Here's some interesting results that were received in a recent study sponsored by Genworth Financial:
Sixty-five percent of homeowners pay off their credit card balances each month (versus 48% of non-homeowners). Furthermore, a quarter of those homeowners with mortgages have managed to make a lump-sum payment or accelerate their mortgage payments in the past year.
Nearly half (44%) of homeowners were able to pay all of their bills and save some money in the past year, suggesting a strong correlation between home ownership and financial fitness.
The Financial Fitness survey was conducted in conjunction with the Canadian Association of Credit Counseling Services. Compared to the same survey undertaken in 2007 when the economy was booming, Canadians are even more likely now to say their financial fitness is good (55% versus 50%).
Other key survey findings show:
• Mortgage holders more likely to have accelerated or made a lump-sum payment include those with incomes $75-$99k (32%) or $100k+ (30%), and women more than men (26% versus 21%).
• 49% of homeowners made down payments of 20% or more on their purchase
• 13% of homeowners say they are in great financial shape
• 12% of homeowners say they have requested a credit report within the past 12 months
• 59% of Canadians say they pay their credit cards in full each month
• 39% of Canadians say that in the past year they were able to pay their bills and save some money. A further 41% were able to pay their bills but not save
• First-time buyers/those who intend to buy a home as well as those requiring mortgage insurance are more likely to have spoken to a financial planner/coach in the past 12 months
Monday, September 20, 2010
Wednesday, September 1, 2010
Variable and fixed rate forecasts
Big bank economists have chopped their rate-hike forecasts again. TD made the biggest adjustment earlier today. It slashed its 2011 year-end overnight rate estimate by one whole percentage point. This underlines how dramatically expectations can change in just a few short months.
On average, major economists now expect a 150 basis point increase in the overnight rate over the next 16 months. Their outlooks, if accurate, imply a 4.25% prime rate by December 31, 2011. Prime rate is currently 2.75%.
Based on a 70 basis point average discount from prime, this suggests 5-year variable rates in the 3.55% range by year-end 2011. That's lower than today's typical discounted 5-year fixed rate.
As for the next rate hike, the signals are mixed. Canadian bond dealers are all expecting a 1/4 point increase at the Bank of Canada's September 8 rate meeting. The financial markets, however, are pricing in just a 30% probability of a hike.
After the next rate increase, most analysts now seem to expect the BoC to pause for a while. "The coming policy pause could now easily last a year," says BMO.
Fixed-Rate Mortgage Forecast
Banks foresee 5-year bond yields climbing 127 basis points in the same 16-month time frame. That would put the 5-year yield at 3.41% by the end of next year.
Assuming a typical 120 basis point spread above yields, this suggests deep-discounted 5-year fixed rates could rise to roughly 4.61% by year-end 2011.
On average, major economists now expect a 150 basis point increase in the overnight rate over the next 16 months. Their outlooks, if accurate, imply a 4.25% prime rate by December 31, 2011. Prime rate is currently 2.75%.
Based on a 70 basis point average discount from prime, this suggests 5-year variable rates in the 3.55% range by year-end 2011. That's lower than today's typical discounted 5-year fixed rate.
As for the next rate hike, the signals are mixed. Canadian bond dealers are all expecting a 1/4 point increase at the Bank of Canada's September 8 rate meeting. The financial markets, however, are pricing in just a 30% probability of a hike.
After the next rate increase, most analysts now seem to expect the BoC to pause for a while. "The coming policy pause could now easily last a year," says BMO.
Fixed-Rate Mortgage Forecast
Banks foresee 5-year bond yields climbing 127 basis points in the same 16-month time frame. That would put the 5-year yield at 3.41% by the end of next year.
Assuming a typical 120 basis point spread above yields, this suggests deep-discounted 5-year fixed rates could rise to roughly 4.61% by year-end 2011.
Monday, August 23, 2010
Know where your money goes
Surprisingly, many people never develop a budget. As long as the bills are paid each month, and they're putting some money into savings, everything seems fine. However, a budget is an essential part of managing your finances.
