The Bank of Canada has reiterated its conditional commitment to keep that rate until mid 2010. 

Please see below for the full report.

One of our clients contacted us to help them with an a mortgage review this week and we saved them $1,300 dollars a month $ 15,600 a year and over the 5 years $78,000.00 in interest alone. This will help their family have a clear title home 7 years sooner and also improve their retirement cash flow by allowing them with all the money they are saving monthly, to buy a rental condo that will earn them an additional $450 a month in income. One simple call to our office changed this family’s life.

What would you do with that additional savings? Call 604-802-3983 or introduce us over an email at acalla@dominionlending.ca to someone that you truly care about to see how we can help you today!

 Bank of Canada maintains overnight rate target at 1/4 per cent and reiterates conditional commitment to hold current policy rate until the end of the second quarter of 2010

OTTAWA – The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1/4 per cent. The Bank Rate is unchanged at 1/2 per cent and the deposit rate is 1/4 per cent.

While significant fragilities remain, global economic developments have been slightly more positive and the global outlook has improved modestly relative to the Bank’s projection in its October Monetary Policy Report (MPR).

In Canada, as expected, the composition of aggregate demand is shifting towards final domestic demand and away from net exports. In the third quarter, the balance of these shifts resulted in weaker-than-projected GDP growth. Core inflation in recent months has been slightly higher than the Bank had projected, although total CPI inflation remains close to projections.

The main drivers and the profile of the projected recovery in Canada remain consistent with the Bank’s views in the October MPR. The Bank continues to expect economic growth to become more solidly entrenched over the projection period and inflation to return to the 2 per cent target in the second half of 2011.

Conditional on the outlook for inflation, the target overnight rate can be expected to remain at its current level until the end of the second quarter of 2010 in order to achieve the inflation target. In its conduct of monetary policy at low interest rates, the Bank retains considerable flexibility, consistent with the framework outlined in the April MPR.

The risks to the outlook for inflation continue to be those outlined in the October MPR. On the upside, the main risks are stronger-than-projected global and domestic demand. On the downside, the main risks are a more protracted global recovery and persistent strength in the Canadian dollar that could act as a significant further drag on growth and put additional downward pressure on inflation. The Bank views all of these risks through the prism of achieving the 2 per cent inflation target.

While the underlying macroeconomic risks to the projection are roughly balanced, the Bank judges that, as a consequence of operating at the effective lower bound, the overall risks to its inflation projection are tilted slightly to the downside.

Information note:

The next scheduled date for announcing the overnight rate target is 19 January 2010. A full update of the Bank’s outlook for the economy and inflation, including risks to the projection, will be published in the Monetary Policy Report on 21 January 2010.

Enjoy your week

Bank of Canada to keep rates low, uphold outlook

By Louise Egan OTTAWA (Reuters) – The Bank of Canada is widely expected to keep its hands off interest rates on Tuesday, holding them at near zero and committing to do so until at least July, despite growing evidence the economy is kicking back to life.

Canada’s unemployment rate falls to 8.5 per cent as 79,000 jobs created in November

OTTAWA — Canada’s economy swelled by 79,000 jobs last month, much better than many economists had expected, as the number of people with full-time and part-time jobs increased in November while the number of self-employed fell.

Statistics Canada reported Friday that Canada’s unemployment rate fell to 8.5 per cent in November, down one-tenth of a point from October.

The number of people with full-time jobs increased by 39,000 in November, the third straight month of increases, while part-time employment increased by 40,000, following declines in October and September.

“Simply put, this was an inexplicably strong report, and points to a very strong pick-up in Canadian labour market activity in November,” Millan Mulraine of TD Securities wrote in a note to investors.

“However, we consider this pace of job growth to be unsustainable, and believe that it is inconsistent with the current pace of economic recovery in Canada.”

While analysts generally welcomed the national job numbers, they did so with a few caveats.

“This is a generally solid report but with three flies in the ointment that cause concern,” Scotia Capital’s Derek Holt and Karen Cordes said in a note to investors.

They said their first concern is that total hours worked declined by 0.3 per cent. “More bodies are being hired, but at reduced aggregate hours worked. It’s hours worked that drive paycheques, such that the consumer cash flow implications are far less impressive than the job count.”

