Blog Archive for December 2011

Canadians enjoyed low mortgage rates throughout 2011, and many financial experts believe limited economic growth will preserve low rates well into next year.

According to a recent Vancouver Sun report, a panel of Canadian economists agree that growth will hover around 2 percent in 2012. Meanwhile, panel expects the Bank of Canada to leave its key interest rate unchanged all year, maintaining housing affordability despite high home prices.

"As interest rates stay low, it puts a floor on the property market, keeping it affordable, which will boost construction employment as well," said Jamie Price of Macquarie Private Wealth, as reported by the source. "As soon as the Bank of Canada starts raising rates, the prime rate will go up and a lot of people's mortgage rates will go up along with it and that's going to put a real crimp on housing values." Continue reading »

Record-high household debt and global economic uncertainty has some Canadians worried about their current and future financial situation.

According to a recent Sun Life Financial survey, 36 percent of Canadians currently feel more stressed about their finances than they did 12 months ago. Fifty-three percent of men between the ages of 18 to 34 feel worse off financially than last year, the report said.

"It's clear from the survey that the uncertain economic conditions are impacting Canadians and causing financial concerns during an already stressful time of year," said Kevin Strain, senior vice president at Sun Life Financial Canada. "Canadians approaching retirement are feeling these impacts the most because they are planning to put their savings into action. If they haven't prepared accordingly, the current environment may be throwing their plans off track." Continue reading »

Canada's housing boom has lasted for more than a decade, but some experts believe it's finally showing signs of slowing down.

According to a recent Bank of Nova Scotia report, home prices in Canada have increased 85 percent during the previous 13 years, placing the nation's real estate boom "in the middle of the pack" when compared to other countries.

"The relatively smaller cumulative price increase compared with some of the frothiest markets reflects in part a later takeoff," the report said. "Canada's residential real estate boom started several years later than many of its counterparts, with the economy still feeling the effects of the deep recession of the early 1990s and weak labour markets through mid-decade." Continue reading »

Limited economic growth and an oversupply of condominiums has prompted some experts to predict Canadian home prices will decline next year.

According to a recent Bank of America Merrill Lynch report, home prices will drop 5 percent during the first half of 2012, as housing is overvalued by as much as 10 percent. Continued low mortgage rates have fueled rising demand for housing, while the market contains an excess of condominiums, especially in Toronto, the report said.

"The combination of weak growth, large supply in certain large markets and the relative valuations themselves conspire to warrant a contraction (in 2012)," said Bank of America economist Sheryl King, according to Reuters. "A five percent contraction is pretty modest by historical standards. I don't think that it's a very bold call at this point." Continue reading »

Rising residential and condominium home prices have forced some Vancouver residents to consider renting instead of buying, and housing developers have designed some units specifically for young citizens on a budget.

According to a Vancouver Sun report, project developer Reliance Properties recently converted an old hotel into a residential building containing Canada's smallest apartments. The 30 furnished units are between 226 and 291 square feet, and include a kitchen, bathroom, built-in wall bed, fold-down table and flatscreen TV.

"The suites are highly designed to be functional at this small size," said Reliance president Jon Stovell, as reported by the source. "They live here, they play here and they walk to work and that's what it's for. The building has no parking spaces. Most people don't want it." Continue reading »

Global economic uncertainty, unstable stock markets and changing pension regulations have made personal financial planning a tough chore, but the confusing economic landscape makes using a financial adviser an even more positive experience.

In a recent New Brunswick Business Journal column, financial adviser Scott Lewis says Canadians should consider making a New Year's resolution to examine their personal finances and devise a customized saving plan.

"You must know where you are going and how you are to get there; otherwise, you are bound to encounter problems, or even get financially "lost" along the way," Lewis says. "With a well constructed financial plan in place, your chances of success will be much greater. You will also be better able to adjust to changing circumstances and implement a predetermined contingency plan should the unexpected happen." Continue reading »

Despite rising home prices, continued low mortgage rates have held Toronto's real estate market healthy, as sales activity was strong during the first half of December.

According to a recent Toronto Real Estate Board report, home transactions totaled 2,699 for the first 14 days of December, up 11 percent compared to the same period last year. Additionally, sales have increased 4.3 percent on a year-to-date basis.

"Strong average price growth, driven by seller's market conditions, has been largely mitigated by the continuation of very low borrowing costs this year," said TREB senior manager of market analysis Jason Mercer. "The share of average household income going toward mortgage principal and interest has increased only marginally and remains in line with accepted mortgage lending standards." Continue reading »

Several recent studies have concluded that global and domestic financial problems will force Canada's economy to experience limited growth in 2012 and possibly 2013, and some experts now predict the Bank of Canada will have no choice but to drop its interest rates.

According to a recent Postmedia News report, global economic uncertainty, rising unemployment, a potentially slowing Canadian housing market and low consumer spending could force the BoC to decrease its rates below already-low levels.

"The hard landing Bank of America/Merrill Lynch Global Research expects Europe will shave at least 0.3 percentage points off 2012 GDP growth in Canada, with the first half flirting with outright contraction," Bank of America economist Sheryl King said, as reported by the source. "And in our view, the growth and credit backdrop will prompt easing by the Bank of Canada." Continue reading »

The Canadian government recently made several changes to the Canada Pension Plan to accommodate an aging population, but some retirees and nearly retired residents are concerned the modifications may have a negative impact.

According to a Winnipeg Free Press report, many baby boomers are worried the new CPP system will limit their retirement savings, not increase them. For example, the report said the regulations will force mandatory contributions for Canadians ages 60 to 64 if they're collecting CPP payments while still working.

Many citizens are upset the federal government didn't consider their concerns before devising a new retirement fund strategy, and some nearly retired workers will be forced to make larger payments before turning 65, the report said. Continue reading »

Household debt in Canada reached a record high during the third quarter of this year, and while the Bank of Canada's key lending rate has remained unchanged, some banks are lowering mortgage rates to improve housing affordability.

BMO Bank of Montreal recently dropped its five-year fixed mortgage rate to 3.49 percent and encouraged prospective homebuyers to select 25-year amortization loans, which could help limit interest costs and mortgage debt.

"Canadians need to be continually examining ways to reduce overall housing costs," said Katie Archdekin, head of mortgage products, BMO Bank of Montreal. "It is important for homeowners or potential buyers to be prudent and stress-test their mortgage against a higher interest rate to ensure they can afford what they signed up for. Total housing expenses should not consume more than one-third of total household income." Continue reading »