Is household debt a threat to our economy?

Here are the facts:

1.Canadian household debt is indeed equal to 154% of disposable income… 2.The housing market is softening and prices are going down in many areas of
the country… 3.Canadians will be impacted by higher interest rates…

Even given these facts; it’s unlikely that Canada will experience a financial crisis. Household debt has been increasing steadily over that past 30 years as interest
rates continue to decline but, for the most part, Canadians gear their borrowing to what they can afford. Jobs are holding steady and business is confident about
future prospects. So, lower interest rates mean less money goes to servicing debts.

In accumulating debt, Canadians also have a large asset, namely their homes. And although some in the financial community are concerned about the
massive debt, Eric Lascelles, chief economist at RBC Global Asset Management recently said that assets outweigh debt by a factor of five.
It’s true that high household debt does put homeowners at risk but a closer look at the stats tells a better story. Overall Canadians exercise fairly good
judgment when it comes to borrowing. The more vulnerable – seniors and lowincome earners — carry lower debt loads. It’s also true that the housing market
carries a big part of household debt, however the percentage of income earmarked for mortgage payments is not burdensome.
The new mortgage rules will certainly have an impact on the housing industry as will declining house prices; and interest rates will rise. Perhaps this will lead
to some weakening of the economy. Delinquencies might increase a bit but the risk of the economy going into a recession is low. High-ratio mortgages are
insured and our sub-prime market is small.

As for the weaker growth, Flaherty has said that the government could increase its deficit to shore up the economy. “If we ran into a serious world economic crisis arising out of the European situation, or something else, “he said, “Then of course we’d be responsive if we had to be to protect the Canadian economy and protect Canadian jobs as we have done in the past.”

Guy Ward is a Mortgage Broker in Calgary, Alberta with TMG (The Mortgage Group Alberta).


What is happening in 2013!

This past year was challenging for the Canadian housing market. Mortgage rule changes, which include a reduction in the amortization period to 25 years; limits on refinances to 80% of the value of the home; and changes to home equity lines of credit have slowed the pace of sales. Some first time home buyers have withdrawn from the marketplace. In various parts of the country listings have decreased, which has affected some who want to move but can’t due to a lack of inventory.


Not all areas of the country are experiencing slowed sales and it is not all gloom for 2013. The Canadian Real Estate Association (CREA) is predicting that national sales activity will recede by only two per cent to 447,400 units. The national average price is forecast to edge up another three tenths of one per cent to $365,100 in 2013, with British Columbia, Ontario, and New Brunswick registering small price declines and modest average price gains in line with or below inflation in other provinces.Moderation is the buzz word when discussing the other positives. The economy is still creating jobs and the US economy has recently shown improved job creation. If this persists, it will contribute to faster job creation in Canada.The inflation rate fell to a three-year low in November and interest rates remain at historical lows. Moderate economic, job, and income growth will temper the impact of recent mortgage rule changes, which are not expected to dampen activity much more.It also appears Canadians will be entering 2013 in a more positive mood about their finances than they were a year ago. The Harris-Decima poll released last month found that 70% of those surveyed were feeling positive about their current financial situation – up six percentage points from a similar survey conducted in late 2011.

A few economists say that it is certainly possible for the economy to grow in 2013 as long as situations in other countries improve. Doug Porter, Bank of Montreal’s chief economist is one of them. He said the US housing sector is turning the corner and that country’s auto sales are getting back to almost normal, which would have a huge positive impact for the Canadian economy. The Royal Bank of Canada has the economy picking up steam in each of the first three quarters of 2013, starting with a 2.4 per cent gain in the first quarter and peaking at 3.4 in the third, the summer months.Certainly the winds are shifting as the U.S., Europe and China make economic strides. Barring another major setback, those three sources of external strength will help lift Canada’s economy.


Guy Ward is a Mortgage Broker in Calgary, Alberta with TMG (The Mortgage Group Alberta).




And a Happy New Year to all!

, T-bnAs we finally close 2012, there are many things on which we can reflect. The sad, the inexplicable, the disappointing and yes, some good things too – from an investment perspective anyway!

Canadian banks and other financial institutions, despite a credit downgrade late in the year, are among the safest in the world and investors continue to benefit from holding their preferred shares, common stocks and various debt instruments. The same appears true for the utility industry, despite the contretemps of the Northern Gateway (or maybe Arctic Gateway or Eastern Gateway) oil pipeline in Canada and the US side of the Canada/US Keystone XL pipeline project. Oil is a key utility input in all of it’s many forms as is natural gas. I will stay out of the debate on fracking!

