Thursday, June 28, 2012

Happy Canada Day

Victor Peca
Mortgage Broker
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Happy Canada Day
This year we'll enjoy Canada Day celebrations with a cherished long weekend. Whatever you have planned - time at a cottage, weeding in the garden, reading in a hammock, family reunion, visiting friends, home or community barbecue, fireworks - be sure to take some time to reflect just how fortunate we all are to live in the best country in the world!
We're so very proud that celebrations will be taking place in homes, patios and backyards that we were privileged to help bring to thousands of Canadians.
Happy Canada Day!

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U.S. housing market poised for new boom

Barrie McKenna  The Globe and Mail Published

The U.S. housing market is doing much better. And it's now on the cusp of what could be a dramatic turnaround.
That's the conclusion of a new report by Vancouver-based independent housing economist Doug Smyth, who argues, among other good things, that millions of newly created jobs will eventually power another boom in demand for softwood lumber.
Mr. Smyth's prediction is based on a much more impressive recovery in the U.S. jobs market than is generally recognized. That's driving mortgage foreclosures down, and household formations and consumer spending up.
The result is enormous pent-up demand for homes, which he likened to a boiler rapidly filling with steam. Part of the untold story is new demand coming from a generation of foreign-born Latinos, who are waiting to jump into the market.
"The U.S. economy is now close to the tipping point, where increased employment will generate significant increases in all types of homes," argued Mr. Smyth, former research director at the Industrial Wood and Allied Workers of Canada.
Conditions are now ripe for builders to dig ground on new single family homes at a rate of up to 1.3 million a year as early as next year or 2014, and even more in 2015.
"Given the combination of the improving economics and the enormous build-up of pent-up demographic demand for single-family housing after the last four years of poor starts, it is not a question of whether the recovery will come, or by how much, but when," the reports points out.
Annual single-family starts of 1.3 million would mark a dramatic turnaround from the disaster of the past three years. Single-family housing starts totalled 445,000, 471,000 and 431,000, respectively, from 2009 to 2011.
In May, U.S. builders started work on new single-family homes at an annual pace of 516,000.
Unlike Canada, the U.S. economy has been slow to replace the jobs it lost in the Great Recession.
But Mr. Smyth's research makes the case that the recovery is going much better than most Wall Street economists recognize. He argues that the "real" recovery has now reached 6.6 million in seasonally unadjusted non-farm jobs. That represents 83 per cent of the jobs lost since January, 2010 – the low point of the decade for employment.
He bases the finding on a more rapid bounce-back in new jobs and a smaller estimate of jobs lost.
The generally accepted estimate of jobs lost in the recession is 8.5 million. Mr. Smyth argues that number should be reduced by 630,000, representing the number of Mexican workers who returned home and are unlikely to re-enter the U.S. labour market.
More jobs means more wealth, higher credit ratings and generally improving confidence.
The report highlights two other factors contributing to the optimistic housing forecast – the improving mortgage market, Hispanic demographics and manufacturing renaissance.
Mr. Smyth says there's been a dramatic improvement this year in key mortgage market indicators, including tumbling foreclosures and accelerating house price increases.
The report also points out that the 6.3 million Latinos who came to the U.S. from 2000 to 2007 are now entering their prime home-buying years. And with the economy improving, they have the wealth to start buying.

Thursday, June 21, 2012

Ottawa tightening mortgage rules; no more 30-year amortizations


The federal government is moving again to tighten the rules on mortgage lending in Canada amid growing concerns that the housing market is overheated and household debt levels are climbing to perilous levels
The country's biggest banks were caught off guard on Wednesday night as the Department of Finance prepared to clamp down on mortgages by reducing the maximum amortization for a government-insured mortgage to 25 years from 30.
Ottawa will also limit the amount of equity that can be borrowed against a home to 80 per cent of the property's value, down from 85 per cent.
The moves are designed to cool the housing market and limit the record levels of personal debt Canadians have amassed in recent years. Figures from Statistics Canada show the average ratio of debt-to-disposable income climbed to 152 per cent, up from 150.6 per cent at the end of 2011. A rise in interest rates or further job losses could put some households at financial risk, endangering any economic recovery.
The Bank of Canada is expected to keep interest rates low for some time because the economy shows little sign of a strong recovery, so tightening mortgage rules is one way to ensure Canadians don't get in over their heads during a prolonged period of ultra-low interest rates.
Reducing the maximum amortization on government-backed mortgages will eliminate the 30-year mortgage for most borrowers in Canada. The changes, which are expected to be unveiled at a news conference in Ottawa on Thursday morning, will translate into higher monthly payments, but result in the loan being paid off sooner.
Ottawa will announce two other changes, according to a source. It will no longer allow high-ratio mortgages over $1-million, and it will cap the gross debt service (which looks at a consumer's total debt payments as a percentage of their income) at 39 per cent. While many banks tend not to allow mortgages over 40 per cent, there had been no official rule in place.
It is the fourth time in four years that Ottawa has moved to cool the housing market by tightening mortgage rules. In early 2011, Finance Minister Jim Flaherty reduced maximum insured amortizations to 30 years, and limited borrowing to 85 per cent of the property value.
CIBC economist Benjamin Tal described the changes as a "gentle push," since the government didn't make alterations to the minimum downpayment required on mortgages, which stands at 5 per cent.
"The fact that they didn't change downpayments is a realization that doing so would probably be too severe given that the market is slowing down," he said.
However, there remain concerns the changes could cause too abrupt a shift in the market. "All of these things might precipitate the housing market downturn that the government wants to avoid," Jim Murphy, CEO of the Canadian Association of Accredited Mortgage Professionals, said in an interview.

