A large bubble of people in their prime home-buying years, coupled with an influx of immigrants, is poised to support Canada’s housing market for the next decade, a major bank economist said Thursday.
Benjamin Tal of CIBC put out a report on Thursday in which he argued that Canada’s population demographics are working in favour of the country’s housing market.
Canada is facing a well-documented demographic pinch over the coming years, as Baby Boomers retire and seek to cash out their homes to finance their retirement. Experts have gotten increasingly concerned on the impact this boomer bulge will have on the job market and the housing market.
But beneath the numbers, Tal sees some reasons for optimism. Although the 55- to 74-year-old age group will see the largest population increase in the next decade, the second-largest will come in the 25-44 group. That’s the prime home-buying demographic, with recent research suggesting 18% of that group buys a home in any given year.
Click here for the full CBC News story.
The Bank of Canada will tone down the hawkish language in upcoming statements and drop talk of a rate hike all together by the end of the year, Capital Economics says.
The bank, which releases a policy statement next week, has held its benchmark rate steady at 1% for nearly two years.
Bank of Canada governor Mark Carney’s unexpectedly hawkish language earlier this year had economists betting on rate hikes in the first quarter of 2013, but those expectations have since fizzled.
Most forecasters now expect the bank to hike rates in the second quarter of 2013, a Reuters poll showed today.
Click here to read the Financial Post article.
Analysts are suggesting brokers will see little in the way of a rate war for the rest of 2012 as the big banks look to protect interest margins in a slowing market.
The analysis came a day before the first of the Big Five trod out earnings reports for the third quarter yesterday. The expectation is those numbers will restate the case for more conservative mortgage pricing as the growth in new mortgages creeps forward.
“I expect lending to continue to slow down, especially on the mortgage side, as we move into the latter half of 2012 and into 2013,” Tom Lewandowski, an analyst at Edward Jones, told reporters. “That just creates more of a focus on expenses, given the interest rate environment that we’re operating in currently.”
Interest margins are continuing to shrink as the books of all lenders begins to reflect the shift to lower interest rate mortgages. That means that even outside the vagaries of the bond market, banks are taking in less mortgage interest even as the rate they offer depositors remains stable or increases in some cases.
Click here for more details from MortgageBrokerNews.ca.
Canada’s household debt problem is not quite as bad as we think it is.
By some measures, growth in debt has stalled or slowed this year. Take credit cards – outstanding balances are flat on a year-over-year basis. And where borrowing is rising the most – car loans – you can argue that people are making rational economic decisions to replace aging vehicles.
To be sure, people are way too comfortable owing money these days. But the level of angst about debt is overly dramatic. It’s even a little hypocritical in terms of what people are saying about debt and what they’re actually doing.
A story about rising debt levels was one of the most read on the Globe website last week, and the comments from readers treated indebtedness as the worst sort of personal failing. And then there are the polls the big banks keep doing in which people are asked about their attitudes toward debt. Debt is bad, most of the poll participants keep saying in their answers.
Click here to read more from the Globe and Mail.
When you buy a new home, lenders like to see proof that you can cover the closing costs.
To satisfy this condition you typically have to demonstrate your ability to pay an additional 1.5% of the purchase price at closing, on top of your down payment.
But not everyone knows what closing costs entail. TD recently released an interesting survey that touches on this. It found that 13% of first-time buyers “overlooked some of the one-time fees associated with buying a home, such as inspection fees and land transfer costs, and 6% didn’t budget for anything beyond the down payment and monthly mortgage payment.”
That’s partly a failing of the mortgage advisers counselling those borrowers.
Click here for the full CanadianMortgageTrends.com article.
If you’re serious about becoming a successful investor, there are no shortcuts. Whether your portfolio earns 2% or 12% makes no difference if you’re spending more money than you earn.
Many people believe that you need a high income to become wealthy – and, sure, a big paycheque certainly helps. But lots of people who pull down big salaries don’t end up wealthy, because they spend all of the money they earn (and then borrow more). Meanwhile, we’ve seen plenty of Canadians with modest incomes build seven-figure portfolios thanks to decades of frugal living and diligent saving.
When Thomas Stanley and William Danko wrote their classic book The Millionaire Next Door, they set out to examine the lifestyles of the wealthy. What they learned surprised them: the people who wore expensive suits, drove flashy cars and drank fine wine had high incomes, but they weren’t necessarily wealthy. They fell into the category that Texans call, “Big hat, no cattle.”
Most of the millionaires they studied, by contrast, dressed casually, drove Chevrolets and drank Budweiser. The authors summed up their observations like this: “Wealth is what you accumulate, not what you spend.” Your first priority, then, should be determining how much of your income you can put aside for investment.
Click here to read more from the Financial Post.
As the kids prepare to head back to school and many cottage owners prepare for the final hurrah of the season, I ask a simple question about your summer retreat: Was it worth it?
Did you spend as much time there as you wanted? Did you get your money’s worth? Have you done the math?
I am often surprised at how much energy and resources go into owning a cottage, compared to the enjoyment that comes from it. At the risk of insulting a large percentage of cottage-loving Canadians, I will jump right in and say that for many owners it just doesn’t make financial sense.
I know many people with a cottage who spend no more than 20 or 30 days a year there. I know there are exceptions, but a large percentage will spend a week or two, and then another 4 or 5 weekends, maybe less.
Click here for more insight from the Financial Post.