They were also concerned about many job gains being in the education sector.

“StatsCan has admitted that they have had difficulty with abnormal seasonal adjustments in this component over recent months,” they wrote. “We don’t trust this component and caution on future revisions and or disappointing base effects to the December jobs reading a month from now.”

Holt and Cordes were also concerned about weak productivity.

Self-employment also fell in November by 32,000 jobs. That’s potentially a good sign for the economy, since economists tend to discount self-employment gains in a weak economy as mostly involuntary, the result of enterprising Canadians starting their own businesses when they can’t find regular work.

Statistics Canada says employment is now down 321,000 jobs, or 1.9 per cent, since October 2008.

The agency also noted that hourly wages were 2.3 per cent higher than a year ago, the lowest year-over-year growth since March 2007.

Employment growth were spread across the country, with the biggest gains in Ontario, Quebec and Alberta.

Most gains were among women between the ages of 25 and 54, and men aged 55 and over.

Statistics Canada notes that between October 2008 and March 2009, employment fell in almost all industries, especially in manufacturing and construction. But since March, the manufacturing sector has slowly stemmed its hemorrhaging of jobs, while employment has picked up in construction and some service industries.

“Almost all the employment growth in November was attributable to the strength of the service sector (plus 73,000), especially educational services,” the agency said in a note.

“With November’s increase, employment in the service sector is back at its October 2008 level, while employment in the goods sector remains well below (minus 324,000) where it was at that time.”

Regionally, Ontario’s unemployment rate remained unchanged from the previous month at 9.3 per cent, even though the province’s economy grew by 27,000 jobs in November.

In Quebec, gains of 21,000 jobs pulled the province’s unemployment rate down four-tenths of a point to 8.1 per cent. The province has lost jobs more slowly than other provinces during the economic downturn.

Alberta’s employment rose by 13,000 last month, the biggest gain in more than a year. British Columbia’s economy also continues to grow.

Manitoba’s economy remained stable, as it has throughout the downturn, and Newfoundland and Labrador also saw employment increase by 2,700 jobs in November.

Benjamin Reitzes of BMO Capital Markets Economics says the November job numbers should boost the Bank of Canada’s confidence in the economy following soft economic growth in the third quarter of the year and weak October figures.

“The solid November report offsets the prior month’s disappointing drop,” he said.

“The average 18,000 gain over the past two months probably best characterizes the state of Canada’s job market, and points to an economy emerging from recession.”

The Canadian Press

Bond Yields Up Big

Bond yields usually rise on good economic news and today was no different. The 5-year bond yield jumped 0.14% today on strong jobs data from both sides of the border.  (Canadian Jobs Report / U.S. Jobs Report)

Canada added 79,100 jobs in November. Traders had expected only 15,000.

With rebounding yields, fixed mortgage rates will probably halt their drop, at least for the time being.  As of now, discounted 5-year fixed rates are just under 4%—well below the approximate 10-year average of 5.36%.

The 5-year yield, which influences fixed mortgage rates, now stands at 2.53%.  It seems to be putting in a floor in the 2.35% to 2.40% range.  It may be tough to penetrate that floor in the near-term without weaker economic news, or some other economic shock.

The Bank of Canada holds its last interest rate meeting of the year on Tuesday. 19 of 19 economists polled by Bloomberg predict no change to the Bank’s 0.25% overnight rate.

Nevertheless, analysts will be watching to see if the BoC surprises the bond market with any optimistic outlooks.

By Garry Marr, Financial Post

November housing sales across the country are set to reach new highs based on fresh data from the country’s two most expensive markets.

The national numbers from the Ottawa-based Canadian Real Estate Association are not due out until mid-December but the Toronto Real Estate Board said yesterday it had its best November on record. Toronto’s news came on the heals of a Wednesday release from the Real Estate Board of Greater Vancouver that said sales activity in the city rocketed up 252.7% in November from a year ago.

What the latest numbers will likely mean is an improvement in the national average sale price, which was up 20% in October from a year ago — the largest such increase in two decades. The two cities tend to skew the national average price up or down, based on levels of sales activity.

