Posts
Saturday, November 29, 2008
Moving
As I was going through my emails today, I saw that I could dynamically link a Wordpress blog with LinkedIn. Since this will make access easier, I am moving my blog postings to http://russskinner.wordpress.com/. Please visit.
More credit card surprises
Sunday's Star had another excellent column by Ellen Roseman. This was the last in a series dealing with credit cards. Its title was "Some final thoughts on credit cards." (It is available online at http://www.thestar.com/Business/article/541945".)
Among the lesser documented features of credit cards she addressed:
-The holds various merchants will put on your credit card. Most people are aware that there is a hold when they charge a hotel room or a rental car, but might be surprised to learn that if you pay at the pump for your gasoline with a credit card, there may well have been a hold of $100 put on your card. The difference between your purchase and that $100 may not be removed from your account for a couple of days. (This isn't the way she put it, but I think is what she meant to say.)
-Such a charge (or series of charges) could put you close to your credit limit. If the hold hasn't been removed by the time the next charge is processed, you could face a fee for going over your limit, or for having had a charge refused. (These fees range from $10 to $35.)
-If you have a credit balance on your credit card (for some reason, you have given them more money than you owe), you may be charged a fee. She lists five issuers (including Scotiabank) that will charge you from $5 to $10 for this situation. (Sears MasterCard, meanwhile, will ding you $25 for an inactive balance.)
-And one set of charges that I have been unable to summarize, so I will quote her:
"Beware of new charges for purchases of wire transfers, money orders, traveller's cheques, bets, lottery tickets and casino gaming chips.
"Some card issuers treat these transactions as cash advances, charging interest from the first day until they're paid off.
"Some treat them as purchases, but add fees ranging from $2.50 in Canada and $5 outside Canada at CIBC and RBC to 1 per cent of the amount at MBNA (with a minimum of $7.50 and no maximum)."
It's hard to play a game if you don't know the rules. Look for further postings as I come across more instances of articles addressing these issues.
Also, I have a free report available addressing 11 other things your credit card issuer would just as soon you didn't know. If you are interested in a copy, let me know.
Among the lesser documented features of credit cards she addressed:
-The holds various merchants will put on your credit card. Most people are aware that there is a hold when they charge a hotel room or a rental car, but might be surprised to learn that if you pay at the pump for your gasoline with a credit card, there may well have been a hold of $100 put on your card. The difference between your purchase and that $100 may not be removed from your account for a couple of days. (This isn't the way she put it, but I think is what she meant to say.)
-Such a charge (or series of charges) could put you close to your credit limit. If the hold hasn't been removed by the time the next charge is processed, you could face a fee for going over your limit, or for having had a charge refused. (These fees range from $10 to $35.)
-If you have a credit balance on your credit card (for some reason, you have given them more money than you owe), you may be charged a fee. She lists five issuers (including Scotiabank) that will charge you from $5 to $10 for this situation. (Sears MasterCard, meanwhile, will ding you $25 for an inactive balance.)
-And one set of charges that I have been unable to summarize, so I will quote her:
"Beware of new charges for purchases of wire transfers, money orders, traveller's cheques, bets, lottery tickets and casino gaming chips.
"Some card issuers treat these transactions as cash advances, charging interest from the first day until they're paid off.
"Some treat them as purchases, but add fees ranging from $2.50 in Canada and $5 outside Canada at CIBC and RBC to 1 per cent of the amount at MBNA (with a minimum of $7.50 and no maximum)."
It's hard to play a game if you don't know the rules. Look for further postings as I come across more instances of articles addressing these issues.
Also, I have a free report available addressing 11 other things your credit card issuer would just as soon you didn't know. If you are interested in a copy, let me know.
Friday, November 21, 2008
A circumstance to be avoided
In cleaning out some old newspapers, I came across entry in the Sunday Star from June 22nd. It has a weekly feature on "The Week's Best Invented Words," which included this one credited to the Washington Post:
CASHRTATION, n.: "the act of buying a house, which renders the subject financially impotent for an indefinite period."
(As a licensed mortgage professional, I can assist in avoiding this condition.)
CASHRTATION, n.: "the act of buying a house, which renders the subject financially impotent for an indefinite period."
(As a licensed mortgage professional, I can assist in avoiding this condition.)