The world needs power – from any and all sources so I believe that for long-term holdings, exposure to this part of the economy is important. Short-term, be prepared for some storms in all of the energy sector, and I suspect they will all be of a political making. So some inclusion of energy and utlities makes some sense – the amount you include depends on your investment comfort level and time-horizon.

Communications in all of it’s forms will continue to grow although I suspect it too will be choppy due to anti-trust, patent issues and regulatory meddling on one level or another. Manufacturing and transportation industries should experience reasonable grow as I believe that deficit and national debts will gradually be controlled allowing economies to begin expanding again.

Whether doing your equities on a do-it-yourself basis or using some form of managed funds or ETFs, I would be staying blue-chip common shares and preferreds particularly for the risk-adverse.

Short-term interest rates (10 years and less), I believe will stay within about 1% to 1.5% of curent levels, which is positive for everyone including companies loooking to expand their operations. If doing things on your own, I recommend GIC or GIA ladders and if you are going the managed fund or ETF route, then I would be looking at average term-to-maturity south of 10 years and only A or better ratings – BBB if you feel adventurous.

On the pure cash side of things, whether in a bank account, T-bill account or some life insurance cash values, it seems to make sense to hold somewhere in the 5% to 7% range – both for protection and any buying opportunities that present themselves.

On Precious Metals – flip a coin! From everything I can find, the “experts” are about evenly divided on direction and potential upside/downside movement. Some level of exposure would seem reasonable if you can tolerate the earthquake-style market reactions but for these I would personally stay on the managed money side and look for broad diversification across countries keeping in mind political situations and I wouldn’t be comfortable holding more than 4% to 5% and only then if I was looking in the 10 plus-year holding range.

Think positive about yourself and your family, keep personal debts going DOWN and by wise in your discretionary spending in 2013!

Some happy year-end thoughts!

An interesting year on many fronts – financial and societal. But have I learned anything I can use in the future? From a financial perspective, I very strongly believe we are going to get more of the same in 2013 that we had in 2012 – notwithstanding the “fiscal cliff” nonsense taking place in the Untied States (deliberate). Resolved or not, my best assessment is that world markets will be slightly chaotic for at least the next 2 years before some level of stability re-appears. Am I psychic?? Absolutely not – but I am a fiscal realist. On a relative basis, Canada is better off that just about everwhere in the world with the exception of New Zealand. For my younger audience, NZ did go bankrupt as a country about 30 years ago – and ever since have kept things fiscally responsible.

Canada may be the best of a bad lot, but we are certainly not having the country’s finances managed in any way, shape or form in a conservative manner. Quite frankly (and I am not, have not been and never expect to be a member of ANY political party), our proclivite spending habits are much more reminiscent of Liberal and NDP spending patterns.

Over the past 18 months or so, there has been a real shift around the world to a more socialistic approach to all levels of government. Citizens of all countries are demanding more services and support from their governments yet no-one wants to pay the price. It is the same in North America, Europe, South America, the Far,Middle and Near-Easts plus the former Soviet states, the Indian sub-continent and Australasia. The people in the Sahara and sub-Saharan regions in Africa are facing even more serious issues of civil wars and genocoide, on one or more levels. The Scandinavian folks are much quieter about things in their part of the world, but they are facing the same issues as the rest of the Eurozone as our our friends in Iceland.

Governments have no money, unless they print more – which brings inflation back into the picture in a big way – something no-one in the world can afford. Some parts of South America are dealing with double-digit inflation now – but on a WEEKLY basis – not annually! So with no money for governments to spend, national debts are growing in leaps and bounds (regardless of the “blue” colours of some leaders), from where does the money originate?

People are still hesitant to invest for the long-term and are spooked every time a politician anywhere in the world, talks about defaulting, restructuring, devaluing or cutting deficits without raising taxes. All of which makes for choppy markets. Yes the Warren Buffet’s and George Soros’ of this world will always make money, because they take the long view.

I haven’t mentioned China and South Korea (or the rest of the Asian-Pacific Rim countries) because despite generally higher levels of “state” control over their economies, they are in no better shape. Closed and partly closed economies may appear to be doing better, but we never really see the complete truth – so in the absence of clarity, investors tend to shy away from them as well.

