Wednesday, January 25, 2012

Many not prepared for retirement!


And take action today!!

While all Canadians are likely aware that retirement looms on the horizon, a staggering majority are not prepared for it; many more don’t even have a plan in place to get them there.
A recent poll from ING Direct suggests that 58% of Canadians say that they are not prepared for retirement, and that 68% have no strategic plan assembled to help them along the way.
Not surprisingly, the poll found that the younger the respondents were, the less that retirement saving was on their minds, although most financial planners will tell you the key for gathering assets for retirement with the least amount of pain is to start early and have the power of compounding on your side.
The focus for most is repaying high interest debt in the short term before embarking on savings. Furthermore, respondents with children aged 18 or under living at home say that there are far too many other expenses taking precedence over retirement savings. Paying down their mortgage and saving for children’s education are taking up all of their time and their resources.
It is crucial though, to have a plan in place, or as many will tell you- retirement savings will not just happen. It takes a well-thought out, long term commitment. With governmental support for retirement likely dwindling in the coming years, as well as with the Baby Boomer cohort moving into retirement, the onus for financial planning is falling more squarely on the shoulders of average investors.
“Saving for retirement can't be an afterthought," said Peter Aceto, president and CEO, ING DIRECT Canada. "Despite the amount of debt people are carrying and what we keep hearing in the news, saving is still possible. Understanding the importance of starting early, even if it means starting small, has a huge influence on the ability to meet your financial goals. Canadians should also look at the value they're getting from their existing financial products and have ongoing conversations about money with friends, family and on social networks, which can play a big role in being better informed about personal finances."
Many do have RRSPs; the poll finds that for those that do have them are contributing on average $1001-$2500 each year.
The key is to make savings painless and invisible and habitual.
"Saving $50 a month, at a 2.5% interest rate compounded over 30 years would provide more than $25,000 in savings*. If you can't find $50 to contribute, start by taking a look at the fees you pay for your financial products. In many cases, this expense can be eliminated and redirected to savings," said Aceto.
He added, "A saving habit takes discipline but once you start it's very easy to maintain, especially with an automatic savings plan. Our clients are always happily surprised at how much they've built in savings even with small monthly contributions. It's exciting to see your savings grow and feel in control of your financial wellbeing."

Wednesday, January 18, 2012

Carney holds rates steady even as his concerns increase

jeremy torobin AND sean silcoff
OTTAWA— From Wednesday's Globe and Mail
Bank of Canada Governor Mark Carney is getting more worried about record levels of household debt, but until the global recovery is on more solid footing, he’ll be relying on others to deal with the issue.

It’s Mr. Carney’s dilemma. Low interest rates have underpinned a worrisome surge of debt, but the economy is too weak to justify higher rates any time soon.

The central bank leader left his key interest rate at 1 per cent Tuesday for an 11th consecutive meeting, marking policy makers’ longest pause since the mid-1990s, as he and his team watch nervously to see how risks linked to the European debt crisis unfold.

Mr. Carney has repeatedly warned that low borrowing costs are enticing too many Canadians to take on debt that won’t be affordable once interest rates rise. On Tuesday he upped the ante.

Mr. Carney took the unprecedented step of noting in an interest rate decision that he expects the debt-to-income ratio will keep rising. Moreover, he attributed this to “very favourable financing conditions” – i.e. the Bank of Canada’s low policy rate, and its influence on the cost of mortgages.

“When they add something that wasn’t there before,” said Michael Gregory, a senior economist with BMO Nesbitt Burns, “it’s a signal that something has moved on their radar screen.”

Mr. Carney appears increasingly uncomfortable with a byproduct of his low-rate policy, even as debt-fuelled spending holds up the housing market and the economy at a time when soft global demand is crimping exports.

The debt-to-income ratio rose to a record 153 per cent in the third quarter, according to Statistics Canada, and exceeds the current level in the U.S. and the U.K. Canada is inching closer to the 160-plus threshold that got the U.S. and the U.K. into so much trouble four years ago.

Risks tied to the slack global economy are already affecting business decisions in Canada and arguably contributing to the slowdown in the labour market. For that reason, economists say it’s unlikely Mr. Carney will raise interest rates until next year.