To see just how important it is, take the first step. Carry a journal and a pen with you at all times for one month to record your expenses. It's easier to manage if you divide the pages into columns and title them with categories such as groceries, mortgage, eating out, entertainment and utilities. Then methodically track everything, no cheating.
Seeing your expenses laid out before you provides you with a thorough understanding of how your cash flows in and out of your pocket. You'll also discover some bad habits you didn't know you had - and get on the road to changing them for the better. Budgeting software such as Quicken makes getting started easy.
To see just how important it is, take the first step. Carry a journal and a pen with you at all times for one month to record your expenses. It's easier to manage if you divide the pages into columns and title them with categories such as groceries, mortgage, eating out, entertainment and utilities. Then methodically track everything, no cheating.
Seeing your expenses laid out before you provides you with a thorough understanding of how your cash flows in and out of your pocket. You'll also discover some bad habits you didn't know you had - and get on the road to changing them for the better. Budgeting software such as Quicken makes getting started easy.
Tuesday, July 20, 2010
Overnight lending rate up
The BoC did raise the overnight lending rate again as we knew they would. Remember we’ve been at the lowest ever, it’s imminent that they will go up. They don’t make it certain they will continue to raise rates.
As I’ve mentioned in the past, we cannot raise rates too quick especially when the US are not. If we jump the gun, past history has told us it doesn’t work and back fires on CDN.
Locking in to a fix rate is still not in the picture for me and shouldn’t be for you. Prime is at 2.75% and most of you are at Prime or below. Locking in today is around 4.2-4.4% depending on your lender. That’s 1.50%+ higher ALL going toward interest.
The strategy portrayed over and over is to increase your payments today to what they would be on a fixed mortgage. This will not only prepare you for any increases, it will knock down your principal much quicker and in the end you’ll be smiling more!
Here’s an article from the web:
The Bank of Canada raised its benchmark interest rate by 25 basis points Tuesday, the second straight time it has done so after keeping rates at unprecedented lows for more than a year.
In its latest policy decision, the bank opted to move its overnight lending rate to 0.75 per cent. The bank had previously raised its benchmark rate to 0.5 per cent in June after having kept rates at emergency lows since April 2009 in an attempt to stimulate the economy and spur lending.
In raising the rate, the bank moved to lightly hit the brakes on a Canadian economy that has shown signs of significant strength in recent months.
But the bank made it clear in its policy statement that it sees Canada's economy recovering more gradually than it did in its previous outlook in April. It now projects GDP growth of 3.5 per cent in 2010, 2.9 per cent in 2011 and 2.2 per cent in 2012.
The bank also made it clear that future rate hikes are not guaranteed.
"Any further reduction of monetary stimulus would have to be weighed carefully against domestic and global economic developments," the bank said in its statement.
Further rate hikes can't be ruled out, BMO economist Michael Gregory noted.
"The bank's forward-looking language does not preclude further rate hikes," he said.
"[But] the bank now has more wiggle room to raise rates ... if they want to. And we think they will."
The next scheduled date for announcing the overnight rate target is Sept. 8.
As I’ve mentioned in the past, we cannot raise rates too quick especially when the US are not. If we jump the gun, past history has told us it doesn’t work and back fires on CDN.
Locking in to a fix rate is still not in the picture for me and shouldn’t be for you. Prime is at 2.75% and most of you are at Prime or below. Locking in today is around 4.2-4.4% depending on your lender. That’s 1.50%+ higher ALL going toward interest.
The strategy portrayed over and over is to increase your payments today to what they would be on a fixed mortgage. This will not only prepare you for any increases, it will knock down your principal much quicker and in the end you’ll be smiling more!
Here’s an article from the web:
The Bank of Canada raised its benchmark interest rate by 25 basis points Tuesday, the second straight time it has done so after keeping rates at unprecedented lows for more than a year.
In its latest policy decision, the bank opted to move its overnight lending rate to 0.75 per cent. The bank had previously raised its benchmark rate to 0.5 per cent in June after having kept rates at emergency lows since April 2009 in an attempt to stimulate the economy and spur lending.
In raising the rate, the bank moved to lightly hit the brakes on a Canadian economy that has shown signs of significant strength in recent months.