“You are going to see a very strong national number. It will be another double-digit increase for sure,” said Benjamin Tal, senior economist at CIBC World Markets. “You have to remember you are comparing all this against a very low base. Last year at this time we were talking about 1929. This was a dead market.”

In November 2008, the greater Vancouver area had a meagre 874 sales. This November that figure was up to 3,083. But there are some indications the temperature in the red-hot housing market is dropping; Vancouver November sales were down 16.8% from October, although the numbers are not seasonally adjusted.

Toronto has a similar story to Vancouver. Canada’s largest market had 7,446 sales last month, almost double the number from a year ago, but down from the 8,476 in October.

Despite the lack of listings in the housing market, prices eased last month. The average sale price in Toronto last month was $418,460, a 14% jump from a year ago, but a drop from therecord high of $423,559 reached in October.

In Vancouver, the average price of a home reached $557,384 last month, a 12.4% increase from a year ago. But at that level, prices in Vancouver are actually down 1.9% from the peak reached in May 2008.

Re/Max, one of the country’s largest real-estate companies, issued its housing outlook for 2010 and though it still sees a strong market, both housing sales and prices are not expected to maintain their torrid pace. Re/Max says sales next year will climb by 2% while the average sale price across the country will rise to $325,000 for a 2% increase.

“There is a ton of business being done but nothing was being done in November [2008]. The whole world stopped last fall, not just the real-estate world,” said Michael Polzler, executive vice-president of Re/Max Ontario-Atlantic Canada. “We should expect a very good year with a continued high number of sales. We don’t expect significant changes in interest rate levels.”

Record low interest rate levels have partially fuelled the market and prices, but so have low inventory levels. In Toronto, inventory levels remain 49% down from a year ago with November 2009 new listings the same as a year ago. In Vancouver, the total number of listings is still down 39% from a year ago.

As for the interest-rate part of the puzzle, the Canadian Association of Accredited Mortgage Professionals latest statistics show consumers could find themselves exposed. In the past 12 months, only 20% of consumers opted for a variable-rate product but the overall numbers show 27% of Canadians still have mortgage tied to prime. “There is no questions rates and affordability have contributed to the market,” said Jim Murphy, president of CAAMP.

 