Mr. Carney has stressed that there may be cases where interest rate changes can buttress moves by regulators to tame asset bubbles or dangerous buildups of debt that could threaten the entire economy. But higher rates now would hurt manufacturers in Central Canada and deter business investment, and tightening while the U.S. Federal Reserve is debating whether it needs to ease more would boost the currency, adding to exporters’ woes.

“The challenge of monetary policy is that it’s a blunt instrument,” said Derek Burleton, deputy chief economist with Toronto-Dominion Bank. “Regulation tends to have the benefits of surgical precision.”

Mr. Carney is no doubt keenly aware of the U.S. Federal Reserve’s failure to grasp the seriousness of trouble that was brewing in the U.S. housing market in the past decade, and criticism that Alan Greenspan fuelled that debacle by keeping interest rates low for longer than he should have.

But Mr. Greenspan was not presiding over an export-dependent economy that, according to new projections Mr. Carney released Tuesday, will grow just 2 per cent this year and 2.8 per cent in 2013, and that’s assuming the European situation is stabilized.

“Standing pat seems appropriate,” Mr. Gregory said. “But if things nudge either way – Europe clarifies itself a bit sooner, or housing takes off – the case for rate hikes will come a lot closer.”

In the meantime, is appears homeowners can’t resist the allure of rock-bottom mortgage rates.

“In my marketplace I see the consumer confidence to be very high, and it’s high because interest rates have been kept low,” said Peter Majthenyi, a Toronto-based mortgage broker. “Since the holidays, my phone hasn’t stopped ringing.”

Tuesday, January 17, 2012

Better economic conditions likely dash any chance of interest rate cut

By Julian Beltrame, The Canadian Press

OTTAWA - Any thoughts Bank of Canada governor Mark Carney might have had about cutting interest rates further today likely flew out the window after a recent spate of relatively good economic news.

The Bank of Canada will announce its policy setting — which influences short term interest rates — at 9 a.m., and the opinion appears virtually unanimous there will be no change from the current one per cent perch.

That should keep in force a credit landscape that has seen borrowing rates across the spectrum of terms and conditions among the most generous in memory.

In fact, last week the Bank of Montreal offered the first 2.99 per cent five-year, fixed mortgage rate in modern Canadian history, forcing other banks to follow suit with similar actions.

In essence, the market is beating the central bank to the punch with credit easing, said Derek Holt, vice-president of economics with Scotiabank.

But there are other reasons analysts — with few exceptions — believe Carney will be loathe to move off one per cent, where he's been since September 2010.

That's because as weak as conditions are, with Europe still at risk of plunging the world into another recession, the economic indicators have been stronger than Carney thought they would be three months ago.

Then, the bank governor projected growth in the third quarter of 2011 would come in at a weak two per cent and the fourth at a barely visible 0.8 per cent. The third quarter is already in the books at 3.5 per cent and the fourth looks closer to two per cent, however.

As well, the resilience of oil prices to the global slowdown likely means inflation in 2012 will be a little stronger than the bank had been counting on.

"The combination of perhaps upward revisions to growth and inflation forecasts ... might be the thing that totally takes rate cuts off the table," said Holt.

There are some who still believe Carney's next move will be to trim interest rates, including Carleton University economist Nicholas Rowe, a member of the C.D. Howe Institute's monetary policy panel, and David Madani of Capital Economics.

Madani expects Carney will take the policy rate to 0.5 per cent by the end of the year. He has a darker than most view of the economy — with growth a mere 1.5 per cent this year, and the unemployment rate rising half-a-point to eight per cent by year's end.

"Although (the bank) ... will no doubt highlight that U.S. economic activity has improved somewhat, even they would admit that a sustained recovery is far from assured, particularly considering Europe's recession and the heightened risk of another global banking crisis," Madani wrote in a note to clients.

But Madani also said Carney is likely to wait out at least one more policy date before making his move.

The main news coming out of Tuesday's announcement, and Wednesday's monetary policy review — the bank's new forecast for the global and Canadian economies — is whether Carney sees the stronger-than-expected second half of 2011 as a precursor for 2012, or simply a blip that merely delayed the onset of weaker growth.

In the previous policy review, the central bank had predicted growth would come in at 2.1 per cent in 2011, 1.9 per cent in 2012, and 2.9 per cent in 2013.