So what to do now? Stay happy and think positive thoughts! Stay short on the fixed-income side of things and use GIC or GIA ladders to protect yourself against upward movement in rates. Keep at least 5% to 7% in cash. In equities, for less than 15 years holding, stay with large caps that have good dividend histories, or mutual funds/seg funds that hold those stocks. For 15 years and longer – right now, your guess is as good as anyone’s! Have a safe and happy Christmas Season! Cheers Ian

6 Reasons to Use a Mortgage Professional

6 Reasons to Use a Mortgage Professional

When buying a new home, there’s a lot to think about. What kind of home do you need? Where do you want to live? How much do you want to spend?

You also have to find a mortgage that best fits your needs. There are many to choose from. By working with a mortgage professional, though, you can rest assured you’ll be getting the best possible financing solution.

Following are six very good reasons to use a mortgage professional:

Expertise: A mortgage professional is a financial specialist, and that’s who you need to help guide you through the variety of options and find a product to suit your needs, whether it’s a fixed- or a variable-rate mortgage or a debt consolidation solution.

A Focused Specialist: Getting a mortgage is a very significant financial event. You want someone who is focused on the mortgage marketplace and your needs.

Speed and Convenience: A mortgage professional will work around your schedule to make the transaction as easy and convenient as possible.

Personal Attention: Not only do you need a mortgage plan that is a custom fit for you, but you also need someone who keeps in touch with you during your mortgage years to make sure the mortgage still fits your needs.

No Cost to You: In most cases, your mortgage professional is paid by the lender.

Ongoing Support and Consultation: Even once your mortgage is signed and paperwork is complete, mortgage professionals are on hand if you need any advice on closing details or even future referral needs. Mortgage professionals are happy to be of assistance when you need it.

Guy Ward is a Mortgage Associate in Calgary, Alberta with TMG (The Mortgage Group Alberta).



Looking to Buy and Renovate? Help is at Hand

Looking to Buy and Renovate? Help is at HandYou’ve found the home you love. The price is great and the area is ideal. Problem is, the kitchen and bathrooms need work. With closing costs and other expenses associated with moving, you wonder how you’ll be able to afford a renovation.There is an option. It’s the Purchase Plus Improvement Mortgage. You can buy your home and renovate it, and it all gets added to your mortgage with one easy payment a month at low rates.

This mortgage program is especially of interest to investors. Owners can mortgage up to four units with at least one unit as their principal residence.

These loans also consider the improved value of the home. For example, if you purchased a home for $200,000 and wanted $40,000 in renovations, you can likely get a mortgage for 95% of the improved value.

Funds are advanced at different stages of work. There are guidelines, and your mortgage professional will be able to help. Such mortgages are usually subject to a 10% holdback for 45 days after completion of work just in case of nonpayment.

To obtain a Purchase Plus Improvement Mortgage, you will need information about the following from your contractor:

Renovations: Description of the work; types of materials being installed, with applicable quantities; and total cost of all the work.

Additions: Description of the work; a copy of drawings; and a cost breakdown of all proposed work (for example, such items as excavations and foundations, framing, windows and exterior doors, electrical, interior painting, plumbing, and heating).


Guy Ward is a Mortgage Associate in Calgary, Alberta with TMG (The Mortgage Group Alberta).


How Your Home Could Help You Pay Off Your Debts

How Your Home Could Help You Pay Off Your Debts

For many Canadians, managing money is a stressful ordeal. When you’re mired in debt, it’s even more difficult.

You’re not alone, though. A recent survey by the Desjardins Group indicated that only 50% of respondents could take care of their needs and pay their bills for more than three months without relying on credit, while 14% would not last a month in cases of emergency such as job loss, accident or illness.

And if you think your income isn’t high enough, think again. Only 55% of those who made more than $55,000 a year said they could last over three months if something happened to that income.

Schools are starting to teach young people about budgets as early as the third grade, and secondary schools are revamping their courses to include money management and investment. That’s good for future generations, but what about now?

There are a few steps you can take before heading to a bankruptcy trustee. First, it’s important to get the best advice for your particular situation. That may include talking to a financial counsellor who can assess your situation and help you set up a budget.

Or you can talk to me about a debt consolidation loan using the equity in your home. You may have enough equity in your home to pay off your high-interest debt with a lower-interest remortgage. You’ll be able to save thousands of dollars in interest. By using a mortgage as a debt consolidation tool and freeing up your cash flow, you will also be in a better position to take advantage of your prepayment privileges to pay off your mortgage more quickly.