December 2009   Angela Calla Dominion Lending Centres Phone: (604) 802-3983 Cell: Fax: E-mail Website   DID YOU KNOW… While most Canadians spend a lot of time, and expend a lot of effort, in shopping for an initial mortgage, the same is generally not the case when looking at mortgage term renewals. Omitting proper consideration at the time of renewal costs Canadians thousands of extra dollars every year. Homeowners should never accept the first rate offer from their existing lender. Without any negotiation, simply signing up for the market rate on a renewal is unnecessarily costing the homeowner a lot of money on their mortgage. It would be my pleasure to have the lenders compete for your mortgage business at renewal time to ensure you receive the best mortgage options and rate catered to your specific needs. HOMEOWNER TIPS Ceiling Fan Tips: Some ceiling fans can turn either clockwise or counter-clockwise. In the summer, you want the air to blow directly downward, to create a cooling effect. Reverse the ceiling fan in the winter so it blows upward. This will help move the warm air from the ceiling and down the edges of the walls for more even comfort, without a draft. About DLC Leasing Inc * DLC Leasing is the leasing division within Dominion Lending Centres Inc. * Our leasing programs provide up to 100% financing on business-related equipment. * Leasing options include new equipment leasing; used equipment and vehicle leasing; customized solutions through vendor finance programs; and lease-backs –where the lender buys equipment from a business owner and the owner leases it back. * Technology, heavy equipment and trailers, furniture and hospitality equipment, and manufacturing and industrial equipment are just a few examples of available leasing options. * With access to multiple lending sources, Dominion Lending Centres’ Lease Professionals can cater to leasing deals for a variety of credit scenarios ranging from A to C credit quality. * Because many of our Lease Professionals are also licensed mortgage agents, we can offer standard equipment leases and creatively structured solutions for seasonal, new or growing companies. * Working with someone who is both a lease and mortgage expert enables you to even use commercial and residential mortgage and property credit line products, alone or in combination with lease financing, to help achieve the best solutions for your equipment acquisition needs. * Our Lease Professionals can even break up large-dollar transactions into multiple leases across a number of funders to ease and simplify the approval process.   Don Welcome to the December issue of my monthly newsletter! This month’s edition helps you plan ahead for holiday spending, as well as discusses the results from an annual Canadian mortgage market report. Please let me know if you have any questions or feedback regarding anything outlined below. Thanks again fo Having trouble viewing this email? Click here   r your continued support and referrals!   Many people have faced tough times in lieu of the recession, and with the high-cost holiday gift-buying and entertaining season quickly approaching, this may be the perfect time to refinance your mortgage and free up some money instead of relying on high-interest credit cards. You may find that taking equity out of your home will help bring joy back into your holiday season – and start the New Year off on a debt-free note, as you may also be able to use some of the equity in your home to pay off high-interest debt such as your credit card balances. This will enable you to put more money in your bank account each month. And since interest rates are hovering near historic lows, switching to a lower rate may save you a lot of money – possibly thousands of dollars per year. There are penalties for paying your mortgage loan out prior to renewal, but these could be offset by the lower rates and extra money you could acquire through a refinance. I can sit down with you and work through all of the equations to ensure this is the right move for you. With access to more money, you will be better able to manage both your holiday spending and existing debt. Refinancing your first mortgage and taking some existing equity out could also enable you to do many things you’ve been longing to accomplish – such as purchasing an investment property, taking that well-deserved vacation, renovating your home or even investing in your children’s education. By refinancing, you may extend the time it will take to pay off your mortgage, but there are many ways to pay down your mortgage sooner to save you thousands of dollars in interest payments. Most mortgage products, for instance, include prepayment privileges that enable you to pay up to 20% of the principal (the true value of your mortgage minus the interest payments) per calendar year. This will also help reduce your amortization period (the length of your mortgage), which, in turn, saves you money.   You can also increase the frequency of your mortgage payments by opting for accelerated bi-weekly payments. Not to be confused with semi-monthly mortgage payments (24 payments per year), accelerated bi-weekly mortgage payments (26 payments per year) will not only pay your mortgage off quicker, but it’s guaranteed to save you a significant amount of money over the term of your mortgage. If, for instance, you have a $100,000 mortgage, an interest rate of 5% and an amortization period of 25 years, your monthly mortgage payment would be $581.60 and your total payments for a year would be $6,979.20 ($581.60 x 12). To understand the savings accelerated bi-weekly mortgage payments can make, take the monthly mortgage payment of $581.60 and divide it by two ($581.60 ÷ 2 = $290.80).  