Fixed or float?

Combination mortgages increasing in popularity: RBC poll

TORONTO, May 17 /CNW/ - The popularity of combination mortgages - which offer both fixed and floating rate segments - is on the rise, according to RBC's 17th Annual Homeowners Survey. In fact, 40 per cent of Canadians who are likely to purchase a home within the next two years plan to take out a combination mortgage, compared to 32 per cent in 2009.

The surging popularity of combination mortgages indicates that Canadians are trying to maximize low interest rates while at the same time retaining the security of a fixed mortgage. The poll also revealed a marked gender split with more women (46 per cent) than men (35 per cent) preferring a combination mortgage.

"Although interest rates are expected to rise, our study shows that not all Canadians intend to automatically opt for a fixed mortgage with a longer term," said Marcia Moffat, head, Home Equity Financing, RBC Royal Bank. "As consumers begin to learn about the benefits of mortgage diversification, we're seeing more homebuyers gain a better comfort level with adding floating rate mortgage options."

While combination mortgages are gaining in popularity, fixed-rate mortgages continue to be the most common choice for potential buyers and are preferred by 44 per cent of Canadians likely to buy a home within the next two years. Atlantic Canadians are most likely (54 per cent) to opt for a fixed rate, with Ontarians (41 per cent) least likely to do so.

"Many Canadians believe that a fixed-rate mortgage is the only way to have a locked-in and predictable payment, but a variable rate does not always mean variable payments," noted Moffat. "With our floating-rate mortgage, the portion of your payment that's applied to the principal changes, as interest rates change, not the actual payment itself. This means that when interest rates go up, your payment will pay off more interest; when interest rates go down, your payment will pay off more principal."

When current homeowners were asked about the impact of potential interest rate increases, 66 per cent said they were concerned, with women (70 per cent) more concerned than men (60 per cent).

"We expect the Bank of Canada to increase the overnight rate starting in June, with the pace of increases being fairly steady through the remainder of 2010 and 2011, which will continue to put upward pressure on borrowing costs," added Paul Ferley, assistant chief economist, RBC Economics.


Mortgage findings at-a-glance:

Fixed rate mortgages are preferred by:

- 44 per cent of Canadians likely to buy a home within the next two
years - down from 47 per cent in 2009

- 54 per cent of Atlantic Canadians (the highest in Canada)

Variable rate mortgages are preferred by:

- 16 per cent of Canadians likely to buy a home within the next two
years - down from 20 per cent in 2009

- 19 per cent of men compared with 12 per cent of women

Mortgage term most likely to be chosen by those opting for a fixed or
combination mortgage:

- Five-year term: 43 per cent

- More than five-year term: 29 per cent

- Three-year term: eight per cent

63 per cent: the proportion of Canadian homeowners who have mortgages
(compared to 56 per cent in 2005)

$124,131: the average amount remaining on Canadian homeowners' mortgages
(compared to $109,504 in 2005)

Lawlessbrown.com

Dramatic Shift in Rate Hike Expectations

Ottawa -- The Greek crisis, together with Thursday's market chaos, has forced a "dramatic shift" in expectations of a Bank of Canada rate hike next month, a view reflected in a steep fall of the loonie on the belief that such increases are no longer in the offing as panic spreads about Europe.

Worries that the spillover in Greece may contract credit growth in Europe and threaten the global economic recovery rattled investors, with equity markets in North America sustaining deep losses and commodity prices falling.

And in a sign of concern reminiscent of the Lehman Brothers Holdings Inc. collapse, the London interbank offered rate - the cost of borrowing for banks from their peers - rose to its highest level since August, while the cost of protecting European bank debt against default surged to a 13-month high.

"Is Greece the canary in the coal mine that is going to lead to much greater economic troubles?" said Avery Shenfeld, chief economist at CIBC World Markets, in summarizing the top concern among market participants.

Markets were nervous from the onset after Jean-Claude Trichet, the European Central Bank president, suggested he was not prepared to take further measures to ensure the fiscal crisis didn't spread further.