Tuesday, June 19, 2012

Your Credit and How it Works

Figuring out exactly how credit scores work is problematic. Like nuclear fission, learning Chinese and setting the clock on your DVD player, credit scoring is not something that most people can easily master. In this article, our experts reveal secret information about late payments and how they impact your credit scores:

Credit scores are used by financial institutions, insurance companies and utility companies as an efficient way to predict how risky a customer you will be. If your credit score is low, it indicates that you are more likely to make late payments or file costly insurance claims. In turn, this means that the creditor is more likely to lose their investment by lending you money. Once you understand that credit scores predict this specific behavior, it’s a lot easier to figure out the best way to manage your credit.

Because scoring systems are so focused on predicting whether or not you’ll go at least 90 days late, surprisingly, an old 30 or 60 day late payment is actually not that damaging to your credit scores as long as it is an isolated incident. Only when your accounts are currently being reported 30 or 60 days past due on your credit reports, will your credit scores plummet temporarily.

If you’re 30 or 60 day late payments are an infrequent occurrence, this kind of low level late payment will damage your credit score only while it is being reported as currently past due. They shouldn’t cause lasting damage to your credit score after this period passes unless you make 30 or 60 day late payments on a regular basis. In this case, the fact that you are habitually late with your payments will cause long term damage to your credit scores.

Here’s a summary of how late payments impact your credit scores:

    30 days late – This record will damage your credit scores only when it is reported as “currently 30 days late.” The exception is if you are 30 days late often. Otherwise, a 30-day late payment will not cause lasting damage.
    60 days late – This record will also damage your credit scores when it is reported as “currently 60 days late.” Again, the exception is if you are 60 days late often.
    90 days late – This record will damage your credit scores significantly for up to 7 years. It doesn’t make a difference whether or not your account is currently 90 days late. Remember, the goal of the scoring model is to predict whether or not you will pay 90 days late or later on any credit obligation. By showing that you have already done so means that you are more likely to do it again compared to someone who has never been 90 days late. As such, your credit scores will drop.
    120+ days late – Late payment reporting beyond the initial 90 day missed payment does not cause additional credit score damage directly. However, there is an indirect impact to your scores. At this point, your debt is usually “charged off” or sold to a 3rd party collection agency. Both of these occurrences are reported on your credit files and will lower your credit scores further.

If you continue to miss your payments beyond 90 or 120 days, the following records may also harm your credit score:

Collections – Collections are the result of late payments. There are two types of collections; those that have been sold to a 3rd party collection agency or those that have been turned over to an internal collection department
Tax liens – Tax liens are obviously not preceded with late payments on any sort of account. However, when tax liens are reported on your credit reports they have the same negative impact to your credit scores as any other seriously delinquent account.    Settlements – Settlements are deals made between you and a creditor who is trying to collect a past due debt. Normally, you and the creditor would agree on an amount that is less than what you really owe them. Once you pay them, they consider the matter closed and paid off. However, they will report that you have made a debt settlement for less than your contractual obligation.
Repossessions or foreclosures – Having a home foreclosed upon or a car repossessed are both considered serious delinquencies and will lower your credit scores considerably for up to seven years. The assumption normally made by the consumer is “hey, I gave the home or car back to the lender, why are they going to show me as delinquent?” The answer you’ll get from lenders is that you signed a contract with them to buy a home or car and pay it in full over a period of time. You failed to do so therefore they consider you to be in default of your agreement with them and will report this on your credit reports.

