar -.59c to 102.65c USD

o The dollar earlier found strength from data showing that Canadian manufacturing sales increased 1.9 per cent to $47.5 billion in March. However, losses picked up following a speech by Bank of Canada governor Mark Carney, where he said a further rise in interest rates will have to be "carefully considered."

• Oil -$2.28 to $97.37USD per barrel

o Oil prices continued to retreat from a 30-month high near US$115 at the beginning of the month amid demand concerns.

• Gold -$3.00 to $1490.60 per ounce

o A series of margin hikes were meant to curb the influence of speculators have also sent commodities lower.

• Canadian 5 yr bond yields markets -.03bps to 2.50. The spread (based on the MERIX 5 yr rate published rate of 4.19%) is above the comfort zone at 1.69. At the other end, the spread on the new 5yr Unpublished special of 3.89% is 1.39, is still slightly below the comfort zone.

What do the Results of the Election Mean for Mortgage Rule Changes?

Mortgage Broker News recently featured industry expert, Boris Bozic.  He spoke about how recent mortgage rule changes in relation to a newly elected Federal government, as well as the trailer fee debate and the topic of broker ethics. Watch Video

Broker news TV brings you closer to the industry's most influential leaders and thinkers. Click on the videos below to watch the interviews.

Boris Bozic

Boris was born in Toronto and he majored in Bachelor of Political Science and a Diploma of Radio Broadcasting. During his 22 years in the mortgage industry, Boris had held a variety of roles, including: Mortgage Broker, Sales Director, large independent mortgage broker firm.  He was also National Director, Third Party Mortgage Origination, Broker and Builder Development for the second largest Bank in Canada. In this position, Boris grew the Bank’s Originator Business from $750 million to $4.5 billion and garnered a reputation as an advocate for broker originators.  Currently, Founder and CEO, MERIX Financial, Originating over $10 Billion in mortgage volume in under 5 years.

 
CAAMP Highlights
- Current Chair, 2010 CAAMP Mortgage Forum
- 3 years as Chair, CAAMP Lender/Insurer Advisory Committee
- 2009 – Re-elected to CAAMP Board of Directors, Ontario
- 2007 – 2009 - CAAMP Board of Directors, Ontario

Other Industry Highlights
- VP, MBABC
- Current Member of MBABC, AMBA, IMBA

Financial Update: Monday May 16, 2011

Stability in the Canadian Mortgage Market: Canadian Association of Accredited Mortgage Professionals (CAAMP) Spring Survey

CAAMP’s spring survey results suggest Canadian Mortgage borrows are stable, have financial flexibility and reveal confidence in today’s mortgage environment. Canadians are reducing their mortgages by making lump sum payments, increasing their monthly payments and their amortization periods, of which exhibit confidence. According to the survey, 22% of mortgage borrowers increased their payments during the past year; 18% made a lump sum payment; 9% did both and 27% who renewed also increased their payments. The survey also states that the mortgages repaid in the last 20 years, 1/3 were paid off early.

"Prudent management of their mortgage debt has paid off for Canadians," said Jim Murphy, AMP, 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," said Murphy.

Highlights:

• 22% of mortgage borrowers increased their payments during the past year; 18% made a lump sum payment; 9% did both and 27% 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;

• Canadian homeowners have $222,000 in home equity, on average, equal to 66% of the value of their homes

• During the past year, homeowners borrowed $26 billion in additional equity from their homes. 15 per cent of homeowners withdrew equity, averaging $30,000;

• Investments (28%) replaced debt consolidation (19%) as the number two use of home equity takeout. Home renovations remain number one (36%).

More on this Topic:

Stability in the Canadian Mortgage Market – CAAMP Spring 2011

Canadian Business – Canadian Mortgage Borrows Exhibit Confidence

First-time Home Buyers boost Real Estate Market

First-time home buyers are on the rise across the country, according to a housing report by the Altus Group. In the past two years, approximately one in every two homes sold in Canada are first time buyers representing more than $250,000 sales per year. First-time home buyers are taking advantage of many factors to acquire home ownership, such as: reduced or minimal down-payments; longer amortization periods to reduce regular payments; variable rate mortgages to reduce regular payments; RRSPs for down-payments; as well as help from friends and family. “First-time buyers make the home sales world go around, playing an important role as buyers in the newly built market, and also in purchasing existing homes so that the sellers can buy another home, often in the new home market,” the Altus Group said.

Highlights of First-time Home Buyers:

• The majority of the first-time home buyers are under 35, 24-to-34 year olds account for approximately 60%; approximately 25% are 35-to-49 years old.