Investors reacted by selling bonds in debt-laden European countries, with the yield on Portugal's 10-year notes surpassing the 6% level for the first time since the euro's introduction. Higher yields will make it increasingly difficult for countries such as Portugal, Spain and Italy to finance their debts.

It was only two weeks ago that traders had priced in a near 100% probability of a Bank of Canada rate increase in June after the central bank ditched its conditional pledge to keep its key policy rate low and suggested it was time to remove stimulus from the system.

Traders have now scaled back expectations by pricing in just a 50-50 chance of a pending rate, based on trading in the overnight index-swap market.

"The odds have dramatically shifted," said Mark Chandler, head of fixed-income and currency strategy at RBC Capital Markets.

That was evident in trading in the Canadian dollar, which fell as much as US4¢ in value before closing the day down US2.09¢ to US95.03¢. The dollar started the week in the US98¢ range. The currency's drop is attributed to a series of factors, including the Bank of Canada's appetite to raise rates.

Douglas Porter, deputy chief economist at BMO Capital Markets, said the potential fallout in Europe "has to be front and centre in the bank's decision. [The bank] would be much less willing to tighten if we are in the midst of a contagion fear that's sweeping through the markets."

Analysts say market volatility could prompt companies to delay decisions about investing and hiring workers until they figure out how events will unfold. Yesterday's activity on Bay and Wall streets provided no comfort.

Partly due to trading desk errors, the Dow Jones industrial average shed as much as 998 points before retracing losses and closing the session down 347.8 points, or 3.2%, to 10,520.32. The benchmark index in Toronto plunged as deep as 450 points, before rebounding to a 32.7-point loss, closing at 11,842.43.

All this unfolded even though Greece's parliament approved an austerity plan, which includes tax hikes and cuts to public-service perks and pay, demanded by the European Union and International Monetary Fund as a condition to secure a US$140-billion bailout. But concerns remain as to whether Greek legislators will implement the measures in the wake of the escalation of violent riots, which to date have claimed three lives.

In Ottawa yesterday, Finance Minister Jim Flaherty said Ottawa was "monitoring" the events in Europe. Meanwhile, officials with the U.S. Federal Reserve warned of repercussions to the U.S. economy if the feared contagion unfolds in Europe.

Financial Post,

lawlessbrown.com

Fixed or variable? Time to revisit

Jonathan Ratner, Financial Post Published: Thursday, October 22, 2009
Related Topics

While history has shown that variable mortgage rates save borrowers more money, the anticipated upward trend in interest rates as the economy emerges from recession could make this one of the rare periods when a fixed rate turns out to be the superior choice, a new report says.

Inflation may not have been a problem in Canada since the early 1990s, but there is an outside risk that inflation flares up amid record government deficits and as global central banks keep "the pedal to the policy metal," says a new report BMO Capital Markets. The inflation risk becomes even more prominent if the global economic recovery turns out to be stronger than expected.

This could force the Bank of Canada to aggressively raise interest rates, driving variable mortgage rates higher, but leaving fixed rate choosers unscathed.

"Another reason fixed rates are attractive in the current environment is that short-term rates are already as low as they can go -- rates are only going to move higher from here as the economy recovers," said BMO economists Douglas Porter and Benjamin Reitzes.

Fixed rates were advantageous during only two recent periods -- through the late 1970s and briefly in the late 1980s. In both cases, this was ahead of a period of rising interest rates, as is the case now, the economists added.

For those with limited financial flexibility who could run into problems if there was a pronounced upswing in interest rates, such as your average first-time home buyer, the moderate extra cost for the peace of mind a fixed rate mortgage provides may be worth it.

On the flipside, the case for variable rate mortgages is driven by an inflation outlook that remains benign as the soaring Canadian dollar puts downward pressure on prices. As a result, it looks like the Central Bank may follow through on its commitment to hold rates steady through June 2010.

There is also the possibility that fixed rates fall even further if the economy performs worse than anticipated.

