24 Apr

Could Your Mortgage Use a Spring Check-Up?


Posted by: Peter Puzzo

Now that spring has sprung, it’s a perfect time for your annual mortgage health check-up. If you make time for a quick review each spring, it may yield you some fruitful financial savings.


Your 2013 home loan review will examine the most common potential monthly savings opportunities, including high-interest credit card debt or fixed loan payments. Reviewing your options annually could result in having more money left over at the end of each month.


With interest rates at historic lows, now is the time to investigate all your options and perhaps save yourself thousands of dollars per year! Imagine what you could do with the savings – anything from renovating or investing to going on a much-needed vacation or putting money towards your children’s education.


Right now, you can lock into a five-year mortgage below 3%. You could have done the same in 2001 but it would have been about 7%. In 1982 it would have been 18%. Even in the low-rate days of 1952, it would have been about 5.5%.


Borrowing costs are lower than any time in modern history. If your current rate is above 4%, now may be a good time for a free spring mortgage check-up.


Completing a straightforward annual review will keep your home financing as lean and trim as possible. In other words, you will have a clean bill of mortgage health, which is just what the doctor ordered!


If you’d like a free mortgage check-up, call or email me today!


8 Apr

Canadian Housing Still Affordable


Posted by: Peter Puzzo

It’s difficult to scan the latest news without coming across one headline or another that talks about Canada’s housing market being on the verge of collapse or its bubble bursting.

But the true market experts beg to differ. That’s why it’s important to look at the facts.

According to BMO Capital Markets, an examination of valuations and affordability across the country – not just in Toronto and Vancouver – suggests less risk of a nationwide hard landing than implied by many headlines.

In fact, aside from detached properties in Vancouver, Toronto and Victoria, the other major cities BMO Capital Markets studies appear affordable for median homebuyers.

In other words, mortgage payments and other housing-related costs do not exceed 39% of family income (that’s the guideline established by the government in July 2012 for obtaining an insured mortgage).

In addition, with the exception of Vancouver’s condos, Canada’s major cities would remain affordable even if mortgage rates rose two percentage points to more normal levels.

Nationwide, mortgage payments on the average-priced house consume a moderate 28% of household income, or 23% for people living outside Vancouver and Toronto, says BMO. Keep in mind that national mortgage-service cost ratio peaked at 44% in 1989 and 36% in 2007.

Most important, the current 28% matches the long-term norm, suggesting that rising income and falling mortgage rates have largely offset the deterioration in affordability caused by higher home prices.

To pump life into the economy, the Bank of Canada (BoC) has kept Canada’s overnight rate at just 1% since September 2010. According to BMO, a normalized overnight rate would be closer to 3.5% given the inflation target of about 2%.

RBC Economics also notes that, while home prices are currently elevated, exceptionally low interest rates keep the ownership cost burden manageable for the most part.

While affordability levels generally do not appear to pose a threat to the Canadian housing market at the moment, RBC cautions things could be radically different if interest rates were to move rapidly and significantly higher, explaining that exceptionally low mortgage rates have been the main factor preventing affordability from reaching dangerous levels in recent years.

Thankfully, RBC sees continued lower interest rates, expecting the BoC to leave its overnight rate unchanged at 1% throughout 2013 and raise it only gradually starting in 2014.

The CD Howe Institute’s monetary policy council is recommending the BoC keep the target at 1% until March 2014.

RBC believes the eventual rise in rates will take place at a time when the Canadian economy is on a stronger footing, thereby generating solid household income gains, which, in turn, provide some offset to any negative effects from rising rates.

If interest rates remain low, income continues to rise and home prices stabilize in 2013 – as BMO anticipates – fears of a deep housing correction should recede.

With mortgage rates remaining at all-time lows, now’s a great time to get a new mortgage and/or take measures to accelerate your mortgage payments while rates are still low. There are many ways to pay your mortgage off quicker such as increasing the frequency of your payments from monthly to weekly or every other week, or making extra or lump sum payments.