• 1/5 purchased a newly-built home, of these 1/3 opted for a condominium unit

• 1 in 4 of the homes were a single-person household

• Average price $273,000

More on this Topic:

First-time buyers give housing market big boost

Market Update:

• TSX -12.26 to 13,377.16 (Reuters)

o It’s third weekly loss as resource stocks failed to respond to higher oil and metal prices.

Commodity prices were shaken this week by the feeling that global growth is slowing.

• DOW -100.17 to 12,595.75

o Eurozone worries helped push New York's Dow Jones industrial average down .

o Investors also took in data showing that American consumers paid more for gas and food in April, pushing inflation to its highest level in 2 1/2 years.

• Dollar -.68c to 103.24c USD

o A higher greenback sent the Canadian dollar down.

o The American dollar gained ground after the European Union warned that the debt loads of Greece, Ireland and Portugal will be much bigger than previously forecast. The assessment added to fears that international bailouts are failing to solve the region's crisis.

• Oil +$.68 to $99.65USD per barrel

o Traders concerned about flooding in key oil refining areas in the U.S. Midwest

• Gold -$13.20 to $1493.60 per ounce

• Canadian 5 yr. bond yields markets -.02bps to 2.53. The spread (based on the NEW MERIX 5 yr. rate published rate of 4.19%) is just above the comfort zone at 1.66. At the other end, the spread on the new 5yr Unpublished special of 3.89% is 1.36, well below the comfort zone.

Financial Update: Friday May 13, 2011

Foreclosures in U.S. Decline 4%, FHFA

When looking at foreclosures in April 2010 vs. 2011 we noticed at 4% decline in foreclosures.

Video: U.S. Home Foreclosure Decline

More on this topic:

Home Prices in US Decline 4%

Successful Steps for Obtaining a Mortgage

There are a variety of factors which will determine whether or not you qualify for a mortgage. It is important to starting thinking of these factors as early as possible as they are all within your control.

1. Improve your credit score

The lender needs to know how likely you are to make the mortgage payments every month. Usually, the lower your credit score, the higher your interest rate will be (for increased risk). Some suggest, if your credit score is below 620, you will be considered subprime and will have difficulty getting a loan. On the other hand, generally if you have a credit score above 800, you may be easily be able to get the best interest rate available (also known as the par rate).

2. Sufficient and stable Income for size of the loan

It is important to have a stable job at which you can support the loan and monthly payments. Lenders generally like to see a steady employment history and it helps if you stay within the same line of work or industry. Overall lenders are looking for you to have long-term income stability rather than short term fixes.

3. Saving for the down payment

This is very important as the larger the down payment the smaller the loan you will need. You should also be aware you may have to reach a certain down payment like 10% or 20% in order to qualify.

4. Reduce your debt

When lenders are looking at your debt they aren’t necessarily looking at an overall number but rather the total monthly debt payments. The lenders need to know that even with your total monthly debts you will be able to consistently afford your mortgage payments as well. Decreasing your debt is one of the fastest and effective things you can do you increase the size of the loan you’re eligible for.

On the flip side, perhaps now is not the right time me for you to invest in a mortgage. Michele Lerner, Investopedia.com, highlights Nine Signs You Aren’t Ready for a Mortgage. There may be a few adjustments need to take if you’re living paycheck to paycheck, and living beyond your means with no future financial planning. Managing financial issues can be quite stressful, however there are solutions to help you get back on the right track. It would be wise to talk to a financial planner or your mortgage broker about different options and a mortgage plan.

More on this topic:

Importance of Your Credit Rating

Unlocking a Better Credit Score

Living Beyond Your Means?

Market Updates:

• TSX -30.32 to 13,389.42 (Reuters) came in a little lower as commodity prices clawed back some of the big losses after prices for oil and metals fell further in response to another move by China to have most of its banks (for the 5th time this year) increase the amount of money they hold in reserves to curb inflation after higher than expected price increases in April.

• DOW +65.89 to 12,695.92 Improving commodity prices also pushed New York markets higher

• Dollar -.13c to 103.92c USD
  The Canadian dollar was also well off early lows, as the U.S. dollar lost some strength.

• Oil +$.76 to $98.97USD per barrel
  Commodity prices have been dropping for more than a week amid higher margin requirements and worries about weakening global economic conditions. Oil had plunged as low as US$95.25 following a warning from the International Energy Agency that higher crude prices are hurting demand in the United States. Preliminary March data suggest near zero annual growth in global oil demand for the first time since the summer of 2009 and could cause an anaemic U.S. driving season.

• Gold +$5.40 to $1506.80 per ounce

• Canadian 5 yr bond yields markets +.01bps to 2.55. The spread (based on the NEW MERIX 5 yr rate published rate of 4.19%) is closer to the comfort zone at 1.64. At the other end, the spread on the new 5yr Unpublished special of 3.89% is 1.34, well below the comfort zone.