After rising steadily since 2008, Statistics Canada’s new housing price index has flattened out in September, following on a 0.1 per cent increase in August, but a new report says that's no cause for concern as Canadian real estate development will remain strong.
New housing prices fell in Edmonton, Windsor, Ottawa and Montreal, but those decreases were offset by a 0.5 per cent jump in Calgary, which is seeing higher labour and materials prices as it recovers from floods this summer.
The flat housing prices are no cause for concern, according to the Emerging Trends in Real Estate report from Price Water house Coopers and the Urban Land Institute.
Canada’s relative economic health, especially compared to our neighbours to the south, has kept residential real estate strong, says the report, released Wednesday.
Trend to urbanization
Tighter mortgage rules and increasingly cautious banks have helped flatten condo prices, especially in North America’s hottest condo market — Toronto, the report said. But, cranes are expected to remain visible along major city skylines as projects already in the pipeline are fully built and but the trend toward urbanization keeps demand buoyant.
The trend among young Canadians to live, play and work all in the same neighbourhood is driving a boom in both condos and urban office development, says the report.
The outlook for development of all types of property – from residential to commercial – is good in Canada, according to PwC partner Lori-Ann Beausoleil.
Transit is of increasing importance to all forms of real estate development, she said.
Look for transit
“With challenging infrastructure in all major Canadian centres coupled with the urbanization trend, there will be a continued demand for retail, office and residential space in our urban centres where there is easy access to mass transit,” she said.
Redevelopment of urban areas and creation of mixed use real estate are key trends for the coming year, she said, especially in centres such as Vancouver, Calgary, Toronto and Montreal.
But the report says real estate that is far from transit, or a long way from residential areas may become underused and is less likely to be redeveloped because of a significant shift in where people want to live.
Increased automobile commute times and snarled traffic are turning people off suburban living and many Canadians are choosing condo living over the house with a yard which comes with a frustrating commute.
These include the 20-somethings, who are establishing lifelong habits of urban living, and baby boomers, who want to give up snow-shovelling and be closer to the symphony, the report said.
Changes to office market
Older commercial or suburban properties that are not close to transit may wait in limbo for redevelopment.
The office development business is changing with more demand for open layouts, shrinking space use per capita, technology impacts and demands for energy efficiency, Beausoleil advises.
She said the Canadian real estate sector is likely to remain strong for the coming year, and the U.S. market is likely to recover.
“The forecasts show that Canadian real estate players are able to both invest and attract investors. With the U.S. economy on the upswing, we are likely to see even more activity between the two countries, Beausoleil said.
“Over the last several years, Canada has been the interesting real estate story while the U.S. markets were in distress, but now, we expect that the continuing U.S. recovery will be the real story. Still, Canada’s strong market and the spending power of our consumers will continue to position us well in the international community as we head into 2014.”
Canadian Housing Bubble? 9 Signs We’re In For A Major Correction
Maybe Canada doesn’t have a housing bubble.
Maybe this time, it really is different. Maybe life expectancies have grown, and with them, people’s willingness to take on more debt. That would mean house prices could stay up higher than history would suggest.
Maybe interest rates aren’t going back up. If there is no inflationary pressure, either in Canada or in the U.S., there isn’t much reason for central banks to push interest rates back up.
Maybe we’re in for an endless housing boom. Maybe. But if history is still any guide to go by, then folks, it looks like we have one whopper of a housing bubble on our hands. Because just about every single indicator that warns economists of trouble in the housing market is now flashing red.
Investment bank Goldman Sachs and British business paper the Financial Times are the latest to throw in with the “Canada has a housing bubble” crowd. Goldman put out a report last month saying that some parts of Canada are suffering from overbuilding, and given the excess construction, a “price decline can be quite significant.”
Meanwhile, FT declared Monday that Canada’s “property sector is perched precariously at its peak.”
Here are nine of the most compelling reasons given by economists for why Canada has a housing bubble. Decide for yourself whether this is much ado about nothing, or a major warning sign for an economy in trouble.
1. House Prices Are Growing At An Unreasonable Pace
House prices in Canada have grown 20 per cent since the end of the 2008-2009 recession — and that’s when you adjust for inflation.
The compare: During this time, the U.S.’s flailing housing market saw a net decrease in prices of about 10 per cent, adjusted for inflation. Maybe a better comparison would be Australia, which, like Canada, is a commodities-heavy economy that does well when resource prices are high. Australia’s house price growth during this time has been half that of Canada’s.
2. We’ve Never Been So Indebted
Canadian household debt has hit a record high of 163 per cent of income, meaning Canadians owe $1.63 for every dollar of income. Tha’s pretty close to where the U.S. and U.K. were when their housing bubbles burst.
And Canadians seem to be going debt-crazy even outside of mortgages. According to a recent RBC survey, non-mortgage consumer debt soared 21 per cent in the past year.