Wednesday, November 19, 2008
Another credit crunch nugget
This is also from the Washington Post article mentioned 2 posts ago:
"Gonzalez of American Express said that in a typical year, fewer than 20 percent of its customers have their [credit] lines [a/k/a/ credit limits] adjusted. Of that proportion, 80 percent usually have credit increases, while 20 percent have decreases. In mid-2007, that shifted to a 50-50 ratio."
"Gonzalez of American Express said that in a typical year, fewer than 20 percent of its customers have their [credit] lines [a/k/a/ credit limits] adjusted. Of that proportion, 80 percent usually have credit increases, while 20 percent have decreases. In mid-2007, that shifted to a 50-50 ratio."
Some good news from the credit crunch
In checking out the Washington Post version of the story mentioned in the previous post, I came across this paragraph:
"Fewer consumers are now getting courted. According to Mintel Comperemedia, a marketing research firm, 1.34 billion credit card direct mail offers were sent out in the third quarter, down 13 percent from the previous quarter and 28 percent from a year earlier."
Those figures are for the States, but it is a tell-tale sign of the changes. (The previous paragraph mentioned that credit-score cutoffs for direct-mail offers have been raised.)
"Fewer consumers are now getting courted. According to Mintel Comperemedia, a marketing research firm, 1.34 billion credit card direct mail offers were sent out in the third quarter, down 13 percent from the previous quarter and 28 percent from a year earlier."
Those figures are for the States, but it is a tell-tale sign of the changes. (The previous paragraph mentioned that credit-score cutoffs for direct-mail offers have been raised.)
Another article on credit card changes
Yesterday, the Star reprinted (in part) an article from the Washington Post detailing some of the consequences of the credit crunch on credit card users in the U.S. While some of the details are probably U.S.-specific (at least at this point), there are consequences that many people overlook.
Before I get to those consequences, among the steps the article set out as being followed by U.S. credit card issuers:
$ - credit limits being cut (in one case with the explanation, "your total debt is too high relative to your payment history with us and other creditors.")
$ - rates and fees being raised. (One example given: average late fees on all cards have gone up by about 10% in the last year. Elsewhere, I have seen mention that being late twice will see your fate go up to 24.9% from 18.9%. While this looks like a 6 % increase, it is actually an increase of 6 percentage points. If you do the math, you will see that 24.9 is 131.8 % of 18.9. And don't forget, you are paying your credit card with after-tax dollars, so you've had to earn $1.40 or so to have the $1 to pay to the credit card company.)
$ - suspending zero-per-cent balance transfer offers
$ - shutting down inactive accounts.
Sadly, one of the people who had seen her credit limit lowered and rates raised had been in good standing until she withheld payment due to a dispute with a merchant. (Of course, the article only gave her side of the situation, but I have spoken to consumers here who have similar tales of woe.)
Now, I mentioned consequences earlier. To quote from the article (in the Post): "Reducing credit lines, in particular, has wreaked havoc on many consumers by affecting their debt utilization ratio, which is the percentage of available credit they are using. A high debt utilization can lower a credit score, which then makes it tougher to get credit or at least get credit under favorable terms." If you owe $2000 on a $5000 credit card, you are utilizing 40% of that card's available credit. If for whatever reason that credit limit were reduced to $2500, the utilization is now 80%, and you will see your credit score suffer. (Actually, in the U.S., there is now a credit-score-hit at 20% utilization. See earlier posting.)
The bottom line: it's now more important than ever to handle your credit responsibly.
(For those who wish to read the article, it's available at the Star website: http://www.thestar.com/article/538612. The original article is available at the Washington Post, which requires free registration: http://www.washingtonpost.com/wp-dyn/content/article/2008/11/15/AR2008111500216.html. If you have time, read the original version -- some of what the Star cut is quite interesting.)
Before I get to those consequences, among the steps the article set out as being followed by U.S. credit card issuers:
$ - credit limits being cut (in one case with the explanation, "your total debt is too high relative to your payment history with us and other creditors.")