Next, take that payment and multiple it by 26 to arrive at your total payments for the year ($290.80 x 26 = $7,560.80). As you can see, by using the monthly mortgage payment plan, you’ve made payments totalling $6,979.20 for the year, while using the accelerated bi-weekly mortgage plan you’ve made payments totalling $7,560.80 – a difference of $581.60.  By opting for accelerated bi-weekly mortgage payments, you’re making one additional monthly payment per year. Using this example, you would reduce the amortization on your $100,000 mortgage from 25 years to just over 21 years and your total savings on interest over the life of the mortgage would be just over $12,000. By refinancing now – before the holiday season is in full swing – and planning ahead, you can put yourself and your family in a better financial position. As always, if you have any questions about refinancing, reducing debt or paying down your mortgage quicker, I’m here to help!   Canadians are emerging from the recession confident that the value of their homes is rising and optimistic about their local housing markets. The Canadian mortgage market is rebounding and will surpass the $1 trillion mark in 2010, reports the Canadian Association of Accredited Mortgage Professionals (CAAMP) in the fifth edition of the Annual State of the Residential Mortgage Market, released in late November. Canadians are positive about house prices, and attitudes about whether this is a good time to buy a home have never been higher in the three years that CAAMP has surveyed on that question. The overwhelming majority of those surveyed (40%) expect house prices to go up, which is more than double the opinion of those surveyed in spring 2009 (18%). In past surveys, negative house price sentiments were most evident in British Columbia, Alberta and Ontario – provinces that, in retrospect, were hardest hit by the economic downturn. On a 10-point scale (where 1 is very negative and 10 is very positive), attitudes in these provinces have sharply rebounded to 6.44 from 4.77 in fall 2008, 6.24 from 5.00, and 6.30 from 5.11, respectively, and are now in line with the 6.25 national average. Most Canadians are optimistic and believe now is a good time to purchase a home, setting a record-high national average of 6.56 out of 10, up almost a full point from 5.58 last fall. Ontarians are most positive at 6.82, while Saskatchewan residents, who have seen house prices increase rapidly, are most negative at 6.05. As interest rates remain low, it is not surprising that Canadians continue to be satisfied with their mortgages. Of those who renewed in the last year, 73% received lower rates than their original mortgage term. “Mortgage consumers have been busy, and have effectively capitalized on low interest rates to shop and renegotiate,” said Jim Murphy, President and CEO of CAAMP. “CAAMP’s survey found that, on average, negotiated rates were discounted by 1.23 percentage points lower than typical advertised rates for five-year   mortgages, and we see this discounting trend continuing. ”In spite of continued job loss concerns, Canadians’ mortgage debt load remains reasonable. Homeowners have close to three-quarters (74%) of the value of their properties in equity and for those with mortgages, equity is more than one-half (52%) of the value of their homes. Fewer Canadians took equity out of their mortgages this fall (down to 18% from 22% last year). The primary motivator was, once again, debt consolidation or payment (approximately $17 billion), followed by home renovations (approximately $12 billion, down from $14.5 billion in 2008). One third of respondents who took out equity to fund home renovations said the Home Renovation Tax Credit had influenced their decision. Significant Statistics from the Study Overall, Canadians remain very satisfied with their current mortgage, with 77% either completely satisfied or satisfied. The top reason cited is the mortgage rate, which averaged 4.55% this past year – a dramatic decline from 5.41% last year. Canadians in provinces that have felt the greatest effect of the recession are also the most optimistic about the increase in house prices – 42% of people in Ontario, 43% of people in Alberta and 47% of people in British Columbia feel that house prices will increase in the next year. Two-thirds of all mortgages are fixed for terms of four or more years, with five-year terms remaining the most popular at 56%. But many people who took out a mortgage in the past year chose a shorter term, with 20% at one year or less. 68% of mortgage holders have fixed-rate mortgages, while 27% have variable- and adjustable-rate mortgages. Fixed-rate mortgages are the most popular among people between the ages of 18 and 34, while those in the 55+ age group are more likely to opt for variable-rate mortgages. Click here to download the full report.     We are Canada’s premier online mortgage company, and one of the fastest growing mortgage brokerages nationwide! We have more than 1,500 Mortgage Professionals from more than 200 locations across the country! Our Mortgage Professionals are Experts in their field and many are ranked among the best nationally. We work for you, not the lenders, so your best interests will always be our number one priority. We have more than 100 mortgage programs, making it easy to choose the best fit for your unique situation. We close loans in all 10 provinces and 3 territories. We can process your mortgage in as few as 7 days. We are the preferred mortgage lender for several of Canada’s top companies. Dominion Lending Centres’ Mortgage Professionals are available anytime, anywhere, evenings and weekends – and we’ll even come to you!   2189 Austin Ave Coquitlam BC V3K 3R9