3. Canada’s Gap Between House Prices And Rent Is The 2nd Largest In The World
The Economist magazine reminds readers several times a year that Canada’s housing market is among the “bubbliest.” According to its data, Canada’s housing market is overvalued by 73 per cent, compared to rental rates, when looking at long-term norms. That’s the largest gap among countries where this data is available.
4. Canada’s Gap Between House Prices and Income is the Third Worst In The Developed World
That’s according to the OECD, which released a report this summer saying Canada is “vulnerable to a risk of a price correction.” The OECD estimates that house prices are about 30 per cent higher than they should be, given what Canadians earn.
Canada is part of a small group of countries “where houses appear overvalued but prices are still rising,” the OECD said.
5. Canadian Housing Markets Are Exhibiting ‘Irrational Exuberance’
“Irrational exuberance” is the term Fed chairman Alan Greenspan coined in the mid-90s for a market that is bubbling up. (Four years later, the dot-com bubble burst and Greenspan’s warning proved prescient.)
Canada’s housing markets are also showing signs of irrational exuberance. Despite warnings from even the most optimistic market analysts that house price growth is bound to slow due to tighter mortgage rules, huge house price increases still abound in many markets.
One of the most irrational markets is Toronto, where a large drop in sales in 2012 resulted in … very little change in house prices. When the market picked up again this year (sales were up a stunning 19.5 per cent year-on-year last month), the result was … little change in house prices. This is a sign of a market that has become detached from economic fundamentals.
6. Low Mortgage Rates Are All That Are Holding Up This Market
The housing market optimists, like CIBC economist Benjamin Tal, point out that, for all the increases in house prices, affordability is still actually pretty good (or at least not much worse than normal).
They’re right, but this depends entirely on interest rates staying at current historically low levels. If interest rates go up, so do monthly payments, and affordability is out the window.
How precarious is the situation? Economist Will Dunning, who works in part for the Canadian Association of Accredited Mortgage Professionals, estimates that even a one percentage point hike in mortgage rates would be enough to sink the market.
A one-per-cent increase in Toronto would result in a decline in home sales of 15.3 per cent in Toronto, Dunning estimated recently, while prices would drop by about six per cent.
7. We’ve Never Been So Dependent On Construction Jobs
Canada’s booming housing market in the years after the 2008 economic collapse helped to hold up the economy (much of that thanks to rock-bottom interest rates), but it has also fundamentally changed the economy in ways that could prove to be bad news.
With manufacturing slowly dying as a source of jobs, construction jobs have taken over the slack. Fully 13.5 per cent of Canadian jobs are now linked somehow to construction — the highest level on records going back some four decades. Compare that to the U.S., where only 5.8 per cent of jobs are related to construction.
BMO economist Doug Porter believes this could be a sign of an “unbalanced” economy, and the risk here is that, when the construction market returns to normal (as eventually it must), there will be serious job losses.
8. In Housing, What Goes Up Does Come Down
The conventional wisdom is that house prices are something that just keep going up and up. But historical data shows this actually isn’t true. We have records of home sales in North America going back centuries, and throughout the years, average house prices have always trended back towards a level that’s about 3.5 times median income.
So if the median household income in Toronto is about $70,000, which it is, then an average house should cost $245,000, which it certainly doesn’t. The average price of a home sold in Toronto today is $539,035, a seven-per-cent increase from last year.
It’s hard to imagine Toronto house prices falling all the way back to long-term trends even with a housing bubble collapse, so it may be that, at least on this metric, things really are different this time. Perhaps people’s longer lifespans and greater willingness to take on debt have changed the market permanently. Perhaps.
9. Some of the World’s Most Trusted Economic Sources Are Worried
“Because they said so” is not a good reason to believe anything, but it is telling to see who’s worried about a housing bubble in Canada. Here’s a quick rundown of the people and institutions that are saying a day of reckoning is approaching for Canada’s housing markets.
Goldman Sachs has warned of a “large correction” in Canada’s housing market, due to what it sees as overbuilding of housing units.
Renowned U.S economist Robert Shiller fears Canada is experiencing the U.S.’s housing bubble burst but in “slow motion.”
Nobel prize-winning economist Paul Krugman thinks Canadians have taken on way too much debt, and a “deleveraging shock” is likely in the cards.
The Economist magazine calls Canada’s housing markets among the “bubbliest” in the world, noting that house prices are way above normal levels compared to rent and income.
The Organization for Economic Cooperation and Development (OECD) says Canada has the third-most overvalued housing market in the world, and is part of a group of countries “most vulnerable to the risk of a price correction.”
Maybe this time, it really is different. Maybe life expectancies have grown, and with them, people’s willingness to take on more debt. That would mean house prices could stay up higher than history would suggest.
Maybe interest rates aren’t going back up. If there is no inflationary pressure, either in Canada or in the U.S., there isn’t much reason for central banks to push interest rates back up.
Maybe we’re in for an endless housing boom. Maybe. But if history is still any guide to go by, then folks, it looks like we have one whopper of a housing bubble on our hands. Because just about every single indicator that warns economists of trouble in the housing market is now flashing red.