$ - rates and fees being raised. (One example given: average late fees on all cards have gone up by about 10% in the last year. Elsewhere, I have seen mention that being late twice will see your fate go up to 24.9% from 18.9%. While this looks like a 6 % increase, it is actually an increase of 6 percentage points. If you do the math, you will see that 24.9 is 131.8 % of 18.9. And don't forget, you are paying your credit card with after-tax dollars, so you've had to earn $1.40 or so to have the $1 to pay to the credit card company.)
$ - suspending zero-per-cent balance transfer offers
$ - shutting down inactive accounts.
Sadly, one of the people who had seen her credit limit lowered and rates raised had been in good standing until she withheld payment due to a dispute with a merchant. (Of course, the article only gave her side of the situation, but I have spoken to consumers here who have similar tales of woe.)
Now, I mentioned consequences earlier. To quote from the article (in the Post): "Reducing credit lines, in particular, has wreaked havoc on many consumers by affecting their debt utilization ratio, which is the percentage of available credit they are using. A high debt utilization can lower a credit score, which then makes it tougher to get credit or at least get credit under favorable terms." If you owe $2000 on a $5000 credit card, you are utilizing 40% of that card's available credit. If for whatever reason that credit limit were reduced to $2500, the utilization is now 80%, and you will see your credit score suffer. (Actually, in the U.S., there is now a credit-score-hit at 20% utilization. See earlier posting.)
The bottom line: it's now more important than ever to handle your credit responsibly.
(For those who wish to read the article, it's available at the Star website: http://www.thestar.com/article/538612. The original article is available at the Washington Post, which requires free registration: http://www.washingtonpost.com/wp-dyn/content/article/2008/11/15/AR2008111500216.html. If you have time, read the original version -- some of what the Star cut is quite interesting.)
Saturday, November 15, 2008
Change in treatment of credit card usage
A few weeks ago in Business Week there was a short item explaining that, in the U.S. anyway, the point at which credit card utilization is penalized has moved from 35% to 20%. (And I don't think people realized that it was as low as 35% originally.)
I haven't been able to verify if this change has also been made in Canada, but would be surprised if it doesn't come north if it hasn't already.
A lot of people prefer a particular credit card, whether for points or cash back. There is no problem with that; I just hope you aren't hurting your credit score.
I haven't been able to verify if this change has also been made in Canada, but would be surprised if it doesn't come north if it hasn't already.
A lot of people prefer a particular credit card, whether for points or cash back. There is no problem with that; I just hope you aren't hurting your credit score.
Check your credit card terms
I was reading Ellen Roseman's blog and saw mention that a reader's new Visa cardholder agreement says that the cardholder is liable for “unauthorized purchases made until loss or theft of the card is reported.”
I had my card compromised once, and didn't know it until I was called by customer service. (I would have noticed only when the statement arrived, how many dollars later.)
Ellen Roseman's reader's (partial) solution is to lower their credit limit. That has its own problems (see next posting), but I thought I should pass on this change. (As part of our goal of educating consumers.)
The blog is at http://www.ellenroseman.com/?p=235 ; the entry is by JH, Nov. 10/08.
I had my card compromised once, and didn't know it until I was called by customer service. (I would have noticed only when the statement arrived, how many dollars later.)
Ellen Roseman's reader's (partial) solution is to lower their credit limit. That has its own problems (see next posting), but I thought I should pass on this change. (As part of our goal of educating consumers.)
The blog is at http://www.ellenroseman.com/?p=235 ; the entry is by JH, Nov. 10/08.
Tuesday, August 26, 2008
What goes into my credit score?
The factors that go into your credit score, and the percentage weight of each are as follows:
• Payment history (35%) - Indicates whether you have made your credit card payments, loan payments and other payments on time. Even making one payment after the due date can cause your score to drop by as much as 20 points.
• Amounts owed (30%) - Compares how much you owe to your credit limits with various lenders.
• Length of time in file (15%) - Indicates how long you have had credit accounts. Typically lenders want to see three "trade lines" that have been open for at least a year.
• New credit (number of inquiries) (10%) - Shows how often you are looking for new credit and how you handle accounts you have recently opened
• Type of credit (10%) - Considers the type of loans you have - car loans, lines of credit, credit card balances
By the way, the score will be in the range of 300-900. If you are at 720 or above, you will likely qualify for the best mortgage rates. As your score declines, you pay a higher rate. If you are below 500 or so, you will not likely to be able to get credit, unless you have great equity, and even at 500, you will be paying an additional 3.5-4 % in interest.