Remember, the goal of most credit scoring models is to predict whether or not you will go 90 days past due or worse on any obligation. What’s missing? The scoring models are not designed to predict whether you will default for any specific dollar amount. As such, having a 90 day past due of only $100 is as bad as having a 90 day past due of $10,000. The same goes for low dollar collections, judgments or liens. The dollar amount doesn’t matter. The fact that you paid late is what’s most important in the eyes of a credit scoring model.

If you already have a 90 day late payment record on your credit history then your scores are already suffering. Be certain that the information is being accurately reported. If it isn’t then you have the right to dispute it with not only the credit reporting agencies but also with the lenders who reported it. Your goal is to have the item corrected or removed, especially if it is in error. Once removed or corrected your credit scores will immediately recover.

Don’t renew your mortgage with your eyes closed

When your mortgage comes up for renewal, your lender will send you a letter suggesting you renew at their current offer. If you do, you’ll be renewing your mortgage with your eyes closed! This is your moment of opportunity to negotiate the best possible deal, either with your current lender or with a new one. Do you know if the same lender remains your best choice? If you don’t, you aren’t alone.
At the end of 2011, Manulife Bank of Canada released the results of their latest consumer debt survey.  They found that two-thirds of homeowners (65 per cent) did not compare products from several different lenders to make sure they were getting the best deal the last time their mortgage came up for renewal. Twenty per cent stayed with their current lender and did not negotiate, while 45 per cent stayed and negotiated but did not shop the market.  Interestingly, the youngest age group surveyed (30-39) were the most likely to shop around (41 per cent) but also the most likely to stay with their current lender and not negotiate (24 per cent). This age group is in the most hectic period of balancing work and children, which often causes things to be left to the last minute and it’s easier to follow the path of least resistance.
You could save a considerable amount of money if you renew at a lower rate.  A half percent difference on a $225,000 mortgage with a 20 year amortization can mean over $5,200 in interest savings over five years.  Wouldn’t it be better to put that amount towards reducing your mortgage principal?
You also need to consider that your mortgage needs may have changed.  This may be a good time to roll your high-interest credit cards and other debt into your mortgage to get one lower payment, boost your cash flow and save on interest costs. Or you may want to take some equity out for renovations, a second property or for investing. 
Keep in mind that there are some administrative details and costs when switching your mortgage to another lender, but don't let this discourage you from finding out more. It doesn’t cost you anything to investigate your options or get a second opinion. When you switch your mortgage to a new lender, you will go through an approval process similar to when you took out the original mortgage. You can either assign your existing mortgage or you can apply for a new one should you want to borrow a larger amount to consolidate your high interest debt or complete some renovations.
Your lender may charge a discharge fee, and you may need to pay legal and appraisal fees if you are getting a completely new mortgage instead of switching your existing one. At that point, you should assess if the money you will save by switching to a better interest rate offsets those costs. The cost for you mortgage life insurance may also change. You won’t have to pay for your mortgage broker’s service (oac) because the lender selected pays compensation for the services and mortgage solution provided to you.
If a renewal is in your financial future, bring us your renewal notice four months prior to your renewal date. There are some great options out there; we’ll help you look around.

Call me today to discuss your options.
5 year fixed rate 2.99%
5 year variable prime minus.10% = 2.90%
today's prime rate is 3.00%

Victor Peca- M09001613
Call me for a no fee mortgage assessment before you renew or refinance 

Cottage sales booming as buyers seek out lakeside bargains

By Susan Pigg - Moneyville 
The call of the loon — as well as lots of choice and a few bargains — is drawing Canadians back to the lake in numbers not seen since 2008, according to a report on the cottage market released Monday by Re/Max.
Sales are up in 70 per cent of Canadian markets examined for the annual study and on a par with last year in another six per cent.
But prices remain soft, or even depressed, in most areas of the country — and those who are opting for cottages aren't willing, for the most part, to spend more than $400,000, the study found.
Some high-end luxury markets, such as Muskoka, however, are seeing higher demand for the $1 million-plus showcase cottage, largely because prices have fallen to more reasonable levels, the report notes.
"Renewed consumer confidence is the true driver," of what is seen as hopeful signs of activity in a market that has been sluggish since the Great Recession, says Michael Polzler, executive vice president of Re/Max Ontario and Atlantic Canada.
Low interest rates are also a major factor, although would-be cottagers remain cautious.
While there are some shortages of entry level properties, activity is "exceptionally healthy" and supply strong as the boomer market softens — with fewer buying and more selling to free up cash as their kids leave home.
That's opened the cottage door to a new generation of buyers — young couples with children, the report notes.
"Clear evidence of a recovery exists in Ontario's recreational property markets," says Re/Max. Some 71 per cent of all regions of the province reported sales have increased or remained on a par with this time last year.
But prices have been slow to rebound: Prices have dropped or stayed the same as last year in 71 per cent of cottage areas studied for the report.
The call of the loon has been especially strong in areas like Grand Bend, Orillia, Huntsville and Parry Sound this spring, says Re/Max.
Only five Ontario markets saw a slight dip in prices, but most of them are expected to catch up quickly this summer.
"Buyers are very selective this year," notes the report.
They are avoiding overpriced places altogether, willing to travel further to get a better deal or even buy a backlot place — just off the water but with access — to keep costs down.
A lack of affordable, entry level cottages is being felt in some regions, especially in the Huntsville/Lake of Bays area where realtors are seeing bidding wars for the first time in years on properties priced at $400,000 and under, the report says.
That's pushed average prices in that popular area up by 10 per cent in April over a year earlier.