Investment bank Goldman Sachs and British business paper the Financial Times are the latest to throw in with the “Canada has a housing bubble” crowd. Goldman put out a report last month saying that some parts of Canada are suffering from overbuilding, and given the excess construction, a “price decline can be quite significant.”
Meanwhile, FT declared Monday that Canada’s “property sector is perched precariously at its peak.”
Here are nine of the most compelling reasons given by economists for why Canada has a housing bubble. Decide for yourself whether this is much ado about nothing, or a major warning sign for an economy in trouble.
1. House Prices Are Growing At An Unreasonable Pace
House prices in Canada have grown 20 per cent since the end of the 2008-2009 recession — and that’s when you adjust for inflation.
The compare: During this time, the U.S.’s flailing housing market saw a net decrease in prices of about 10 per cent, adjusted for inflation. Maybe a better comparison would be Australia, which, like Canada, is a commodities-heavy economy that does well when resource prices are high. Australia’s house price growth during this time has been half that of Canada’s.
2. We’ve Never Been So Indebted
Canadian household debt has hit a record high of 163 per cent of income, meaning Canadians owe $1.63 for every dollar of income. Tha’s pretty close to where the U.S. and U.K. were when their housing bubbles burst.
And Canadians seem to be going debt-crazy even outside of mortgages. According to a recent RBC survey, non-mortgage consumer debt soared 21 per cent in the past year.
3. Canada’s Gap Between House Prices And Rent Is The 2nd Largest In The World
The Economist magazine reminds readers several times a year that Canada’s housing market is among the “bubbliest.” According to its data, Canada’s housing market is overvalued by 73 per cent, compared to rental rates, when looking at long-term norms. That’s the largest gap among countries where this data is available.
4. Canada’s Gap Between House Prices and Income is the Third Worst In The Developed World
That’s according to the OECD, which released a report this summer saying Canada is “vulnerable to a risk of a price correction.” The OECD estimates that house prices are about 30 per cent higher than they should be, given what Canadians earn.
Canada is part of a small group of countries “where houses appear overvalued but prices are still rising,” the OECD said.
5. Canadian Housing Markets Are Exhibiting ‘Irrational Exuberance’
“Irrational exuberance” is the term Fed chairman Alan Greenspan coined in the mid-90s for a market that is bubbling up. (Four years later, the dot-com bubble burst and Greenspan’s warning proved prescient.)
Canada’s housing markets are also showing signs of irrational exuberance. Despite warnings from even the most optimistic market analysts that house price growth is bound to slow due to tighter mortgage rules, huge house price increases still abound in many markets.
One of the most irrational markets is Toronto, where a large drop in sales in 2012 resulted in … very little change in house prices. When the market picked up again this year (sales were up a stunning 19.5 per cent year-on-year last month), the result was … little change in house prices. This is a sign of a market that has become detached from economic fundamentals.
6. Low Mortgage Rates Are All That Are Holding Up This Market
The housing market optimists, like CIBC economist Benjamin Tal, point out that, for all the increases in house prices, affordability is still actually pretty good (or at least not much worse than normal).
They’re right, but this depends entirely on interest rates staying at current historically low levels. If interest rates go up, so do monthly payments, and affordability is out the window.
How precarious is the situation? Economist Will Dunning, who works in part for the Canadian Association of Accredited Mortgage Professionals, estimates that even a one percentage point hike in mortgage rates would be enough to sink the market.
A one-per-cent increase in Toronto would result in a decline in home sales of 15.3 per cent in Toronto, Dunning estimated recently, while prices would drop by about six per cent.
7. We’ve Never Been So Dependent On Construction Jobs
Canada’s booming housing market in the years after the 2008 economic collapse helped to hold up the economy (much of that thanks to rock-bottom interest rates), but it has also fundamentally changed the economy in ways that could prove to be bad news.
With manufacturing slowly dying as a source of jobs, construction jobs have taken over the slack. Fully 13.5 per cent of Canadian jobs are now linked somehow to construction — the highest level on records going back some four decades. Compare that to the U.S., where only 5.8 per cent of jobs are related to construction.
BMO economist Doug Porter believes this could be a sign of an “unbalanced” economy, and the risk here is that, when the construction market returns to normal (as eventually it must), there will be serious job losses.
8. In Housing, What Goes Up Does Come Down
The conventional wisdom is that house prices are something that just keep going up and up. But historical data shows this actually isn’t true. We have records of home sales in North America going back centuries, and throughout the years, average house prices have always trended back towards a level that’s about 3.5 times median income.
So if the median household income in Toronto is about $70,000, which it is, then an average house should cost $245,000, which it certainly doesn’t. The average price of a home sold in Toronto today is $539,035, a seven-per-cent increase from last year.
It’s hard to imagine Toronto house prices falling all the way back to long-term trends even with a housing bubble collapse, so it may be that, at least on this metric, things really are different this time. Perhaps people’s longer lifespans and greater willingness to take on debt have changed the market permanently. Perhaps.
