Canadians appear to have gotten the message Mark Carney was sending when the Bank of Canada Governor went public last year with his concerns about rising levels of household debt.
In the months since his remarks – which were augmented by changes to lending rules by Ottawa – growth in consumer borrowing has noticeably slowed, according to Royal Bank of Canada and credit-counselling agencies. A clearer picture will be available when the banks report their second-quarter earnings next month.
Meanwhile, it appears that tapped-out consumers are preparing for inevitable higher interest rates, and tighter lending rules have deterred some would-be borrowers from taking on more than they can afford. Also, the central bank’s latest forecast indicates policymakers see growth in household spending evolving more in line with growth in incomes.
Carney ratcheted up his warnings last year, arguing too many indebted Canadians would be in big trouble if they were to lose their jobs or suddenly incur a large, unexpected expense. At the time, the average household debt level including mortgages had reached a record 146% of personal disposable income. Initial signs of a pullback are being attributed to two factors: consumers scaling back their appetite for debt, particularly now as rising energy costs cut into their budgets; and changes the federal government made to longer-term mortgages and secured lines of credit.
for more details from the Globe and Mail
You walk into the open house, take one look and say to yourself: This is it. It’s the house I have to live in. Where do I pay? A bidding war? I’m in.
Over my years of buying houses, I never bought one that did not have that frisson moment, that thrill of finding a place so suited to my wants. Indeed, I have in the past decided that I wanted to buy a house in what seems, in retrospect, to be nanoseconds. (By contrast, I’ve taken weeks to decide on the right pair of shoes.)
It’s no way to make an “investment,” to be sure. But, as I’ve previously discussed in this space, buying a house is perhaps the most uninvestment-like of investments. Just about anyone who’s purchased a property or thought about purchasing knows that it is much about gut-feel, in which the senses can conspire to trump sense.
Now, as the major real estate selling season gets under way, along comes a survey commissioned by BMO Bank of Montreal to give statistical weight to the notion that intuition carries a particularly heavy weight in the house-buying process.
Buying a house is a big learning experience for most of us, since we do it infrequently. Buying a condo presents even more challenges.
I always advise people to do lots of research, talk to neighbours and check the minutes of the condo board meetings. Don’t make an impulse purchase, as Jody White described doing in a MoneySense
article, “Went for a coffee, came home with a condo.”
I recently talked to Peter C, a reader who bought a condo in downtown Toronto before it was built. This was a first home purchase for the school teacher in his late 40s, who hoped to pay off his mortgage quickly and retire early. So, how is he doing? What has he learned since moving into his unit two-and-a-half years ago?
“The condo was a great decision,” he says. “I’m on an ambitious plan to pay off my mortgage in five years. Then it will truly be Freedom 55 for me.”
But if he had to do it over again, Peter would have checked out the ratio of renters to owners in his building on Carlton St near Yonge St – an area popular with college and university students.
Canadian household debt loads hit record territory this year, surpassing even levels south of the border. A new Statistics Canada paper out last Thursday sheds some light on just who’s most indebted and why.
First, the aggregate numbers: household debt for Canadians more than doubled between 1984 and 2009 – from $46,000 to $110,000, largely due to mortgage debt. Growth has accelerated even faster since 2002 (it’s continued to climb this year, though economists expect the rate of accumulation will slow as borrowing costs rise).
The paper, by senior analyst Matt Hurst, lists several reasons for the surge. Some are familiar – low interest rates and a cultural shift to consumerism. Others include increased demand in the housing market from the boomers, heightened competition and deregulation in the banking sector, new financial products, more relaxed credit constraints and more women in the workforce.
More than three quarters, or 76%, of Canadians carried debt in 2009 and, among those who did, the average load was $119,000.
Whether it’s a duplex, a cottage or a Florida getaway, a second property can be a rewarding investment over time. But if you’re not careful, it can prove taxing as well. A little planning goes a long way.
The following are some common mistakes financial planners see in their practice, as well as some tips for minimizing the tax hit.
If you borrow money to buy or repair a rental property, make sure you arrange things so that the interest on the loan is tax deductible. That means keeping mortgages and lines of credit for the rental property completely separate from loans taken out to buy or improve your principal residence, which are not tax deductible.
“You can’t unmix money,” says Warren Baldwin, Regional Vice President of financial planning firm TE Wealth in Toronto.