Archive for the ‘debt’ Category

How to prepare for a housing bust

Tuesday, March 24th, 2015

Garry Marr writes about the situation in Alberta over in the Financial Post. The drop in oil prices has hit their economy first and hardest with sales down by 30-40% over a year ago and growing listings.

So how do you prepare for a surprise economic hit like that?

Simple. Save up to cover for job loss, keep your debts and bills manageable and  don’t get into a situation where you have to sell when everyone else is selling.

Unfortunately Canadians aren’t doing so well on the debt front:

Debt reached an all-time high in the fourth quarter, relative to income. Statistics Canada says the debt to disposable household income ratio is 163.3%, much of it attributable to housing costs.

Read the full article here.

IMF issues fresh warning on Canada housing market

Monday, March 9th, 2015

Apparently it’s not just the Bank of Canada that thinks Canadian RE buyers are suckers. The IMF is issuing yet another warning of potential problems in the Canadian Real Estate Market.

The International Monetary Fund is raising red flags about Canada’s housing market, warning that moves by Ottawa in recent years to tighten mortgage lending standards and boost oversight of the country’s financial system haven’t gone far enough.

Household debt levels remain well above those in other Western countries, the organization said in a commentary posted to its website Monday. Home prices have jumped 60 per cent in the past 15 years and remain overvalued from 7 per cent to 20 per cent, in line for a “soft landing” over the next few years, the IMF said.

At the same time, it reiterated its call for Canada to collect more data on its housing market and to centralize oversight of the financial sector. As it stands, regulation remains fractured among the Department of Finance, the Office of the Superintendent of Financial Institutions, the Canada Mortgage and Housing Corporation and provincial governments all playing separate roles in regulating the housing the market.

Read the full article in the Globe and Mail.

What do these cities have in common?

Monday, March 2nd, 2015

Take a look at this list:

Calgary
Winnipeg
Edmonton
Gatineau
Halifax
Hamilton
Oshawa
Montreal
London
Kitchener
Kingston
Ottawa
Quebec
Regina
Saguenay
Saint John
Sudbury
St.John’s
St. Catharines
Sherbrooke
Saskatoon
Thunder Bay
Toronto
Trois Rivieres
Vancouver
Victoria

Know what those 26 cities have in common?

They’re all Canadian for one, but they are also places where house prices have doubled or tripled over the last 15 years.

As special as Vancouver is, it’s apparently not unique when it comes to rising prices.

Thanks to Joe Mainlander for pointing this out, original data source is Toronto Condo Bubble.

More Canadians making early withdrawal from RRSPs

Monday, February 23rd, 2015

At this time of year most people are thinking about topping up their RSP to get a bit of a tax break, but unfortunately some Canadians are making plans to cash out their RSP before retirement to pay for living expenses.

As politicians wring their hands over Canadians’ lack of retirement savings, figures obtained by Global News from years of tax filings indicate a significant jump in the number of Canadians making early withdrawals from their RRSPs – not for housing or education, but simply to make ends meet.

The biggest increase was from 2007 to 2009, when 1.86 million Canadians took out RRSP cash early. That figure dipped slightly by 2012, to 1.82 across Canada, but remains about 7 per cent above 2007 levels nationally, 12 per cent above 2007 levels in Quebec and almost 10 per cent above in comparatively wealthy Alberta.

Read the full article over at Global News.

Tiny lenders chop rates to grab mortgage customers

Tuesday, February 17th, 2015

Rates have dropped and that means better deals on mortgages. The big banks have dropped discount rates to an average of 2.79% on a 5 year mortgage.

Meanwhile the smaller lenders are hungry for more business so they’re cutting profits to compete on lower rates.

Mortgage Brokers are also taking cuts on commission to compete in the race to the lowest rate:

The rate war is even more intense among mortgage brokers, many of whom are shifting away from the traditional full-service model that saw brokers spending hours working with clients to select the best mortgage and earning hefty commissions. These days, more borrowers are turning to online and “self-service” brokerages that compete on volume, offering less personalized service and sacrificing some of the commissions they earn from lenders in order to discount rates even further.

Not everyone is a fan of the model. Some are worried that with interest rates already so low, brokers are having to dig deep into their commissions to offer meaningful discounts, a model that some brokers argue could threaten the industry as a whole.

“The majority of people don’t like what we’re doing and it’s a troublesome thing for us to digest because ultimately it’s the best for the consumer,” said Jeff Mark, co-founder of Spin Mortgage, an 18-month-old online brokerage that is advertising a five-year fixed rate at 2.49 per cent, well below the typical bank rate, by sacrificing some of its commissions. “We make less money per deal. I don’t know how that isn’t a good thing for the market.”

Read the full article here.

Household debt is growing faster in Greece than in Canada

Monday, February 9th, 2015

Most everyone knows that Canadians hold a lot of household debt now.  Debt levels have been growing for years, but it still seems surprising that Canada is second only to Greece in household debt growth.  This according to a report from the McKinsey Global Institute who adds our country to a list of seven others at risk from high debt levels.

The report found household debt in Canada had risen to 155 per cent of income in 2014, up from 133 per cent seven years earlier. That’s a slightly lower estimate than the Bank of Canada’s, which estimates household debt at 162.6 per cent of income, a record high.

Only Greece saw a larger increase in household debt since the Great Recession, rising 30 percentage points. The U.S., by comparison, has seen household debt levels decline by 26 percentage points, relative to income, in that time. U.S. household debt levels have been largely falling since the country’s housing bubble burst during the last recession.

Read the full article here.

You’ll be relieved to know that even though our debt growth has been 2nd fastest, we still don’t have the highest debt levels. That prize goes to Denmark and Norway.