9. Some of the World’s Most Trusted Economic Sources Are Worried
“Because they said so” is not a good reason to believe anything, but it is telling to see who’s worried about a housing bubble in Canada. Here’s a quick rundown of the people and institutions that are saying a day of reckoning is approaching for Canada’s housing markets.
Goldman Sachs has warned of a “large correction” in Canada’s housing market, due to what it sees as overbuilding of housing units.
Renowned U.S economist Robert Shiller fears Canada is experiencing the U.S.’s housing bubble burst but in “slow motion.”
Nobel prize-winning economist Paul Krugman thinks Canadians have taken on way too much debt, and a “deleveraging shock” is likely in the cards.
The Economist magazine calls Canada’s housing markets among the “bubbliest” in the world, noting that house prices are way above normal levels compared to rent and income.
The Organization for Economic Cooperation and Development (OECD) says Canada has the third-most overvalued housing market in the world, and is part of a group of countries “most vulnerable to the risk of a price correction.”
BMO Releases 30 Tips for 30 Days During Financial Literacy Month
TORONTO, ONTARIO—(Marketwired - Oct 31, 2013) - To mark Financial Literacy Month in Canada, BMO Financial Group is releasing a financial tip for each day of the month during November. Part of ‘Making Money Make Sense’, BMO’s tips are designed to help individuals and families gain a better understanding of their finances, save money and manage day-to-day finances more effectively.
"We recognize the importance of promoting financial literacy across North America and applaud the efforts of the federal government," said L. Jacques Ménard, Chairman of BMO Nesbitt Burns and Financial Literacy Task Force Vice-Chair. "BMO strives to help our customers and Canadians gain the knowledge, skills and confidence to make responsible financial decisions at all stages of their lives, and we’re confident that Financial Literacy Month will have a positive, long-term impact on the overall financial knowledge and skills of Canadians."
BMO’s 30 Tips for 30 Days in November:
Tip #1: Understand your needs and look for an investment advisor who takes an interest in your specific life situation to help you meet your financial goals.
Tip #2: Open a Registered Retirement Savings Plan (RRSP) as early as possible and making regular contributions will ensure financial stability during retirement.
Tip #3: Investing in an RRSP is a great way to save for retirement in a tax-efficient manner. No tax is paid on investment growth in an RRSP so investments compound far more quickly than they would if invested outside of an RRSP.
Tip #4: Familiarize yourself with the wide range of investments that can be held in an RRSP, including bonds, equities, exchange traded funds (ETFs), guaranteed investment certificates (GICs) and mutual funds.
Tip #5: Spousal RRSPs can be an effective income-splitting strategy to help defer taxes right away and reduce overall taxes in retirement.
Tip #6: Invest in a Tax Free Savings Account (TFSA) to save thousands of dollars in taxes over the long term and to help you grow your savings faster.
Tip #7: Diversify your portfolio by including a mix of investments spread across several sectors to reduce volatility without lowering expected returns.
Tip #8: Consider preferred shares as an investment choice in today’s low interest rate environment. They are a hybrid of equities and bonds and offer guaranteed fixed dividends with stable share prices and predictable distributions.
Tip #9: Create a comprehensive household budget and revisit it often to help keep your overall finances in check.
Tip #10: Track your day-to-day spending habits and take advantage of rewards programs to make the most out of every dollar spent.
Tip #11: This holiday season, encourage friends and family to contribute to your child’s RESP to help pay for his or her education.
Tip #12: Donate securities to benefit from tax savings while supporting a cause that you believe in.
Tip #13: Ensure you are covered with travel medical insurance to avoid financial risk before going on vacation.
Tip #14: Use a combination of a credit card, debit card and cash for added security, convenience and flexibility when travelling to or shopping in the U.S.
Tip #15: Take advantage of credit cards that offer affordable emergency medical and travel insurance to save money and have peace of mind when you travel out-of-country.
Tip #16: Students should pay off credit card balances in full each month and take advantage of rewards and discounts associated with their student-specific credit card to save money.
Tip #17: When planning for a new home, housing costs - including mortgage payments, utilities and taxes - should not take up more than one-third of your total household income. If you can land safely within these parameters, then homeownership is an affordable and realistic option.
Tip #18: Under the federal government’s Home Buyer’s Plan, use your RRSP to help make a down payment on your first home.
Tip #19: Use the tax refund generated from your RRSP contribution to pay down your mortgage.
Tip #20: Before getting married, have an open dialogue about your current finances including your respective saving and spending habits. The “financial talk” will help with the transition from “my money” to “our money.”
Tip #21: Establish a realistic budget for your wedding day and identify ways to minimize costs.
Tip #22: Re-visit your financial situation and budget accordingly when “expecting” a new addition to the family.
Tip #23: Save for your child’s education by investing monthly Universal Child Care Benefit (UCCB) cheques in a Registered Education Savings Plan (RESP).