It is advisable to check your credit score at least once a year. (Statistics say that 70%+ of credit reports include errors, and they usually aren't in your favour.) You can get a mailed copy of your credit report (without your credit score) once a year. Info is available at Equifax (www.equifax.ca), TransUnion (www.transunion.ca), Northern Credit (www.creditbureau.ca).
• Payment history (35%) - Indicates whether you have made your credit card payments, loan payments and other payments on time. Even making one payment after the due date can cause your score to drop by as much as 20 points.
• Amounts owed (30%) - Compares how much you owe to your credit limits with various lenders.
• Length of time in file (15%) - Indicates how long you have had credit accounts. Typically lenders want to see three "trade lines" that have been open for at least a year.
• New credit (number of inquiries) (10%) - Shows how often you are looking for new credit and how you handle accounts you have recently opened
• Type of credit (10%) - Considers the type of loans you have - car loans, lines of credit, credit card balances
By the way, the score will be in the range of 300-900. If you are at 720 or above, you will likely qualify for the best mortgage rates. As your score declines, you pay a higher rate. If you are below 500 or so, you will not likely to be able to get credit, unless you have great equity, and even at 500, you will be paying an additional 3.5-4 % in interest.
It is advisable to check your credit score at least once a year. (Statistics say that 70%+ of credit reports include errors, and they usually aren't in your favour.) You can get a mailed copy of your credit report (without your credit score) once a year. Info is available at Equifax (www.equifax.ca), TransUnion (www.transunion.ca), Northern Credit (www.creditbureau.ca).
Friday, August 15, 2008
(National Post, 15 Aug 2008, Page P1)
BY GARRY MARR Chart of the day, Page FP2
National Post
15 Aug 2008
Falling Alberta home prices dragged down the Canadian housing market, which recorded its second consecutive monthly decline in July, the Canadian Real Estate Association said yesterday. The question is no longer whether Canadian house prices will drop...read more...
Related:
Alberta leads home price drop
Vancouver’s July home sales drop 44% from last year
Vancouver’s July home sales drop 44% from last year
Alberta leads home price drop
Vancouver’s July home sales drop 44% from last year
Vancouver’s July home sales drop 44% from last year
Calling Chicken Little!
It was quite interesting looking at the three more serious Toronto newspapers today. (Sorry, but I don't usually look at the Sun.)
The background is that the Canadian Real Estate Association yesterday released the sales figures from July. Nationally, the average sale price was down 3.6% from a year earlier, while in Toronto the average sale price was up 1.5% from this time last year.
The Financial Post had a block headline across the first page: HOUSING WOES BUILDING. The second paragraph was rather startling: "The question is no longer whether Canadian house prices will drop but whether they will sink to levels seen in the United States, where home prices in some markets have crumbled by as much as 30% in the past year." The only problem is that nowhere in the article is anyone quoted suggesting that that is a likely scenario.
To their credit, the Post did give the average price change, and unit sale change (in absolute numbers and percentage change) for Calgary, Edmonton, Vancouver, Toronto, and Montreal on the first page.
The Toronto Star headline, "House values sinking into read" ran under a graphic of the price change over the one-year period nationally, in Toronto, Calgary, and Vancouver. In between was a cartoon of a water-front house, with a reflected red down arrow in the water. The size of the arrow would suggest a decline far above and beyond what the stats show.
More troubling in the Star was the secondary headline, "Average national prices decline 3.6 per cent in July sparking fears U.S. housing woes are moving north." That concern is addressed in the first paragraph, "Canadian average home prices have fallen for the second month in a row, raising concern by economists that the housing market may have been caught in the undertow of a U.S.-based slowdown." Thirteen paragraphs later the U.S. situation is next mentioned: "So far, no one is saying the Canadian market is going the way of the U.S. market, where a credit crunch has seen median home prices year over year fall by 14 per cent, and where some hard-hit areas have seen values drop by 50 per cent." The closest a comment comes to justify the concern is in the following (final) paragraph, quoting Doug Porter, BMO Capital Markets' senior deputy economist from an economic note: "'While we still doubt that Canada will stage an instant replay of the trauma in the U.S. markets, even a mild version would be bad news,' Porter said."