 

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By Kristine Owram (CP) – Nov 23, 2009

TORONTO — Interest rates aren’t going up any time soon, but when they do the rise will be rapid enough to potentially prove devastating for homeowners who aren’t prepared, mortgage industry experts say.

Because of this, mortgage lenders and brokers have a responsibility to help home buyers assess their capacity to make higher monthly payments, and to constantly evaluate their chances for default.

“There should be some prudence and there should be counselling by mortgage brokers to ensure people do leave a little wiggle room,” Ivan Wahl, chairman and CEO of Xceed Mortgage Corp. (TSX:XMC), said at an industry conference Monday.

Wahl praised Canadian regulators for preventing the housing meltdown that decimated the American economy, but said mortgage lenders have a responsibility to self-regulate as well.

“Regulators have a very specific role, but you can’t regulate prudence,” he said. “Self-discipline has to continue to be supplied.”

He called for an “early warning system” that would allow lenders to adjust quickly if an increased number of borrowers default on their mortgages as a result of higher interest rates.

The Canadian housing market fared much better than its American counterpart during the recession due to both better regulation and a more prudent culture. While the financial crisis in the U.S. was caused in large part by subprime mortgages, which led homeowners to default en masse when housing prices began to fall, strict regulations helped the Canadian economy avoid a similar meltdown.

Last week, a report said a record-high 14 per cent of U.S. homeowners with a mortgage were either behind on payments or in foreclosure at the end of September.

Similar Canadian statistics are hard to come by, but the comparable number would be “much lower” in Canada, said Gregory Klump, chief economist of the Canadian Real Estate Association.

Even mortgage lenders weren’t expecting the Canadian housing market to fare as well as it has.

“The last half of ’09 is better than anybody expected,” said John Webster, president and CEO of Scotia Mortgage Corp.

“We were looking at a nuclear winter . . . (for new mortgages), a 30 to 35 per cent drop, and that hasn’t happened,” agreed Stephen Smith, chairman and president of First National Financial LP (TSX:FN.UN).

The health of the Canadian housing sector has been aided by low interest rates – 5.59 per cent for a five-year fixed-rate mortgage and 2.25 per cent for a five-year variable-rate mortgage at one bank.

Depending on whether they are fixed or floating-rate, mortgages are tied to either the bond market or the Bank of Canada’s key lending rate, which are closely related. The central bank’s rate has been sitting at a record low of 0.25 per cent since the spring and it has said it will keep it steady until at least next June to help stimulate the ailing economy.

Benjamin Tal, senior economist with CIBC World Markets, said he expects the Bank of Canada will end up keeping its lending rate steady into 2011, as it would endanger the economy to raise rates too soon.

However, this isn’t to say higher interest rates won’t hit Canadian consumers eventually, Tal said. He predicted inflation of between three and five per cent by 2011.

“This will be enough to kill the bond market and to lead to higher interest rates down the road,” he said.

And when interest rates do rise, they’ll rise quickly. This could hurt Canadian homeowners who haven’t carefully evaluated their ability to carry their mortgage at a higher interest rate.

For example, a $200,000 mortgage with a term of 25 years and an interest rate of 2.25 per cent has monthly payments of $876.26. For the same mortgage with an interest rate of five per cent, the monthly payments become $1,169.18.

“We have to educate ourselves and our clients that interest rates will rise and when they rise they will rise quickly, 200 to 300 basis points,” Tal said. Borrowers then have to decide if they’ll still be able to finance their mortgage at a higher interest rate.

“If not, buy a smaller house,” Tal said. “It’s as simple as that.”

Mortgage lenders and brokers gathered in Toronto on Monday for the Canadian Association of Accredited Mortgage Professionals’ annual conference and expo.

CAAMP says the volumes of residential mortgage credit outstanding is forecast to grow by seven per cent between 2009 and 2011, and is predicted to pass $1 trillion in 2010. The average mortgage interest rate was 4.55 per cent as of October, down from 5.41 per cent a year ago.

Bond Yields Approaching Key Lows

People shopping for a fixed-rate mortgage can do the happy dance.  Government bond yields keep plunging, and that’s pulling down fixed mortgage rates.

• The 5-year yield (a barometer of 5-year fixed mortgage pricing) has broken through key 4-month support levels. 
• The 2-year yield has given up almost all of its massive October run-up
• The 1-year yield is approaching its all-time low of 0.43%.

We’ve already seen several lenders cut rates, and the best rates for 1- to 10-year terms will likely further in the short term.

However oppsed to commiting to lowering there rates across the board lenders are offering many quick close specials.

Inquire at 604-802-3983 for details.

B.C. housing affordability deteriorates as Vancouver market surges forward: RBC Economics

TORONTO, Nov. 25 /CNW/ – B.C. posted the biggest increases in homeownership costs in the country in the third quarter and costs will likely remain well above long-term averages, according to the latest housing report released today by RBC Economics.

