CategoryConsumer Debt

Posted September 17, 2013 Consumer Debt

Rising personal debt levels.. but how about rising asset levels?

Ever notice how all economic news is bad? Seriously, when was the last time you heard Canadians were doing well, financially? Even when we came out of the October 2008 U.S. sub-prime mortgage crisis (notice I’m very specific about the cause of that recession) with flying colours, we kept seeing the same negative messages about how lucky we were to come out of this as strong as we did.

But here we are, 5 years later (hard to believe it’s been 5 years) and all we keep hearing and reading is how the economy is fragile… the housing bubble is coming… personal debt levels are at record highs… housing affordability index has increased (this measures how much of your income is used for housing)… This all sounds terrible and depressing.. maybe we should sell everything, move to another country and herd sheep? Continue reading “Rising personal debt levels.. but how about rising asset levels?”

Posted March 27, 2013 Consumer Debt

BMO caves in to Federal govt pressure and raises mortgage rate.

It was bound to happen. BMO announced their so-called ‘low-rate’ (NO FRILLS) 5 yr fixed rate mortgage would be increasing to 3.09% from 2.99%. This comes shortly after the Federal Minister of Finance, Jim Flaherty, said that he called BMO and asked them to pull their 2.99% ads. Last week, the Minister’s office asked Manulife Bank to withdraw their recent ad promoting a similar low rate.

While, 2.99% isn’t the best rate today, it was the lowest advertised rate from the BIG SIX BANKs. It was somewhat symbolic. Of course, Mortgage Brokers have access to even lower rates through the wholesale mortgage market, but these lenders don’t have the deep advertising pockets that BMO or the other BIG SIX BANKs have. So the publicity surrounding this rate and the increase will get much more air-time. You can actually find full-featured 5 year mortgages at 2.89% today, through a good mortgage broker (a word of warning.. I’ve seen lower rates offered, and I have access to these products… but these products are not full-featured and come with some limitations that make them less attractive… just be careful when choosing your mortgage and your mortgage broker)… Continue reading “BMO caves in to Federal govt pressure and raises mortgage rate.”

Posted March 21, 20133 Comments Consumer Debt

Canadian Govt doesn’t want you to find the lowest mortgage rate.

Yesterday, we saw our Federal Minister of Finance, Jim Flaherty, admit to having his office phone up Manulife Financial and ask them to stop advertising their 2.89% 5 year fixed rate mortgage special. An unprecedented move for a government official… Yes, it’s true! But wait, it gets better (or worse). Flaherty admitted to calling up BMO personally, to ask them to stop advertising their 2.99% 5 year fixed rate (NO FRILLS mortgage). click here for the article.

Now, just a comment about these products and rates…. if you are a regular visitor to CanadaMortgageNews.ca then you’ll know the BMO low-rate (or NO FRILLS to be more accurate) is a terrible product with too many restrictions and limitations… Manulife has a decent product….rate is competitive, however, like most other Bank’s, there is some mystery about what their best rates really are… so once again, you can’t rely on a website or bank advertising when it comes to finding the best mortgage…a mortgage broker is the best way to get unbiased advice with access to dozens of Lenders. Continue reading “Canadian Govt doesn’t want you to find the lowest mortgage rate.”

Posted February 4, 20131 Comment Consumer Debt

Personal Debt level concerns are overblown according to Equifax stats.

So here we go again.. More stats that show our personal debt levels aren’t out of control… That’s right, I said ‘aren’t’ out of control. Equifax Canada says our defaults are at record low levels and we are paying off our debts faster. This doesn’t come as any surprise to me. Anyone that’s followed my posts knows that I have questioned all the popular articles telling us we are not managing our debts responsibly.

You’ve seen the reports… ‘Personal debts at record high levels’…..’Personal Debt crisis’. We’ve been hammered with the same headlines for the past few years. I just wasn’t seeing this with my readers or my clients… I kept seeing consumers wanting to take advantage of these record low interest rates to invest or improve their homes (why is that a bad thing?). That’s not bad debt in my opinion… that’s good debt.. And now we have some stats to back up what I have experienced. Continue reading “Personal Debt level concerns are overblown according to Equifax stats.”

Posted May 31, 2012 Consumer Debt

Shhh…Interest rates are still at record lows… and Canadians are making huge prepayments.

IT’S OKAY TO FEEL GOOD ABOUT LOW INTEREST RATES

I’m sure this isn’t what our Federal govt wants you to hear. But it’s true… Fixed rates are in the low 3.00%s…. So why aren’t we feeling good about this? Why isn’t everyone happy? Record low interest rates means less interest cost to you… it means low housing costs…It means you are saving money.

A mortgage is the biggest debt most of us will ever have… We all talk about mortgage rates with our friends, co-workers and family…. It’s a popular subject… But for some reason, we aren’t feeling good about these low rates… It’s almost like we should be feeling a little guilty, like the cat that swallowed the canary… do you feel like that?

Could it be that we have been beaten to death with negative messages by the Federal Minister of Finance? Housing Bubble coming!!!…. personal debt levels rising!!… higher interest rates coming…!! Maple Leafs win Stanley cup (oops, had to throw that one in)… we’ve been talking about these same things for years… yet they haven’t happened! I’m not saying these aren’t concerns but I think some of these have been overstated without providing enough proof or evidence.

The govt doesn’t want you to borrow at these rates… They are afraid you would be too irresponsible and would borrow more than you could afford… (never mind the fact that you must qualify at BANK POSTED rates which are 2.00% higher than these wholesale mortgage rates…)

NEW STATISTICS SHOW WE ARE RESPONSIBLE AND NOT SHOWING ANY SIGNS OF TROUBLE

By the way… the strange part about all this “boy that cried wolf” noise from the govt, is that there really isn’t any proof that we are in trouble…. That’s right.. Mortgage Arrears are low and have been low for over a decade… Affordability is better than it was 20 years ago! (low rates have helped but increases in income have also factored in)…

And how about this stat that just came out….Around 23% of Canadian mortgage borrowers have increased their regular mortgage payments by $400 to $500 per month. 19% are making lump sum payments of around $12,500 per year. That works out to over $20billion in extra payments towards their mortgages. Or put another way, over 1 million mortgage holders out of the estimated 5.85million mortgage holders in Canada are paying far more than the minimum payment. Does this sound like a country of irresponsible borrowers? … (source Financial Post).

Either the govt’s message has sunk in, or there really wasn’t as big a problem as we were led to believe…. I’ll let you be the judge…

But we could be facing a ‘Made in Canada’ problem as this article states… . With the govt planning to make the biggest changes in history with mortgage and HELOC lending, they will be affecting a large segment of new borrowers but even more EXISTING borrowers… they will force a large percentage of Canadians to sell their homes, close their businesses or seek higher interest debt…. And why? What purpose does it serve? The stats tell us we are fine…

House prices are hot in Toronto but they are cold in the rest of Canada… The govt is providing a solution to problem that doesn’t exist.

If you aren’t sure if you could benefit from today’s low rates, or how these proposed new lending changes will affect you, give me a call or send me an email… I’d be happy to discuss your options.

Steve Garganis