In The Globe and Mail's Report on Business the story on made the third page (although there was a preview on p. B1), with the headline "Soft Ontario housing market fuels concern." Lori McLeod, identified as "Real Estate Reporter," put things in context in her third and fourth paragraphs:
"So far, the drop in average home values has mainly radiated from Calgary and Edmonton, where July prices fell by 7.8 per cent and 5.3 per cent respectively from the previous year.
It wouldn't be surprising to see prices in these and other large Western cities slump by as much as 20 per cent in the near term in a correction of markets that got ahead of themselves, said Benjamin Tal, senior economist at CIBC World Markets Inc."
This article also quoted Douglas Porter, although with a different job title:
"A sharp drop in consumer sentiment helped push sales down 10.9 per cent from the year before, and the latest figures drive home the impact that excess supply is having on prices, Douglas Porter, deputy chief economist at BMO Nesbitt Burns Inc., said in a research note.
"'While we still doubt that Canada will stage an instant replay of the trauma in U.S. markets, even a mild version would be bad news,' Mr. Porter said."
The Globe article also included a salient fact that I didn't see mentioned elsewhere: "Listings also remained near record levels in July, with 50,782 properties listed for sale in major markets. It is the second-highest level on record, and down a slight 0.2 per cent from the peak hit in May."
So, what's the bottom line? Why did I go on at such length about this? Firstly, as someone who has read newspapers since I was a kid, I am still disappointed when I see such shoddy reporting. Making assertions that aren't backed up is unacceptable.
But more to the point, in the U.S. more than 20% of mortgage were in their version of the sub-prime market (much looser rules, and much freer access to credit than here). When people with no equity were foreclosed on, it makes it much harder for their neighbours to get full value for their home. And when a number of people go into foreclosure, or are "upside down" on their mortgage (owe more than the house is worth) that affects everyone in the area. That is not the case here, and there is no sign it would be.
With the economy slowing down, did anyone really expect house prices to continue to advance? Long term, home ownership is the way most Canadians have relied upon to build a fair part of their net worth. Or, as the saying goes, if you rent, you're paying off your landlord's mortgage - why not build some equity?
(The links to the newspaper articles, and the Canadian Real Estate Association press release are: [Star article:] http://yourhome.ca/homes/article/478851; [Globe:] http://www.theglobeandmail.com/servlet/story/LAC.20080815.RREALESTATE15/TPStory/?query=Lori+McLeod; [CREA:] http://creastats.crea.ca/natl/. The Post article can be linked to from the next blog posting, which is shown above.)
Thursday, July 17, 2008
MORTGAGE INSURERS PUSH TO KEEP ZERO-DOWN LOANS (National Post, 16 Jul 2008, Page P1)
I will be dealing with this issue in a special edition of my newsletter this weekend, but thought I would put this out there. While I may have missed it, I didn't notice any mention of this in the Globe or the Star.
MORTGAGE INSURERS PUSH TO KEEP ZERO-DOWN LOANS
BY GARRY MARR
National Post
16 Jul 2008
Private mortgage insurers are pushing for ways to keep no-money-down mortgages alive and are set to meet with Department of Finance officials in the next two weeks to discuss possible options, sources indicate. The move comes after Ottawa cracked down...read more...
MORTGAGE INSURERS PUSH TO KEEP ZERO-DOWN LOANSBY GARRY MARR
National Post
16 Jul 2008
Private mortgage insurers are pushing for ways to keep no-money-down mortgages alive and are set to meet with Department of Finance officials in the next two weeks to discuss possible options, sources indicate. The move comes after Ottawa cracked down...read more...
Related:
Ottawa cracks down on mortgages
Ottawa cracks down on mortgages
Mortgage rules revamped
Mortgage rules tightened
Ottawa cracks down on mortgages
Ottawa cracks down on mortgages
Mortgage rules revamped
Mortgage rules tightened
20% down makes savers of spenders (National Post, 17 Jul 2008, Page P7)
I will be blogging on the issues raised in this article in the next day or so, but thought it was worthwhile noting this article. Some frightening stats and quotes.