“While all provinces and major markets experienced diminished home affordability during the third quarter, British Columbia led the way with the largest rise in costs across all housing types,” said Robert Hogue, senior economist at RBC. “We believe this marks the end of the affordability improvement in the province, with the cost of homeownership remaining fairly high in the near future.”

The RBC Affordability measure for British Columbia, which captures the proportion of pre-tax household income needed to service the costs of owning a home, rose across all four housing classes in the third quarter of 2009 (the higher the measure, the more expensive it is to afford a home). Affordability of the benchmark detached bungalow moved up to 60.8 per cent, the standard townhouse to 47.4 per cent, the standard condo to 34.0 per cent and the standard two-storey home to 67.6 per cent.

According to the RBC report, the Vancouver housing market continues its spectacular rebound, with property prices now heating up and poised to boil over Sales of existing homes have surged since the spring and demand is outpacing supply, leading to a more competitive market and the reemergence of bidding wars.

“The near-frenzied tone of the Vancouver market is occurring despite still historically poor, and now declining, levels of affordability,” noted Hogue.

RBC’s Affordability measure for a detached bungalow for Canada’s largest cities is as follows: Vancouver 66.8 per cent, Toronto 48.6 per cent, Ottawa 39.2 per cent, Montreal 37.5 per cent and Calgary 36.7 per cent.

The report also looked at mortgage carrying costs relative to incomes for a broader sampling of cities across the country, including Vancouver and Victoria. For these cities, RBC has used a narrower measure of housing affordability that only takes mortgage payments relative to income into account.

The property benchmark for the Housing Affordability measure, which RBC has compiled since 1985, is based on the costs of owning a detached bungalow. Alternative housing types are also presented including a standard two-storey home, a standard townhouse and a standard condo. The higher the reading, the more costly it is to afford a home. For example, an Affordability reading of 50 per cent means that homeownership costs, including mortgage payments, utilities and property taxes, take up 50 per cent of a typical household’s monthly pre-tax income.

Highlights from across Canada:

    –   Alberta: The province experienced the first increase in homeownership

        costs since late-2007, in the third quarter. Housing market activity

        has picked up and stabilized with the modest rise in costs

        attributable to higher mortgage costs rather than a rise in property

        values. Attractive affordability levels and a return to economic

        growth should fuel housing demand in Alberta next year.

    –   Saskatchewan: With mortgage rates rising slightly and properties

        gaining value, owning a home became slightly less affordable in the

        province, following steady improvement for more than a year. However,

        homeownership costs remain historically high in Saskatchewan as a

        result of the sharp price appreciation that took place during the

        recent housing boom.

    –   Manitoba: Despite slight increases in the cost of homeownership – the

        smallest amongst all provinces in the third quarter – Manitoba’s

        housing market remained relatively affordable. Market conditions in

        the province appear tightly balanced, which should sustain solid

        resale activity in the near-term. Job growth and a faster economic

        expansion next year should maintain solid housing demand.

    –   Ontario: After a period of declining property values, the Ontario

        housing market appears to be bouncing back with home resale prices

        returning to and, in some cases, surpassing earlier peaks. While this

        reversal has brought confidence back into the market, third quarter

        affordability levels have deteriorated for the first time in over a

        year.

    –   Quebec: Broad-based vigour in the housing market fueled by the

        earlier drop in mortgage rates to historically low levels, has sent

        property values to new highs in many parts of Quebec. Consequently,

        housing affordability deteriorated in the province for the first time

        in more than a year during the third quarter.

    –   Atlantic Canada: Housing on the east coast continued to be among the

        most affordable in the country, with Atlantic Canada experiencing

        moderate but steady gains in property values sustained by a gradual

        increase in the sale of existing homes. Increases in homeownership

        costs in the region, in the third quarter, were modest relative to

        other provinces, with levels mostly below national averages.

How many credit cards should you have?

When banks introduced Canada’s first credit card, Chargex, in 1968, it was designed as a convenient tool for their most valued customers. Today’s creditors have a more egalitarian approach — it seems that if you have a pulse, you can have a credit card.

But why stop at one? According to Statistics Canada, there are 3.1 credit cards in circulation for every Canadian over the age of 18 — that’s 74 million cards.