Tip #24: Create a payment schedule, which includes spaced-out payments and planned financial commitments, to manage day-to-day finances.
Tip #25: Use trusted online financial tools and resources to make smart financial decisions and set yourself up for financial success.
Tip #26: Pay yourself first and put 10 per cent of your income into a high-interest savings account to boost your savings potential.
Tip #27: Bring your lunch to work and put the dollars you save towards retirement.
Tip #28: Include an emergency fund in your financial plan to help ensure you are prepared for unforeseen expenses and to avoid incurring high interest debt.
Tip #29: Consolidate high-interest debt into a line of credit to save on interest costs and become debt-free sooner.
Tip #30: Small business owners should implement year-end tax strategies that will reduce costs and help save money.
"We recognize the importance of promoting financial literacy across North America and applaud the efforts of the federal government," said L. Jacques Ménard, Chairman of BMO Nesbitt Burns and Financial Literacy Task Force Vice-Chair. "BMO strives to help our customers and Canadians gain the knowledge, skills and confidence to make responsible financial decisions at all stages of their lives, and we’re confident that Financial Literacy Month will have a positive, long-term impact on the overall financial knowledge and skills of Canadians."
BMO’s 30 Tips for 30 Days in November:
Tip #1: Understand your needs and look for an investment advisor who takes an interest in your specific life situation to help you meet your financial goals.
Tip #2: Open a Registered Retirement Savings Plan (RRSP) as early as possible and making regular contributions will ensure financial stability during retirement.
Tip #3: Investing in an RRSP is a great way to save for retirement in a tax-efficient manner. No tax is paid on investment growth in an RRSP so investments compound far more quickly than they would if invested outside of an RRSP.
Tip #4: Familiarize yourself with the wide range of investments that can be held in an RRSP, including bonds, equities, exchange traded funds (ETFs), guaranteed investment certificates (GICs) and mutual funds.
Tip #5: Spousal RRSPs can be an effective income-splitting strategy to help defer taxes right away and reduce overall taxes in retirement.
Tip #6: Invest in a Tax Free Savings Account (TFSA) to save thousands of dollars in taxes over the long term and to help you grow your savings faster.
Tip #7: Diversify your portfolio by including a mix of investments spread across several sectors to reduce volatility without lowering expected returns.
Tip #8: Consider preferred shares as an investment choice in today’s low interest rate environment. They are a hybrid of equities and bonds and offer guaranteed fixed dividends with stable share prices and predictable distributions.
Tip #9: Create a comprehensive household budget and revisit it often to help keep your overall finances in check.
Tip #10: Track your day-to-day spending habits and take advantage of rewards programs to make the most out of every dollar spent.
Tip #11: This holiday season, encourage friends and family to contribute to your child’s RESP to help pay for his or her education.
Tip #12: Donate securities to benefit from tax savings while supporting a cause that you believe in.
Tip #13: Ensure you are covered with travel medical insurance to avoid financial risk before going on vacation.
Tip #14: Use a combination of a credit card, debit card and cash for added security, convenience and flexibility when travelling to or shopping in the U.S.
Tip #15: Take advantage of credit cards that offer affordable emergency medical and travel insurance to save money and have peace of mind when you travel out-of-country.
Tip #16: Students should pay off credit card balances in full each month and take advantage of rewards and discounts associated with their student-specific credit card to save money.
Tip #17: When planning for a new home, housing costs - including mortgage payments, utilities and taxes - should not take up more than one-third of your total household income. If you can land safely within these parameters, then homeownership is an affordable and realistic option.
Tip #18: Under the federal government’s Home Buyer’s Plan, use your RRSP to help make a down payment on your first home.
Tip #19: Use the tax refund generated from your RRSP contribution to pay down your mortgage.
Tip #20: Before getting married, have an open dialogue about your current finances including your respective saving and spending habits. The “financial talk” will help with the transition from “my money” to “our money.”
Tip #21: Establish a realistic budget for your wedding day and identify ways to minimize costs.
Tip #22: Re-visit your financial situation and budget accordingly when “expecting” a new addition to the family.
Tip #23: Save for your child’s education by investing monthly Universal Child Care Benefit (UCCB) cheques in a Registered Education Savings Plan (RESP).
Tip #24: Create a payment schedule, which includes spaced-out payments and planned financial commitments, to manage day-to-day finances.
Tip #25: Use trusted online financial tools and resources to make smart financial decisions and set yourself up for financial success.
Tip #26: Pay yourself first and put 10 per cent of your income into a high-interest savings account to boost your savings potential.
Tip #27: Bring your lunch to work and put the dollars you save towards retirement.
Tip #28: Include an emergency fund in your financial plan to help ensure you are prepared for unforeseen expenses and to avoid incurring high interest debt.
Tip #29: Consolidate high-interest debt into a line of credit to save on interest costs and become debt-free sooner.
Tip #30: Small business owners should implement year-end tax strategies that will reduce costs and help save money.