Sunshine coasts largest developer files for Bankruptcy

Wednesday, January 28th, 2015

Last week over at VancouverPeak Skook posted about the bankruptcy filing of Wakefield Construction.

We missed that posting here at VancouverCondo.info, but it’s got some interesting details about the impact to the economy and a number of subcontractors on the sunshine coast, Vancouver, Whistler and Bowen Island.

There are no winners in this situation – not the employees, not the subcontractors, not the local businesses nor suppliers, not the community and not Lance Sparling. As the list of “Unsecured” creditors shows, he borrowed from himself, too, to keep the ball rolling. His waterfront home was put on the market a year ago and remains unsold despite a -25% drop in the list price; but, as we know those million dollar plus properties have been slow to move on the Sunshine Coast – only 17 sold in 2014 out of a total of 123 listed – that’s barely 14%.

Skook also relates a personal memory:

Like so many others living in and north of Sechelt I wondered what would replace the old “Wake-in-the-Field” Inn and then was fascinated by those uniquely curved roofs of that replacement – the Wakefield Beach development. When I moved down to Sechelt, I had the opportunity to walk through the project and it is a very special and attractive development. The company, Wakefield Construction, was born from that development and at least in this instance the company name lives on.

While Skooks posting is almost nostalgic in tone, the first major media to pick up this story is Business in Vancouver. In their story the Realtor is surprised:

“They ruled the world up here,” said Sechelt realtor Susanne Jorgenson,” “I don’t know how they could have failed.”

..The chamber of commerce is shocked:

“I was shocked,” said Kim Darwin, president of the Sechelt and District Chamber of Commerce. “[The Coast] has a number of new construction projects coming up, so I hope our smaller contractors can step up.”

And the customer is angry:

“They screwed a lot of people,” said Brad Copping, general manager of South Coast Ford Sales Ltd., which had hired Wakefield Construction to complete a 9,000-square-foot addition to its Sechelt dealership. Copping is now paying three of the former Wakefield employees to continue work that is now half complete.

“This will cost a couple of hundred thousand dollars,” said Copping, whose company is not on the creditor list. “They [Wakefield Construction] over billed us and then didn’t pay their sub-contractors. So we are paying twice for the same work.”

Read the full article over at Business In Vancouver.

 

Are you ready for higher interest rates?

Tuesday, January 27th, 2015

That seems like a really weird question as rates continue to drop.

But over at the Vancouver Sun, Barbara Yaffe says ‘Prepare now for interest rate shock‘.

On top of the Bank of Canada recent surprise .25% rate cut there are a number of people predicting another cut coming this year, so why worry about interest rates at all?

The size of the average mortgage on a dwelling in Greater Vancouver is $400,000, reports Jeff Johnson, mortgage broker at Cloverdale-based Dominion Lending Centres Canadian Mortgage Experts, with offices in B.C. and Alberta.

That jumbo figure is based on the average 2014 value of a Vancouver property, $801,000, and a Canadian Association of Mortgage Professionals survey last year showing the average equity position assumed by borrowers is 50 per cent.

Johnson notes that if interest rates rise in 2015 by even just half a percentage point, monthly payments on a typical variable rate $400,000 mortgage could increase by $100 to $1,872.

“And this is the best case scenario, as rates could continue to slowly increase (thereafter).”

Elyea points out such increases would be coming on top of 2015 hikes imposed on B.C. residents for MSP premiums, car insurance and BC Hydro.

And it is worth remembering British Columbians have more modest employment earnings than elsewhere in Canada. The B.C. average weekly wage last year was about $890, compared to $940 across Canada.

Ok, sure. But we know all that already. How long have we been hearing the warnings about ‘being ready’ for rate increases while they just stay down at record lows or continue to drop?

It’s like that old story ‘The Boy who cried Wolf’.  Eventually the villagers get sick of hearing all the false warnings, learn to ignore them and live happily ever after.

RBC first to cut mortgage rate

Monday, January 26th, 2015

Last week when the Bank of Canada announced their surprise rate cut none of the big banks seemed to be in a rush to announce lower lending rates on mortgages.

We asked which will be the first lender to lower mortgage rates and now we have the answer:

RBC is the first to cut mortgage rates as bond yields plunge.

Royal Bank, the country’s second-biggest lender by assets, offered a five-year fixed rate of 2.84 per cent on Jan. 24, down from 2.94 per cent last week, according to rate-tracking website Ratespy.com. That’s below RBC’s posted rate of 4.84 per cent. The bank also trimmed its three-, seven-, and 10-year rates, according to CanadianMortgageTrends.com, an industry news website.

Race to the bottom or just a good time to renew?

Who will be the first lender to drop mortgage rates?

Thursday, January 22nd, 2015

After yesterdays Bank of Canada rate cut we’re seeing lots of articles about what this means for the housing market.

Reasonably enough economists are predicting a dip in mortgage rates after this cut, but so far the big banks don’t seem to be in a hurry.

However, TD Bank was quick to announce Wednesday it will maintain its prime interest rate at three per cent, noting that factors beyond the central bank influence its rates.

“Not only do we operate in a competitive environment, but our prime rate is influenced by the broader economic environment, and its impact on credit,” the bank said in a statement.

And the Royal Bank appeared in no hurry to drop rates either, saying in an email response to a query that “while we don’t have any product announcements to make at this time, we are considering the impact of today’s Bank of Canada decision.”

It was anticipated that the Bank of Canada would move to increase its overnight rate later this year due to an improving economy, until crude prices started to slide and dropped below US$50 a barrel.

Phil Soper, president of realtor Royal LePage, predicted Canadians could be shopping for cheaper mortgages within days.

“It doesn’t take long to react to a policy change like this,” Soper said. “That’s why it’s such a powerful tool.”

Read the full article over at Yahoo.

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