Read more: http://www.nationalpost.com/news/story.html?id=2133046#ixzz0UmpgE2LO

www.lawlessbrown.com

Why Canada's housing sector didn't collapse

Globe and Mail Update Published on Monday, Oct. 19, 2009

While it's tempting to think of a “housing correction” as a continent-wide phenomenon, National Bank Financial says the Canadian and U.S. markets couldn't be more different.

“The two have absolutely nothing in common,” senior economist Marc Pinsonneault wrote in an economic update Monday. “In Canada, the correction got under way much later and lasted nowhere as long.”

Mr. Pinsonneault said “prudent lending practices” in Canada prevented the housing market from falling as hard as its American counterpart, and pointed out that Canada's crisis was a side-effect of its recession rather than its cause.

Here are four ways the markets have differed:

Duration of slowdown

The Canadian market began to slide in October, 2008, while the American slump has lasted 2 1/2 years.

“People wishing to sell their homes either cut their asking price or quite simply took their property off the market,” he said of the Canadian market. “Lower interest rates, lower home prices and renewed consumer confidence led to a quick recovery in sales, so much so that as early as last May, these had surpassed pre-recession levels.

Price declines

According to Teranet, Canadian home prices fell 8.9 per cent from their August, 2008, highs to their recessionary lows eight months later. In the U.S., the S&P/Case Shiller index shows prices slid 33 per cent in 33 months.

Delinquency rates

Canadian banks have seen delinquency rates climb to 0.4 per cent, compared to the 0.65 per cent high reached in 1992. The number is far greater in the U.S., at 3.67 per cent.

Consumer spending

When home prices are under pressure, consumers tend to reel in the spending.

“According to Statistics Canada, from the end of Q3 2008 to mid-2009, the value of household real estate wealth sagged only 1.1 per cent,” he said. “The impact of this impoverishment on consumer spending has been negligible.”

In the U.S., the value of household real estate wealth dropped 18.2 per cent. The Federal Reserve estimates that for each dollar lost in housing wealth, consumer spending pulls back up to 15 cents.

Steve Ladurantaye

www.lawlessbrown.com

Average Canadian home prices up slightly, says Royal LePage survey

The Canadian Press

TORONTO - The housing market may be recovering, but is experiencing an under supply of homes for sale in southern Ontario and elsewhere in Canada.

That's according to the latest house price survey by Royal LePage. It says with the recession retreating, home prices are stabilizing and unit sales are increasingly driven by improved affordability.

Royal LePage says the average price of a two storey home in Canada is up just 0.1 per cent from a year ago at $409,335.

Average bungalow values grew 0.06 per cent year-over-year to $341,146, while the price of an average condo increased 0.09 per cent to $243,748.

Royal LePage says a shortage in housing supply is leading to bidding wars in several cities, including Toronto, Montreal, St. John's, N.L.; St. John, N.B. Moncton, Edmonton, Calgary, North and West Vancouver, and Victoria.

While the Atlantic provinces saw a strong recovery in home prices, western provinces have been slower to recover from significant price corrections in 2008, particularly in British Columbia and Alberta.

Ontario and Quebec saw home prices stabilize or gain slightly year-over-year with much of the recovery occurring in a strong third quarter.

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Benefits of Harmonized Sales Tax for Families

Benefits for Families and Consumers

Right now, provincial sales tax (PST) is paid by every business at every step in the creation of a consumer product. You may not realize it, but the PST is charged multiple times during the production of a product before it reaches the store.

Every business involved in the creation of a product pays the PST on almost all of the things they buy to carry on their business - from the extraction of the raw material through manufacturing or processing, as well as the warehousing, transportation, distribution and final sale of the product. For example, a business pays tax on their office equipment, supplies and furniture, telecommunications equipment and services, vehicles, energy to heat and light buildings and power equipment, cash registers, shelving and all the other materials and equipment they use to operate their business – and the cost of that embedded PST is passed on to you, the consumer.