Simple Ways To Raise Your Credit Score
If you’re like most people, the recession took a toll on your finances and probably your credit score. So how do you get it back to where it needs to be? While it usually takes seven years for any negatives marks to be removed from your credit report, there are a couple quick and simple ways to you can raise your credit score now. Here are a couple to keep in mind.
1. Keep paying things on time:
The most important thing to remember is to keep your credit report clean from here on out. Pay your bills on time. Make sure you aren’t over your limit on any of your credit cards. Keep the balances on your credit cards low. Keeping your finances clean is the best way to raise your score.
2. Don’t cancel any of your credit cards:
This may seem counterintuitive, but canceling credit cards actually lowers your credit score. Part of your credit score is based on how much credit you utilize (your credit utilization score), so the more credit you have available, the higher your credit score. If you cancel a credit card, you no longer have that credit available, which lowers your credit utilization score, which in turn lowers your credit score. Even if you’ve paid off a credit card, keep it open and gather up the extra points you get from having that extra line of credit. If you qualify, you can also apply for a new credit card to raise your credit utilization ratio, although don’t apply for more than one. Applying for too much credit at once can lower your score. Here is a good list of the best rewards credit cards that can help you save money and raise your credit score.
3. Open the lines of communication with your credit card lenders:
If a bunch of credit card debt is keeping your credit score down, talk with your credit card lenders to see if you can strike a deal to pay off that debt. Many lenders are open to making deals with you, since all they are really after is the money you owe. Just remember, if you do make a deal with a lender, ask them how they will be reporting it to the credit bureaus. They have two options: “Paying as agreed,” which won’t hurt your credit score, or “Not paying as agreed,” which could bring your credit score down. Make sure they are reporting it as “paying as agreed” before you agree to any deal.
4. Sign up for a secured credit card:
If your credit is so bad that you keep getting denied for a credit card or loan, try signing up for a secured credit card. Traditionally, you put down a “deposit” for a secured credit card that ends up being your credit limit, so it doesn’t matter how bad your credit is, secured credit cards are available for everyone. Just make sure to apply for a card that reports to all three credit bureaus, otherwise having the extra line of credit won’t affect your credit score.
5. Make sure there are no mistakes on your credit report:
Over 42 million people in this country have errors on their credit report, and 10 million of those have errors that affect their credit score. Make sure you are regularly checking your credit report to make sure there are no mistakes and that you haven’t been a victim of identity theft. Fixing simple mistakes on your credit report can be a quick way to boost your score. Each of the different credit bureau has instructions on their web sites on how to fix an error, or you can hire a credit repair service to do the work for you (as well as try other methods to raise your credit score.)
Keep in mind, the only guaranteed way to raise your credit score is to keep your report as clean as possible and wait until negative information expires from your credit report, which takes seven years (some bankruptcies take 10 years.) As new positive information appears and old negative information disappears, you’ll see your score start to rise.
1. Keep paying things on time:
The most important thing to remember is to keep your credit report clean from here on out. Pay your bills on time. Make sure you aren’t over your limit on any of your credit cards. Keep the balances on your credit cards low. Keeping your finances clean is the best way to raise your score.
2. Don’t cancel any of your credit cards:
This may seem counterintuitive, but canceling credit cards actually lowers your credit score. Part of your credit score is based on how much credit you utilize (your credit utilization score), so the more credit you have available, the higher your credit score. If you cancel a credit card, you no longer have that credit available, which lowers your credit utilization score, which in turn lowers your credit score. Even if you’ve paid off a credit card, keep it open and gather up the extra points you get from having that extra line of credit. If you qualify, you can also apply for a new credit card to raise your credit utilization ratio, although don’t apply for more than one. Applying for too much credit at once can lower your score. Here is a good list of the best rewards credit cards that can help you save money and raise your credit score.
3. Open the lines of communication with your credit card lenders:
If a bunch of credit card debt is keeping your credit score down, talk with your credit card lenders to see if you can strike a deal to pay off that debt. Many lenders are open to making deals with you, since all they are really after is the money you owe. Just remember, if you do make a deal with a lender, ask them how they will be reporting it to the credit bureaus. They have two options: “Paying as agreed,” which won’t hurt your credit score, or “Not paying as agreed,” which could bring your credit score down. Make sure they are reporting it as “paying as agreed” before you agree to any deal.
4. Sign up for a secured credit card:
If your credit is so bad that you keep getting denied for a credit card or loan, try signing up for a secured credit card. Traditionally, you put down a “deposit” for a secured credit card that ends up being your credit limit, so it doesn’t matter how bad your credit is, secured credit cards are available for everyone. Just make sure to apply for a card that reports to all three credit bureaus, otherwise having the extra line of credit won’t affect your credit score.
5. Make sure there are no mistakes on your credit report:
Over 42 million people in this country have errors on their credit report, and 10 million of those have errors that affect their credit score. Make sure you are regularly checking your credit report to make sure there are no mistakes and that you haven’t been a victim of identity theft. Fixing simple mistakes on your credit report can be a quick way to boost your score. Each of the different credit bureau has instructions on their web sites on how to fix an error, or you can hire a credit repair service to do the work for you (as well as try other methods to raise your credit score.)