But the bank made it clear in its policy statement that it sees Canada's economy recovering more gradually than it did in its previous outlook in April. It now projects GDP growth of 3.5 per cent in 2010, 2.9 per cent in 2011 and 2.2 per cent in 2012.
The bank also made it clear that future rate hikes are not guaranteed.
"Any further reduction of monetary stimulus would have to be weighed carefully against domestic and global economic developments," the bank said in its statement.
Further rate hikes can't be ruled out, BMO economist Michael Gregory noted.
"The bank's forward-looking language does not preclude further rate hikes," he said.
"[But] the bank now has more wiggle room to raise rates ... if they want to. And we think they will."
The next scheduled date for announcing the overnight rate target is Sept. 8.
Monday, July 12, 2010
Minimizing your personal debt
Determine if you're in the red or black
Minimizing debt means getting to know yourself better, financially. The first thing you want to do is find your net worth. Knowing your net worth is a valuable tool for monitoring your financial progress from year to year, and ensures you're headed in the right direction. Calculating it is quite simple too. You just need to gather information on what you own and what you owe.
1) In one column list your assets including home equity, cars, valuables, bank accounts and retirement savings.
2) In another column list all of your liabilities including mortgage, car loans, credit card debt and any other debt you may have.
3) Next, total the two columns and subtract your liabilities from your assets
You now know your net worth. Regardless of the amount, or even if it's a negative number, you have a starting point. Record the date on your calculation and go through the same process next year or even in six months. It can be a powerful motivator for reducing debt - a personal budget is a great way to help you achieve your goals.
Minimizing debt means getting to know yourself better, financially. The first thing you want to do is find your net worth. Knowing your net worth is a valuable tool for monitoring your financial progress from year to year, and ensures you're headed in the right direction. Calculating it is quite simple too. You just need to gather information on what you own and what you owe.
1) In one column list your assets including home equity, cars, valuables, bank accounts and retirement savings.
2) In another column list all of your liabilities including mortgage, car loans, credit card debt and any other debt you may have.
3) Next, total the two columns and subtract your liabilities from your assets
You now know your net worth. Regardless of the amount, or even if it's a negative number, you have a starting point. Record the date on your calculation and go through the same process next year or even in six months. It can be a powerful motivator for reducing debt - a personal budget is a great way to help you achieve your goals.
Monday, June 28, 2010
Understand your credit score
You know from first-hand experience that your credit score plays an important role when purchasing a home. But for many, its contents are not entirely understood.
Canada's two major credit-reporting agencies, Equifax and TransUnion, gather a financial history about you that includes information about your credit and bank accounts, public records that reveal bankruptcies or credit-related court judgments, and any debt that went to a collection agency. It may also include a personal statement from you regarding information in your history.
This information is used to generate a score between 300 and 900 which lenders then use to determine whether or not to extend credit to you. The higher your score the lower your risk.
You should request a credit report from both credit agencies at least once a year to ensure your information is correct. Visit equifax.ca and transunion.ca to learn more.
Canada's two major credit-reporting agencies, Equifax and TransUnion, gather a financial history about you that includes information about your credit and bank accounts, public records that reveal bankruptcies or credit-related court judgments, and any debt that went to a collection agency. It may also include a personal statement from you regarding information in your history.
This information is used to generate a score between 300 and 900 which lenders then use to determine whether or not to extend credit to you. The higher your score the lower your risk.
You should request a credit report from both credit agencies at least once a year to ensure your information is correct. Visit equifax.ca and transunion.ca to learn more.
Monday, June 14, 2010
Credit cards used wisely
Keep these tips in mind:
Limit your number of cards: It's easier to keep track of expenses, and reduces the chance of a missed payment.
Transfer credit card debt: It's a goo idea to always pay your credit cards in full each month. If you are carrying a balance, a personal line of credit offers a much better interest rate.
Don't spend what you don't have: Use the convenience of a credit card only knowing the money is in the bank.
Be diligent with payments: Never pay the minimum only. Your original purchase could end up costing you twice as much.
Avoid missed or late payments: You could incur additional fees and a black mark on your credit rating
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