Under the proposed Harmonized Sales Tax (HST) most taxes paid on business inputs are refunded to the business, and those savings can be passed on to consumers:
- When three Atlantic provinces adopted HST, consumer prices fell, according to a study by University of Toronto professor Michael Smart.
- When the BC HST is implemented similar price reductions are expected.

HST Exemptions:
Under the proposed HST, a number of products will be exempt from the seven per cent provincial portion of the BC HST:

- Gasoline, ethanol, diesel and biodiesel when used in motor vehicles.
- Books
- Children- sized clothing and footwear
- Children’s car seats and car booster seats
- Diapers
- Feminine hygiene products

All other items that are currently zero-rated or exempt from the GST will also be zero-rated or exempt from the HST.

New Home Rebate:
- A rebate will ensure that, on average, purchasers of new homes up to $400,000 do not pay more tax due to harmonization than is currently embedded as PST in the price of a new home. Purchasers of new homes above $400,000 will be eligible for a rebate of $20,000 (i.e., a rebate on the first $400,000 of value).

- Buyers of used homes will NOT pay any HST.

Low Income Credit
- Low income families and individuals will receive an annual B.C. HST Credit of $230 for individuals with income up to $20,000 and $230 per family member for families with incomes up to $25,000, paid quarterly with the GST credit. This will benefit over 1.1 million British Columbians.

Residential Energy Rebate:
- A provincially-administered point-of-sale rebate for residential energy will ensure the HST will not increase consumers’ costs for oil, electricity, natural gas or propane used to heat or power homes.

For more information on the Harmonized Sales Tax, pleases visit:
http://www.gov.bc.ca/hst


Krista and Sherri
lawlessbrown.com

Benefits of Harmonized Sales Tax

Benefits for Home Buyers

Currently, new homes in B.C. are subject to the GST, and also carry an estimated two per cent embedded tax as a result of the PST paid on most construction materials.

Under the proposed Harmonized Sales Tax, new homes will be subject to the HST but the embedded PST will be eliminated because builders will be able to recover the tax paid on materials through input tax credits. Used homes will not be subject to the HST.

An essential part of the BC HST will be a tax rebate for new homes.

- A rebate of up to $20,000 will ensure that purchasers of new homes up to $400,000 do not pay more tax due to harmonization than is currently embedded in the price of a new home.
- New homes above $400,000 will be eligible for a $20,000 rebate.
- New home sales will be subject to the HST
- Sales of used homes will not be subject to HST.

For more information on the Harmonized Sales Tax, pleases visit:
http://www.gov.bc.ca/hst

www.lawlessbrown.com

Moving up: ‘Aspirational homes' still affordable

Virginia Galt
The Globe and Mail

Wednesday, September 23, 2009

Home prices are rising again, but the cost of moving up to that “aspirational home” in Canada is still affordable because of low mortgage interest rates, real estate firm Coldwell Banker said Wednesday. Transferring to Singapore? Not so affordable.

In its annual survey comparing the prices of 2,200-square-foot, four-bedroom houses in 345 North American markets – homes suitable for “middle-management corporate transferees” – Coldwell Banker found that Vancouver remains the most expensive market in Canada, and the 10th most expensive in North America, for corporate up-and-comers.

The average 2009 list price of Vancouver homes in the surveyed category was $1.26-million.

Coldwell Banker also looked at housing prices outside of North America and found that, “compared to many major markets throughout the world, Canadian real estate looks like a bargain,” John Geha, president of Coldwell Banker Canadian operations, said in releasing the survey results.

The study looked at single family homes (with 2 1/2 bathrooms) of the type “usually purchased by move-up buyers experiencing lifestyle changes,” Mr. Geha said.

“Despite record-breaking prices in many of Canada's major markets, these homes are selling, as buyers take advantage of today's historically low interest rates,” he said. “These move-up buyers have been a critical component in our resurgent real estate market, and will continue to play a major role in Canada's recovering economy.”