Keep in mind, the only guaranteed way to raise your credit score is to keep your report as clean as possible and wait until negative information expires from your credit report, which takes seven years (some bankruptcies take 10 years.) As new positive information appears and old negative information disappears, you’ll see your score start to rise.
Clients Less Willing To Renew Early… For Now
Following historically low lending rates, clients are less likely to opt to renew early, leaving few opportunities for independent brokers to try to entice clients to switch lenders… for now, at least.
“Clients (were) getting 2.79- 2.89 five year mortgages and there is no incentive for clients to jump ship earlier and opt to renew early,” Lee Welbanks of Verico Welbanks Mortgage Group told MortgageBrokerNews.ca. “The banks certainly have the advantage because they can renew four months out and they aren’t charging clients a penalty to renew.”
Nevertheless, clients who signed up for five-year fixed rates five years ago – and whose mortgages are now maturing — will likely look to renew, as rates are lower today than they were when they signed up for the current term.
“The variables rates are in vogue right now and we have high rate fixed rates coming out of maturity and so they’re happy to get in on an early renewal,” Welbanks said.
In many of these cases, clients are usually satisfied to stay with the original lender; leaving few opportunities to entice clients to leave. Though that shouldn’t sway brokers from trying.
“We’re trying to find the deals where the clients need more funds. I have some who like my services but, at the end of the day, clients often opt for the path of least resistance – so they choose to renew with the banks or their current lender even if they have to pay a little more,” Welbanks said. “I think the idea is that we need better incentives in order to switch clients; that may be a cash incentive for the hassle they go through, that may be other products you offer.
“It could be a myriad of things but at the end of the day, we can never stop trying, as long as we are not doing something that acts against the client’s better interests.”
And even if that fails, there is always the knowledge that the future will bring with it a leveler playing field.
“The playing field will be more level in 4.5 years because we won’t see as many early renewals. It’s a brand new deal and they have to play with whatever rates are available,” Welbanks concluded.
“Clients (were) getting 2.79- 2.89 five year mortgages and there is no incentive for clients to jump ship earlier and opt to renew early,” Lee Welbanks of Verico Welbanks Mortgage Group told MortgageBrokerNews.ca. “The banks certainly have the advantage because they can renew four months out and they aren’t charging clients a penalty to renew.”
Nevertheless, clients who signed up for five-year fixed rates five years ago – and whose mortgages are now maturing — will likely look to renew, as rates are lower today than they were when they signed up for the current term.
“The variables rates are in vogue right now and we have high rate fixed rates coming out of maturity and so they’re happy to get in on an early renewal,” Welbanks said.
In many of these cases, clients are usually satisfied to stay with the original lender; leaving few opportunities to entice clients to leave. Though that shouldn’t sway brokers from trying.
“We’re trying to find the deals where the clients need more funds. I have some who like my services but, at the end of the day, clients often opt for the path of least resistance – so they choose to renew with the banks or their current lender even if they have to pay a little more,” Welbanks said. “I think the idea is that we need better incentives in order to switch clients; that may be a cash incentive for the hassle they go through, that may be other products you offer.
“It could be a myriad of things but at the end of the day, we can never stop trying, as long as we are not doing something that acts against the client’s better interests.”
And even if that fails, there is always the knowledge that the future will bring with it a leveler playing field.
“The playing field will be more level in 4.5 years because we won’t see as many early renewals. It’s a brand new deal and they have to play with whatever rates are available,” Welbanks concluded.
How To Beat Banks At Renewal Time
The challenges of the traditionally slow winter season is now being compounded by banks contacting past clients 120 days ahead of renewal – and just out of reach of the brokers’ 90 day rate hold.
“I’m relatively new so I still don’t get those return clients with renewals (and) this time of year in Ottawa it’s slow because people don’t want to move in in December and January,” Nick Bachusky told MortgageBrokerNews.ca. “The banks are getting to the clients first – 120 days out, the managers get an automatic message saying whose renewals are up and then the specialists contact the clients with the best rates. It’s tough for brokers to compete because we can only offer at 90 days out.”
The banks tend to have the rate advantage and it can be difficult to sway a previous bank client to move the mortgage to the brokerage side.
“The banks go on floors: they don’t make revenue on it, they make more on volume (and) if it’s a war on rates, the banks will usually win it,” Bachusky said. “They can go to upper management and get rate matches and clients are more willing to stick with the bank because no new paperwork has to be done and no new rules need to be discussed.”
However, one way to get a leg-up on the competition is to focus on other areas of wealth management and providing customers a more holistic financial services approach.
“For renewals, what we’re finding, is that with our client base we offer more than just mortgage services,” Patrick Briscoe of Mortgage Alliance told MortgageBrokerNews.ca. “We have a little bit more client dedication in the fact that they come to us first to get an opinion on what they should do.”