20% down makes savers of spenders
BY BOB IVRY Bloomberg News
National Post
17 Jul 2008
NEW YORK • The U.S. housing crisis may accomplish what years of parental hectoring couldn’t: Turn Americans from spenders into savers. Spending will fall because homeowners can no longer use rising real estate values to borrow cash — US$837.5-billion...read more...
20% down makes savers of spendersBY BOB IVRY Bloomberg News
National Post
17 Jul 2008
NEW YORK • The U.S. housing crisis may accomplish what years of parental hectoring couldn’t: Turn Americans from spenders into savers. Spending will fall because homeowners can no longer use rising real estate values to borrow cash — US$837.5-billion...read more...
Saturday, June 28, 2008
Subscribe to newsletter
As you will notice at the left, there is now a way to subscribe to my monthly "Home Newsletter" right from this blog. And, please, let me know what sort of items you would like to see covered, be it in the newsletter or here on the blog.
Thanks,
Russ
Thanks,
Russ
Change in terminology
As of July 1st, there are a number of changes coming to mortgage dealings in Ontario. As of that date, people like me, mortgage agents, have to be registered with the Financial Services Commission of Ontario. More to the point, we have to call ourselves mortgage agent.
I used to call myself a "mortgage consultant," since I felt that more clearly described my role, but since the term is no longer available, I chose to comply. (Although I suppose I could call myself "the mortgage agent you would want to consult" -- any thoughts on the appropriate font to use to put that on a business card?)
I used to call myself a "mortgage consultant," since I felt that more clearly described my role, but since the term is no longer available, I chose to comply. (Although I suppose I could call myself "the mortgage agent you would want to consult" -- any thoughts on the appropriate font to use to put that on a business card?)
Sunday, May 11, 2008
From lay-aways to 'don't pay a cent' in how many (few) years?
Reading this article in yesterday's National Post got me thinking back to a few years ago. I was in a Kresge's store that was being remodelled, and in the corner was a sign referring to their lay-away plan. A parent was explaining to a child who was fixated on the currently-running "don't pay a cent for 2 years" promotion from a local furniture dealer. I realized how much our expectations had changed. Any other memories or thoughts jogged?
THE DEATH OF THRIFT
JONATHAN CHEVREAU
National Post
10 May 2008
Old-fashioned thrift is in short supply in North America. Savings rates in Canada and the United States have been -1% since 2005, a phenomenon known as “dissaving.” You’d have to go back to the Great Depression to see lower savings rates: At its...read more...
THE DEATH OF THRIFTJONATHAN CHEVREAU
National Post
10 May 2008
Old-fashioned thrift is in short supply in North America. Savings rates in Canada and the United States have been -1% since 2005, a phenomenon known as “dissaving.” You’d have to go back to the Great Depression to see lower savings rates: At its...read more...
Saturday, April 12, 2008
Taking the temperature of the Toronto market
It's April -- baseball has started, the Maple Leafs are golfing, and (traditionally) "for sale" signs should be sprouting. In an article in yesterday's Globe Real Estate section , available at http://preview.tinyurl.com/4xs76j, there were some interesting points made.
A CIBC World Markets economist said that for the first time in 7 or 8 years, it looks like it will be a balanced market between buyers and sellers. He anticipates a market where buyers will be able to take their time, have a house inspection done, and be able to avoid bidding wars. His prediction is that prices will rise, but at the general inflation rate of about 2 per cent.
Since I'm not planning on selling my house this year, I think this is good news for the home market. We've aways seen articles about more than a dozen competing offers on the "must-have" house in the hot neighbourhood. (There was a good example in last month's Toronto Life.) Being able to sit down ahead of time and figure out what you can afford, and then know that the list price for the house is not likely to be the starting point.
So, is this the time to buy? If you were considering a purchase, I see no reason to change your mind. And if you've been considering the possibility, why not check the open houses that will be coming soon to a subdivision near you.
And keep an eye on new listings in the areas you are considering. In the Globe article, an agent said that the problem is "there's not much inventory, but what there is, is selling."
And if you are interested in checking out the market, but aren't sure what kind of mortgage you'd qualify for (or, indeed, would be best for you) get in touch with me.
Happy home hunting
A CIBC World Markets economist said that for the first time in 7 or 8 years, it looks like it will be a balanced market between buyers and sellers. He anticipates a market where buyers will be able to take their time, have a house inspection done, and be able to avoid bidding wars. His prediction is that prices will rise, but at the general inflation rate of about 2 per cent.