The cost of “moving up,” by city

Vancouver: $1.26-million

Toronto: $824,347

Victoria: $663,000

Burnaby, B.C.: $657,000

Fort McMurray, Alta.: $638,000

Calgary: $525,525

Scarborough, Ont.: $481,750

Oakville, Ont.: $469,500

Montreal: $469,250

Burlington, Ont.: $464,025

Kelowna, B.C.: $444,475

Mississauga, Ont.: $443,333

Edmonton: $432,250

Waterloo, Ont.: $400,833

Winnipeg: $390,368

Saskatoon: $381,975

Where the bargains are (under $300,000)

Charlottetown: $158,667

Brantford, Ont.: $239,750

Lindsay, Ont.: $243,100

Windsor, Ont.: $244,000

Moncton: $276,843

Halifax: $277,302

Collingwood, Ont.: $290,000

Barrie, Ont.: $295,000

www.lawlessbrown.com

Is your current Mortgage still your Best Option??

With interest rates still low it's time for a mortgage check up to see if your mortgage is still beneficial to you. With a quick call to your existing mortgage provider you can find out your outstanding balance, maturity date and amount of your pre-payment penalty.
With that information Lawless Brown Mortgage Team can give your mortgage a "health check" compared to today's rates and terms. In today's changing markets and your long term goals, your existing mortgage could no longer be in your best interest financially.
Call us to find out if changing your Mortgage is financially beneficial to you.
Lawless Brown Mortgage Team
250-656-0855

Hybrid Mortgages - a Popular Choice

We have the ability to provide customers 50% of the mortgage in a 5 year ARM (variable) and the remaining 50% in a five year fixed. The weighted average interest rate works out to be 3.58% for five years. So, our customers benefit from the low interest rate savings of the ARM as well as the security of the fixed rate. But they minimize the downside risk to choosing one option over the other. It’s like diversifying your investment portfolio. DIVERSIFY YOUR MORTGAGE!

Krista Lawless
courtesy of Merix Financial

Victoria BC Housing Assessments

Assessments to reach homeowners next week
A majority of properties face the same or lower assessed values
Andrew A. Duffy, Times Colonist
Published: Friday, January 02, 2009

It's not exactly Sears catalogue day, but the first official working day in January no doubt has postal workers doing a few pre-work stretches as they prepare to handle the 1.85 million assessment notices being sent out across the province.
B.C. Assessment will send the notices out starting today meaning homeowners around the province will start seeing the envelopes in their mailboxes early next week. But homeowners anxious to check out the assessment of their homes may be able to do so online at www.bcassessment .bc.ca starting today.
This year's assessment notice will be slightly different than in years past.
That's because the provincial government decided earlier this year to maintain assessed property values for the 2009 assessment roll at the July 1, 2007 valuation date -- the same date used for the 2008 assessment roll.
The goal of this was to give property owners more certainty in response to the downturn in the real estate market.
New construction in 2008 will be assessed at a value as if it existed July 1, 2007.
The 2009 notices will show two assessed values -- for July 2007 and July 2008. The lower amount will be the official assessment.
About 94 per cent of property owners will receive an identical or lower assessment this year than last, according to B.C. Assessment. Of that group, 82 per cent of properties will have the same assessment, 12 per cent will be lower, and the rest applies to less common property classes.
For Greater Victoria, that means the assessed value of all homes should be close to last year's $83.7 billion which was an increase of $10 billion from the year previous.
According to Brian Hawkins, assessor for the region, last year's numbers reflected a steady increase with the majority of homes in the region having increased between eight and 12 per cent in a year.
This year's assessment will also come with a market trend graph for specific areas around the province, both big and small, that will show what the market has done in the last year and a half.
Anyone wishing to appeal their assessment has until Feb. 2 to make the request.



From Krista and Sherri,

We have received our housing assessments in the mail and all are the same as last year. If you have any questions about them or how to use the equity you have in the house to make money for you, call us and let us show you how. You can also find free information and sign up for our newsletter on our website.

www.lawlessbrown.com