Friday, August 28, 2015

Canadian home prices predicted to rise despite economic uncertainty

ANU BARARIA Reuters |The Globe and Mail| Aug. 26, 2015
Canadian home prices are expected to rise a more than 5 per cent this year and 2 per cent in 2016 even as the economy weakens, a Reuters poll has found.
Canada’s economy shrank in the first three months of the year and it may have in the second quarter as well, owing in part to slumping oil prices. But house prices have defied this weakness so far and have kept climbing.
The Reuters survey of more than 20 analysts predicted home prices would rise 5.2 per cent this year, up sharply from a forecast of 3.4 per cent in June’s survey.
The latest expectations for 2016 and 2017 have also been revised upward, to 2.0 and 2.3 per cent from 1.3 and 1.7 per cent respectively. Canada’s Teranet-National Bank House Price Index was up 1.2 per cent in July.
Calling the Canadian housing market “bulletproof,” Mark Hopkins, senior economist at Moody’s Analytics said: “It seems to not only be defying the odds in terms of surviving the large downturn in the global economy, but even now with gross domestic product contracting, it seems as though existing home prices have accelerated, which is a bit strange and counterintuitive.”
A majority of analysts predict a slowdown in home buying despite two rate reductions by the Bank of Canada this year.
“Even though the Bank of Canada is lowering rates, we are going to see a slowdown starting as people find that it is more expensive to buy stuff, and the home renovation activity will begin to slow down,” said David Watt, chief economist at HSBC.
In recent years, the housing market has been an important driver of the Canadian economy. It largely remained strong throughout the U.S. housing market crash and helped Canada brave the worst of the global financial crisis.
While home prices in the United States have begun to recover, in Canada they have been rising unabated ever since and several economists – although not a majority – have long warned of potential correction.
Average home prices have doubled over the past decade fuelled by cheap debt, but 13 of 19 respondents said the housing market remains affordable – at least on a national basis, because low interest rates have kept debt-servicing costs under control.
The Bank of Canada estimates the housing market is about 30-per-cent overvalued and has said it poses a significant risk to consumers overexposed to mortgage debt, especially in regions of the country where last year’s oil-price shock and persistent weakness has hit the job market hard.
In July, the Bank of Canada brought its benchmark interest rates down to 0.50 per cent to dull the sting of plummeting oil prices and reduce the chances of a housing market crash.
But that rate cut likely has fuelled further house price rises in Toronto and Vancouver. Poll respondents said both these urban markets have surpassed affordability limits of the average Canadian homebuyer, outside of the condominium sector, where vast amounts of new supply are being built.
Some analysts fear a risk of correction – particularly in Toronto and Vancouver – once the U.S. Federal Reserve begins to tighten policy this year, which may take Canadian mortgage rates higher.
“The [Fed] rate hike is clearly going to have an impact on the [Canadian] housing market. That’s guaranteed,” Mr. Hopkins of Moody’s said. “But as long as the Fed continues to be the cautious agent that it is now in moving very slowly, I don’t think there will be any surprises.”
The Reuters poll also showed home building in Canada is expected to remain robust over the next year, averaging around 180,000 units.

Tuesday, August 11, 2015

What happens to your credit rating when you miss a mortgage payment?

Richard Moxley  The Globe and Mail  Jul. 20, 2015
Excerpted with permission from The Nine Rules of Credit: What Everyone Needs to Know by Richard Moxley, Published by Self-Counsel Press.
Your mortgage payment doesn’t always show up on your credit report, but if you are late on multiple payments, it could affect the interest rate you’re offered from the bank when your mortgage comes up for renewal again.
If you miss three consecutive payments or more in a row, it will lead to foreclosure proceedings, which is when the bank or lender starts the process of legally taking ownership of your property due to the lack of payments. Banks or lenders don’t want to own your home, but if the lender isn’t getting paid, it will try and sell the property in order to reduce its losses. Foreclosure shows up under the public record portion of your credit report.
You may assume that bankruptcy is the worst thing you can do for your credit; however, if you are applying for mortgage financing, going through a foreclosure is the absolute worst thing you can do for your credit. Bad credit can be rebuilt fairly quickly, but very few lenders will look at providing financing for you if you have a previous foreclosure showing up on your credit report, regardless how strong your current credit is.
If you find yourself in a situation where you may not be able to make your mortgage payments, contact your mortgage lender or mortgage agent to find out what can be done. The same thing is true with any creditor.
If you don’t think you’ll be able to make a payment to any one of your creditors, it is a good rule of thumb to contact them to see if something can be worked out, especially if you contact them before the due date. I’ve never seen the attitude of pretending it will all go away actually work for anyone.
I understand that despite your best efforts, an emergency may come up, preventing you from being able to make a payment. However, the banks still feel that it is your responsibility to keep track of your accounts and pay your bills on time. Get your head around this rule and you will have a great foundation to always have amazing credit.