According to Laurie Campbell, program manager for the Credit Counselling Service of Toronto, it’s not uncommon for people to carry eight or 10 cards and a debt load of $30,000 or more. “The biggest problem we see is overspending with credit cards,” she says. “There is a direct correlation between debt and the amount of credit cards you have.”

Canadians charged more than $170 billion to Visa and MasterCard in 2004, compared to $39 billion in 1990, according to Statistics Canada.

“People don’t see it as real money and that leads to impulse spending,” says Campbell. Indeed, studies show the average person spends 112 percent more on a credit card than he would if using cash.

As a result, people are living beyond their means. As many as 50 percent of credit card users don’t pay their balance each month, opting instead to carry debt and pay interest ranging from a 1.9 percent introductory rate to almost 30 percent on some retail cards.

Credit flux

“We don’t recommend consumers carry a balance,” says Scott Hannah, executive director of the Credit Counselling Society in Vancouver, B.C. Sometimes, however, it’s unavoidable when essential expenses arise, such as auto repairs. The key is recognizing the difference between a want and a need. “Easy and quick access to credit really obscures thinking,” he says.

Credit has never been more accessible. With more than 600 institutions issuing Visa and MasterCard cards, add to that the retail card market (24 million in circulation), and it’s easy to see why wallets are bulging with plastic. In 2003, Canadians received 191.7 million credit-card offers — about six for each person — according to market research firm Mail Monitor.

It’s a competitive market and credit card companies profit from interest and user fees. These days, juggling more than one card or carrying a balance is made easier because a standard minimum monthly payment is as low as two percent, whereas it used to be 5 percent. But remember, if you owe $5,000 at 18 percent interest and pay only the minimum each month, it will take about 30 years to pay off the card (that’s if you never use it again).

“People can carry a lot more debt,” Hannah says. “It’s easier to spend, but harder to pay back.”

The perks of credit

On the flip side, credit cards are hugely convenient and by today’s standards, a necessity — you can’t even rent a movie without one. With more transactions taking place on the Internet, a credit card is handy for finding deals on books or flights. Some cards also have benefits, such as travel insurance, member discounts or points programs.

Retail cards, while charging interest in the 24 to 28 percent range, offer lucrative reward programs and discounts. It’s OK to take advantage of such perks, but Campbell cautions there’s no real benefit if you carry a balance.

“It may make sense to have a credit card for a favourite retailer,” says Hannah, but not one for every store you shop at.

The magic number

Experts agree that in most cases one card is enough.

It used to be that some outlets only accepted one type of card, so it made sense to have a Visa, MasterCard and maybe an American Express, but those days are over. “If you have an all-purpose card, 99 percent of the time you’re going to be able to use that card,” says Campbell.

Hannah seconds the one-card rule, but he recommends keeping business expenditures separate with two cards.

Christine McDonald, a spokeswoman for the Financial Consumer Agency of Canada, says the key is “making sure you use the credit you have wisely.” She warns juggling too many cards makes it harder to keep track of spending and payments and hurts your credit score.

One’s credit rating is based largely on credit outstanding, but how much credit you have at your disposal is also considered. Even if there’s nothing owing, just having cards can influence lenders when it comes to granting a mortgage. Several credit cards indicate the potential to get in over your head fast.

Credit cards do help establish a credit history, but Campbell says “people don’t need more than one to build up their credit rating.”

Choosing a card

It’s important to choose the right card. As a general rule, those who carry a balance are better off paying a small annual fee for a low-interest-rate card, while those who pay in full each month may opt for a standard higher-rate card.

Cutting credit

When credit card spending is out of control, the best thing to do is cut up the cards and pay down debt. For some people it makes sense to consolidate debt with a lower-interest line of credit. Otherwise, Campbell recommends paying off the card with the highest rate of interest first. A credit counsellor can help explore the options. Once the debt is paid, contact the issuer and close the account.

Credit cards are two-faced — they’re convenient and come with plenty of perks, but can lead to trouble if you overspend or juggle multiple cards. One, perhaps, two, is all most people need — anything more is playing with fire.

Transmitted by CNW Group on : November 25, 2009 05:00