Since I'm not planning on selling my house this year, I think this is good news for the home market. We've aways seen articles about more than a dozen competing offers on the "must-have" house in the hot neighbourhood. (There was a good example in last month's Toronto Life.) Being able to sit down ahead of time and figure out what you can afford, and then know that the list price for the house is not likely to be the starting point.
So, is this the time to buy? If you were considering a purchase, I see no reason to change your mind. And if you've been considering the possibility, why not check the open houses that will be coming soon to a subdivision near you.
And keep an eye on new listings in the areas you are considering. In the Globe article, an agent said that the problem is "there's not much inventory, but what there is, is selling."
And if you are interested in checking out the market, but aren't sure what kind of mortgage you'd qualify for (or, indeed, would be best for you) get in touch with me.
Happy home hunting
Thursday, April 10, 2008
U.S. mortgage brokers fight back against proposals (National Post, 10 Apr 2008, Page P14)
I saw this article in today's National Post (it's probably in other papers as well, but that's the paper I have electronic access to). While I agree that there were cases of people getting the wrong mortgages, there is no indication in the article that there is a reason for the increased "yield-spread premiums."
People with 'bruised' credit are harder to place, and the lenders offer a higher finder's fee to the broker for placing these clients. An unintended consequence of such a change, I would think, is that it would be harder to get credit for these people. Shouldn't we be encouraging people to build home equity and re-establish their credit. (In Canada, anyway, people in this predicament would be required to put some of their own money down.)
U.S. mortgage brokers fight back against proposals
BY RUTH MANTELL Dow Jones
National Post
10 Apr 2008
NEW YORK • Plenty of parties share blame for the housing crisis, but one of the most maligned groups has been mortgage brokers, who critics claim pushed thousands of homeowners into expensive mortgages they should have never been given. New rules from...read more...
People with 'bruised' credit are harder to place, and the lenders offer a higher finder's fee to the broker for placing these clients. An unintended consequence of such a change, I would think, is that it would be harder to get credit for these people. Shouldn't we be encouraging people to build home equity and re-establish their credit. (In Canada, anyway, people in this predicament would be required to put some of their own money down.)
U.S. mortgage brokers fight back against proposalsBY RUTH MANTELL Dow Jones
National Post
10 Apr 2008
NEW YORK • Plenty of parties share blame for the housing crisis, but one of the most maligned groups has been mortgage brokers, who critics claim pushed thousands of homeowners into expensive mortgages they should have never been given. New rules from...read more...
Related:
Washington shares blame for Bear Stearns collapse
Washington shares blame for Bear Stearns collapse
U.S. OVERHAUL COULD TAKE YEARS Overhaul would give U.S. Fed more power
Washington shares blame for Bear Stearns collapse
Washington shares blame for Bear Stearns collapse
U.S. OVERHAUL COULD TAKE YEARS Overhaul would give U.S. Fed more power
Monday, April 7, 2008
What some people will say!
I was doing a cursory glance through my email on my Treo this morning to see if there was anything urgent to attend to, when I was surprised by a comment that "everyone is saying that real estate is about to take a major plunge downwards." (Of course, a few paragraphs earlier the writer had started a thought by saying "Don't you just wonder sometimes where people get their ideas?" Don't you just love irony?!?)
I sent a reply pointing out that, actually, not everyone is saying that, and linked to a CMHC publication last month that the Canadian market is moving to a balanced market from a sellers' market. (Not ideal for buyers, but better.) But the bigger point is that it is dangerous to listen to "everyone thinks" or "didn't you know..." type thinking. There is an article on this point in the April issue of my newsletter. If you would like a copy, let me know (no charge, no obligation; available in hard or soft copy).
I sent a reply pointing out that, actually, not everyone is saying that, and linked to a CMHC publication last month that the Canadian market is moving to a balanced market from a sellers' market. (Not ideal for buyers, but better.) But the bigger point is that it is dangerous to listen to "everyone thinks" or "didn't you know..." type thinking. There is an article on this point in the April issue of my newsletter. If you would like a copy, let me know (no charge, no obligation; available in hard or soft copy).