Briscoe believes it can be difficult to compete on rate but it’s this other services that help keep the client, in many cases.
“We have seen competition from the banks for sure as they compete for rates, but at the same time by offering other services we have been able to maintain the client,” Briscoe said. “We do investment services, life insurance and income tax preparation.”
Perhaps this approach is the best way to stay competitive during this important time of the year.
“It’s nice to have a niche in what we’re doing but we think it’s necessary for brokers to have the same sort of model if they want to remain competitive,” Briscoe said.
“I’m relatively new so I still don’t get those return clients with renewals (and) this time of year in Ottawa it’s slow because people don’t want to move in in December and January,” Nick Bachusky told MortgageBrokerNews.ca. “The banks are getting to the clients first – 120 days out, the managers get an automatic message saying whose renewals are up and then the specialists contact the clients with the best rates. It’s tough for brokers to compete because we can only offer at 90 days out.”
The banks tend to have the rate advantage and it can be difficult to sway a previous bank client to move the mortgage to the brokerage side.
“The banks go on floors: they don’t make revenue on it, they make more on volume (and) if it’s a war on rates, the banks will usually win it,” Bachusky said. “They can go to upper management and get rate matches and clients are more willing to stick with the bank because no new paperwork has to be done and no new rules need to be discussed.”
However, one way to get a leg-up on the competition is to focus on other areas of wealth management and providing customers a more holistic financial services approach.
“For renewals, what we’re finding, is that with our client base we offer more than just mortgage services,” Patrick Briscoe of Mortgage Alliance told MortgageBrokerNews.ca. “We have a little bit more client dedication in the fact that they come to us first to get an opinion on what they should do.”
Briscoe believes it can be difficult to compete on rate but it’s this other services that help keep the client, in many cases.
“We have seen competition from the banks for sure as they compete for rates, but at the same time by offering other services we have been able to maintain the client,” Briscoe said. “We do investment services, life insurance and income tax preparation.”
Perhaps this approach is the best way to stay competitive during this important time of the year.
“It’s nice to have a niche in what we’re doing but we think it’s necessary for brokers to have the same sort of model if they want to remain competitive,” Briscoe said.
Flaherty: House Prices A Worry, But No Mortgage Crackdown For Now
OTTAWA - Finance Minister Jim Flaherty is taking on the responsibility of averting a housing bubble in Canada that could destabilize the economy, adding he will speak to those in the business to try and keep a lid on rising home prices.
With the Bank of Canada essentially taking itself out of the game by signalling interest rates won’t be raised for some time, Flaherty said Monday after meeting with about a dozen economists that it falls on his department to ensure the market is stabilized.
"It does fall to the Department of Finance to do anything if we’re going to do anything because there’s basically no room for the Bank of Canada to move," he said.
"Some of the economists suggested I have some conversations with people in the building industry because what we’re seeing in certain parts of the country (is) a re-acceleration of housing prices. I do speak regularly to people in the business and I’m going to do more of it now."
Flaherty said he has no intention of acting at the moment, but said he was keeping an eye on the market to see if the current uptick in sales and prices is temporary or the beginning of another hot run.
Most economists see the market slowing after the recent resurgence, including the Bank of Canada. But the central bank also cited the “renewed momentum” as one of three domestic risks to the economy in its October monetary policy report.
"This (the resurgence) would provide a temporary boost to economic activity, but could exacerbate existing imbalances and therefore increase the probability of a correction later on," the bank said. "Such a correction could have sizable spillover effects to other parts of the economy and to inflation."
The minister has been active in the housing market throughout his tenure, at first easing rules but more recently clamping down as Canadians took on ever-increasing debt levels to buy real estate.
The latest measure, which came in July 2012, was followed by a slump in sales and a slowdown in price gains. But the market began picking up again during the summer, particularly in Toronto and Vancouver, with the average home price hitting a new record high of almost $386,000.
Home prices are not Flaherty’s only worry.
The minister told reporters he remains focused on trying to eliminate as much as possible the price gap between the United States and Canada that one recent report pegged at about 10 per cent.
Flaherty said he has been meeting with CEOs of the country’s major retailers to ask for explanations as to why prices for the same items remain elevated in Canada, adding that he is not altogether persuaded by the answers he has been given.
"There are some companies that look at Canada as a relatively small market that is relative well off, (with a) large middle class, and, ‘Let them pay a little more, and they’ll pay it.’," he said of merchant attitudes.
However, Flaherty said he will wait until the results of a study being conducted by the market research firm Nielsen before deciding if anything needs to be done.
"It becomes an interesting question of what the government can do about that … there are always persuasive techniques that can be used to nudge people in the right direction," he said.
The minister has deployed the approach before.
Earlier this year he personally phoned the Bank of Montreal to “persuade” it to raise its five-year fixed mortgage rate after BMO cut it to 2.99 per cent. Flaherty said he was concerned about a race to the bottom on rates that would trigger unsustainable borrowing.
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