Category Archives: rates

Yes We Have No Bubble Trouble.

For all of you worried about a ‘housing bubble’ just stop and read this article:

No Housing Bubble Trouble.

At the national level, what could possibly kick national home prices downstairs? There is nothing to suggest massive job loss ahead or a huge oversupply of new homes. That leaves only the dubious assumption of a big increase in mortgage interest rates as the trigger for any nationwide decline in home prices. But national housing prices did not fall in the past when mortgage rates rose to twice their current level.

Oh, wait.. Sorry that’s from the Washington Times in 2005 and refers to the US market.

This is the one I meant to point to:

No Bubble, No Trouble.

A housing slowdown in Toronto and Vancouver could affect consumer confidence in regions with strong economic fundamentals like Calgary, Edmonton and Halifax, adds Don Campbell, best-selling author of Real Investing in Canada. But rather than a sharp decline, you’re more likely to see slower rates of price appreciation and home sales, says McKellar. “Overall the economy of Canada compared to other countries is still doing very well,” he says. “Housing markets are a function of the economy. Not the other way around.”

Hat-tip to Patriotz and Many Franks for the article links.

 

 

2013: Everything costs more

Well, maybe not everything…

You can probably pay less for a computer or a house, but many of the day-to-day expenses of living are going up around here.

As the new year rolled over there was a spate of announcement for rising taxes, user fees, premiums and fares in BC.

In Vancouver, homeowners will pay about three per cent more in 2013 on their property taxes and utility bills.

The cost of health care premiums is set to rise in the province, from $128 to $133 per month for a family, adding up to $60 per year, according to the Canadian Taxpayers Federation.

“Most of us would say, ‘OK, we can squeeze out five dollars a month somewhere,’ ” said spokesman Jordan Bateman.

But, he added, this is the fourth January premiums have increased and “it’s really starting to weigh down taxpayers.”

Federally, Employment Insurance and Canada Pension premiums will also increase.

Workers who make over $47,400 will pay $891, up $51 from last year, and employers will pay $1,247 in EI premiums, up $72. Workers and employers will both pay an extra $49 in CPP premiums, with workers paying $2,356 in 2013.

The cost of getting around is also going up.

Yep, Translink fares are going up too – a one zone fare goes from $2.50 to $2.75.  Also Tolls and BC Ferry fare.

For the whole list check out the original article in the Vancouver Sun.

Is financing getting tougher for the self employed?

It seems that more and more Canadians are self employed.

The self employed tend to have less steady income then full time employees and as a group it can be more difficult to get a mortgage or refinancing.

As a self-employed website developer who had recently restructured his business, Greg Schmidt knew that refinancing his mortgage wasn’t going to be a piece of cake.

“I had a little bit of a line of credit built up from shifting the focus of the business and my car lease had come up for being bought out, so I needed money to take care of that,” said Mr. Schmidt, a single 42-year-old who owns a home in Toronto that includes an apartment for income. “It turned out the best way to go was to do a new mortgage, increase the amount of the old one and take care of those costs.”

However, when he approached his bank, he was told “the numbers didn’t work for them.”

Read the full article in the Globe and Mail.

Paying debt with debt

This Globe and Mail article starts like this:

A new poll suggests that most Canadians are quite comfortable with using debt as a financial strategy – at a time when debt loads have risen to alarming new highs.

Shouldn’t that be the other way around?  Canadians are quite comfortable using debt as a financial strategy and that has driven debt loads to alarming new highs.

The survey shows 9 out of 10 respondents would consider borrowing money to pay for an unexpected $2,000 cost.  Yeah, that’s right: $2k. These people appear to have little or no financial buffer.

While 55 per cent said they were extremely or very confident they could raise the cash, 92 per cent said they’d consider borrowing to come up with some of the cash.

Less than half – 45 per cent – said they’d never faced a debt problem.

The poll results come as Canadian debt-to-income ratios sit at a record 152 per cent and top officials issue warnings to start paying down debt before interest rates rise.

The findings suggest consumers have been unmoved by warnings that rates will inevitably rise and that the resulting financial burden could sink some households.

“It’s frightening to see that Canadians have become totally blasé about debt – it’s becoming their new ‘normal’ and they’re numb to this dangerous trend,” says Douglas Hoyes, a bankruptcy trustee with Hoyes, Michalos & Associates Inc.

“For many, the use of debt to not only pay for big ticket items like cars, but also to cover day-to-day living expenses, has become commonplace.”

Now compare this to the USA in 2006 where household debt grew at a record level, but a housing boom had also boosted networth.  Some were concerned about unsustainably high house prices, but Ben Bernanke said that he would not prick asset bubbles.

And he didn’t.

In fact the US government did everything in its power to prevent house prices from collapsing.  They pumped money into the system, drove down interest rates and came up with all sorts of programs to prevent people from losing their homes.

You may be surprised to find out what happened to house prices in the US since then, especially the ‘hot’ markets like Florida, Arizona, California and Nevada.