Wednesday, June 13, 2012

Canada to skirt global turbulence, record healthy growth this year

Julian Beltrame   OTTAWA – Canada's recovery is getting a vote of confidence from economists at the Royal Bank, who in a new report judge the economy sufficiently resilient to withstand turbulence from abroad.
The RBC's new quarterly forecast anticipates the economy will rebound to 3.1 per cent growth this quarter, which ends in June, and record a 2.6 per cent gain in gross domestic product overall for both 2012 and 2013.
But fresh data from the Conference Board suggests headwinds from abroad are already impacting Canada's corporate sector.
The board's May index on industry profitability found 13 of 49 industries reporting a decline in profitability and several that had been posting strong increases at the beginning of the year now showing a slowdown.
"The weaker profitability outlook is linked to the ongoing European debt crisis," the think-tank said, also citing slowing growth in emerging markets and depressed prices in the commodities that Canada sells to the world.
The RBC economists acknowledged the external difficulties and have incorporated a slower 3.5 per cent global growth profile for this year. But they are buoyed by Canada's strong fundamentals and believe policy-makers will be successful in preventing a European financial meltdown.
"We're relatively bullish," said Craig Wright, RBC's chief economist. "On balance, conditions for growth are positive, supported by a continuation of a low interest rate environment and a Canadian financial sector that is healthy and ready to provide credit."
Wright said the recent bad news has dampened confidence but has not changed the overall outlook.
"It's still basically a risk story," he said of Europe. "In a sense it's more of the same: we get dragged to the edge of the cliff and then get dragged back."
The other risks the bank says must be averted are the possibility of a harder than expected landing for China, and the danger that political gridlock in the U.S. will prevent a compromise to extend stimulative fiscal measures beyond this year.
The RBC's view of the economy is at the upper limit of private sector economists' range, as well as being above the Bank of Canada's 2.4 per cent growth expectation for both years.
Last week, the central bank signalled it may downgrade its own forecast in the future. In a statement, it noted that "global economic growth has weakened," citing European debt problems and weaker than expected performances in emerging markets, the U.S. and even Canada, which recorded a disappointing 1.9 per cent growth rate in the first quarter.
Last Friday, Statistics Canada confirmed that the strong job gains seen in March and April had petered out in May.
The RBC, however, sees last month's tepid 7,700 jobs increase as cementing expansion in the previous two months since there was no reversal.
The economists attribute the soft first quarter to temporary factors — a mild winter that reduced demand on utilities and temporary shutdowns in both energy and mining production facilities.
They believe the economy will catch up in the second quarter, noting the outsized 140,000 employment increase recorded in March and April.
RBC sees jobs growth continuing in the next two years, taking the unemployment rate from 7.3 per cent at present to 6.9 at the end of 2013.
Continuing, if modest, growth in the United States, along with domestic strength in housing, consumer spending and business investment will help the Canadian economy stay on the path to recovery, the RBC said.
Given the positive growth, Wright said he expects the Bank of Canada will start raising interest rates later this year.
Meanwhile, the report cautions that growth will not be evenly spread.
The picture is marred somewhat by a deepening East-West divide, with resource-rich Alberta and Saskatchewan benefiting from the commodities boom with near four per cent growth rates.
Meanwhile, Quebec and all four Atlantic provinces will be under two per cent this year, with only Nova Scotia and New Brunswick getting above that level next year, RBC said.
Provincial forecasts for 2012 and 2013 are:
·Newfoundland and Labrador 1.9, 3.4.
·Prince Edward Island 1.8, 1.9
·Nova Scotia 1.6, 3.2
·New Brunswick 1.6, 2.1
·Quebec 1.6, 1.9
·Ontario 2.5, 2.4
·Manitoba 3.1, 3.0
·Saskatchewan 3.7, 3.9
·Alberta 4.0, 3.9
·British Columbia 2.6, 2.9