Friday, April 4, 2008
All in the family
While I am collecting some information for a new posting on the variable mortgage outlook here in the GTA, I came across a posting on Slate that called out to be linked to. If you've wondered how companies were trying to dig themselves out from under in the U.S. mortgage crisis, take a look at http://www.slate.com/id/2188248/
It's a wonder they aren't the real estate agent as well.
It's a wonder they aren't the real estate agent as well.
Monday, March 10, 2008
The interest rate gap
The day after the bank rate was reset last week, there was a paragraph in the Globe and Mail's story that jumped off the page at me. "For consumers, the most tangible result is fixed-rate mortgages are not dropping as fast as central bank rates. Mortgage broker ... reckons he will be able to find a variable-rate mortgage at about 4.75 per cent compared with a fixed-rate five-year mortgage of about 5.84 per cent. The spread, now almost a full percentage point, used to be only a quarter or a half point." (The original article is at http://www.theglobeandmail.com/servlet/story/LAC.20080305.RATES05/TPStory/?query=bank+rate+AND+mortgage)
Why should you as a home-owner subsidize the losses the banks have taken due to the credit crisis south of the border. The spread, when it was a quarter point probably made a variable rate a better deal for many people; at 1.09 points (using the numbers in the newspaper story; 'your mileage may vary,' since the rate for either a variable or fixed mortgage will depend upon your credit rating, etc.), why would people go for the fixed rate?
Just wondering.
(Oh, and if you have the chance, check out http://www.RussSkinnerFinancing.com
Why should you as a home-owner subsidize the losses the banks have taken due to the credit crisis south of the border. The spread, when it was a quarter point probably made a variable rate a better deal for many people; at 1.09 points (using the numbers in the newspaper story; 'your mileage may vary,' since the rate for either a variable or fixed mortgage will depend upon your credit rating, etc.), why would people go for the fixed rate?
Just wondering.
(Oh, and if you have the chance, check out http://www.RussSkinnerFinancing.com
Strategies if you have a variable rate mortgage
A number of months ago, a friend was undecided as to whether to go fixed or variable on the mortgage on the new house he was buying. Most of the homeowners he knew were advising him to go fixed, so he really paid attention when I suggested that he go variable. (And this was advice friend to friend -- he had already arranged to place his mortgage through his bank, and I was just giving advice, not acting as a mortgage agent here.)
As the rates changed a few times in the intermittent months, he had second thoughts, but did go ahead with the variable rate option. When the bank rate went down half-a-percentage point last week, he said excitedly, "Should I fix my rate now?" I said that the experts were predicting a further decline, of at least 25 basis point (another quarter of a percentage point) decline in the bank rate the next time it is re-set, April 22nd.
What will I suggest to him (and clients) who approach me at that time for advice. First I will point out how much of his principal he has been able to pay by having had a variable rate mortgage up to now. If he wants to convert, I will suggest that he leave the payment where it has been (typically, a variable rate payment is set at the 5-year fixed rate). The reason for this is that if he has been comfortable with that payment, he might as well keep paying the extra every month, without affecting his prepayment privileges.
What is right for you might very well be different. (Switch to commercial mode:) That's why you should consult a mortgage professional to look at your circumstances. (End of commercial mode.)
If you have any questions about this, let me know.
Russ Skinner
http://www.RussSkinnerFinancing.com/
As the rates changed a few times in the intermittent months, he had second thoughts, but did go ahead with the variable rate option. When the bank rate went down half-a-percentage point last week, he said excitedly, "Should I fix my rate now?" I said that the experts were predicting a further decline, of at least 25 basis point (another quarter of a percentage point) decline in the bank rate the next time it is re-set, April 22nd.
What will I suggest to him (and clients) who approach me at that time for advice. First I will point out how much of his principal he has been able to pay by having had a variable rate mortgage up to now. If he wants to convert, I will suggest that he leave the payment where it has been (typically, a variable rate payment is set at the 5-year fixed rate). The reason for this is that if he has been comfortable with that payment, he might as well keep paying the extra every month, without affecting his prepayment privileges.
What is right for you might very well be different. (Switch to commercial mode:) That's why you should consult a mortgage professional to look at your circumstances. (End of commercial mode.)
If you have any questions about this, let me know.
Russ Skinner
http://www.RussSkinnerFinancing.com/
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