Guy Ward is a Mortgage Associate in Calgary, Alberta with TMG (The Mortgage Group Alberta).


How to Purchase the Perfect Cottage Property

How to Purchase the Perfect Cottage Property
If you’re thinking about buying a cottage property, you’ll need a professional with specialized knowledge to help you make the purchase.

What everyone agrees on is that you should buy a cottage that is approximately two to three hours away from your home. Many lenders will not consider a vacation property that’s too off the beaten path.

Working with a local real estate agent might be a good idea simply because they know the area and probably know the property.

If you’re buying in the winter, a local professional can tell you if there are any hidden sins under the snow. This is important because late fall and winter are the best times to get bargain prices.

You should ask the following questions:


1) How many feet of waterfront are available?
2) Hoes the cottage include a dock?
3) What type of heating is used?
4) Is there electricity and what type of water source is used?
5) Is the property a freehold or on leased or Crown lands?


Getting financing for a cottage can also be easier if clients use a mortgage broker. We have access to the best rates and have a lot more flexibility to work around issues that a bank would not. A broker will usually get you the same rate for a cottage that you have for your primary residence.


Guy Ward is a Mortgage Associate in Calgary, Alberta with TMG (The Mortgage Group Alberta).




STEP Mortgage: Is It Right for Your Needs?

STEP Mortgage: Is It Right for Your Needs?


If you’re researching mortgages, you will likely come across the Scotia Total Equity Plan (STEP) mortgage.

This is a readvanceable mortgage that allows you to automatically borrow up to 65% of your equity (80% if you lock in at least 15% to a fixed term mortgage).

It is similar to a home equity line of credit (HELOC), which is a credit line that is secured by the value of your house, less your mortgage.

On a regular HELOC, you would apply for a set amount, maybe $10,000 or $100,000, as long as the mortgage and the HELOC are less than 80% of your home’s value. The STEP gives you this amount automatically. You can set up a flat amount like other HELOCs, or you can have a line of credit that automatically increases as you pay down the principal on your mortgage.

The mortgage portion can have a mixture of terms and fixed and/or variable rates. For example, you can place a portion of the mortgage in a five-year fixed, some in a five-year variable and the remainder in a one-year fixed.

One benefit to this mortgage is that you can use the equity in your home as a tool for leveraged investing. For example, if you’ve recently paid down $5,000 of your principal, the credit line would increase by $5,000. You can then invest with this available credit and the interest would be tax deductible.

Since existing customers don’t get the best rates at renewal time, lenders give new clients better rates.

Having a STEP mortgage does make it difficult to transfer to another institution, but not impossible.


Guy Ward is a Mortgage Associate in Calgary, Alberta with TMG (The Mortgage Group Alberta).




Deja vu – all over again!

Another interesting US Presidential election has come and gone – and there will be lots of comments over the next few days before this blog is posted – but I just wanted to put out a few random thoughts for consideration.

The US legislative branch is fundamentally no different than before this election. The Congress is controlled by farther-right Republicans who will do anything they can to avoid an increase in taxes to retire the national debt and are all about cutting services to reduce the debt. The Senate is still controlled – even more so – by left and moderate-left Democrats who seem to want to both raise taxes on upper-income taxpayers and are willing to reduce some services – by how much is the big issue!

The White House is just the same with President Obama – left-leaning Democrat – but now the popular vote seems to be with him and Senate folks and combined against the Congress. Can they all work together or will there be another stalemate as there has been for much of the past 2-years?

Investors don’t like uncertainty or instability – anywhere. I am not an economist (thankfully) but I think things will be shaky on the markets for certainly the rest of this year and past Inauguration Day in 2013 until people get a handle on how The Executive Branch and Legislative Branches can or will work together. Despite all the talk about being willing to work “across the aisle” – I have my doubts. Which doesn’t bode well for the Excited States as a whole.

I suspect the housing markets are going to be very lacklustre and a great many States are going to be very hard-pressed to come in with balanced budgets – California being a huge question-mark despite Jerry Brown’s tax plan getting voter approval.

My personal belief is that anyone looking for short-term stability in world financial-markets is going to be in for a great deal of disappointment until sometime around the end of 2013 or early 2014 so ensuring a good financial foundation should be a key for everyone!