With 2011 already in the books — although all the data points are not yet known — the expectation is that growth was more likely in the moderate 2.4 per cent range. But that may not change Carney's view that 2012 will be even weaker, with considerable downside if Europe's debt issues metastasize.

In past policy announcements, Carney has made it clear he views the current one-per-cent setting to be sufficiently accommodative for the current, slow-growth economy. Easy credit conditions stimulate spending and expansion in the economy.

Holt said it would likely take a European implosion for Carney to cut rates further.

Monday, January 16, 2012

Credit counsellors ready for post-holiday rush as Christmas bills come due

Craig Wong
The Canadian Press
Published Friday, Jan. 13, 2012 1:18PM EST
The holiday hustle and bustle is over for most Canadians but now, as the bills begin to roll in, the busy season has begun for credit counselling services.

Scott Hannah, president and chief executive of the Vancouver-area-based Credit Counselling Society, said there's a pick up in inquiries every year as the bills for sometimes too-generous decisions made in December start coming due.

Attack your debt, Part One

The Wealthy Barber on carrying debt
“January is a great time to reflect on what they want to do differently this year – whether it is lose weight, improve their finances or whatever their case may be,” he said.

“Typically, it starts around the middle of the month and coincides when a lot of consumers are just receiving or expecting the statements on their credit cards.”

While financial planners urge Canadians every year to make a plan for their holiday spending, there are some that inevitably don't and overspend or don't stick to a plan, despite the best of intentions.

Pat White, executive director of Credit Counselling Canada, said her organization has been seeing more clients aged 50 and over looking for help in recent years.

“We're seeing more of that side of the population where they still have debts at a time that we think people should be thinking about retirements without debts,” she said in an interview from Brantford, Ont.

Ms. White said as a general rule of thumb, if you can't pay your debts as they come due, you should be seeking help.

“If you're behind on things like utilities, those are obvious signals things are not going well,” she said.

But even if you are current on your bills, but feel stressed or are unable to sleep, she said it is better to seek help before a crisis emerges.

Before you meet with a credit counsellor, experts say you should make a list of your debts, including who you owe, how much, account numbers and when you last made payments as well as a list of your assets.

People also should take with them a statement of income like a pay stub and some idea of their living expenses.

Ms. White said counsellors start with an assessment of a client's financial health before examining their options, including looking for ways to reduce spending and increase income.

“Some people may say, we certainly can cut back on that and it wasn't until we went through this exercise of looking at our expenses did we realize that we were spending more than we thought in one area or another.”

If it is possible, Ms. White said one option to consider may be a bank loan to consolidate other higher interest debt such as credit card balances or a mortgage refinancing that could be used to pay back other borrowings.

But if those options aren't enough, Ms. White said a voluntary debt repayment program may be a possibility.

Under a voluntary debt repayment program, a credit counselling agency contacts lenders and makes arrangements in an informal way to reduce payments and stretch them out over a longer payment. The advantage to the lender is that they receives all that they are owed without having to resort to harsher measures.

There are also the options of bankruptcy or a consumer proposal.

A consumer proposal sees someone repay a percentage of their debt over time, while a bankruptcy is a declaration that someone has nothing left to pay their debts.

“People often think that those are quite drastic measures, but it depends on the circumstances of the person and those options may be the only things that are really viable for them,” Ms. White said.

But Ms. White said the majority of those her agency deals with only require counselling, while around 25 per cent end up taking more drastic steps.

According to the Office of the Superintendent of Bankruptcy Canada, there were 6,259 consumer bankruptcies in October, 2011, the latest month statistics were available, down 20.2 per cent form 7,844 in October, 2010. The number of consumer proposals totalled 3,709 for the month, up 3.1 per cent from 3,598 in the year ago period.

Bank of Canada governor Mark Carney and Finance Minister Jim Flaherty have repeatedly urged Canadians to reduce their debt levels, which stand near all-time highs.

Though economists don't expect the central bank to raise interest rates until perhaps as late as early next year, it is just a matter of time until they come off their near record lows and drive up rates for loans such as lines of credit and variable rate mortgages tied to the prime rate.

Mr. Hannah said with interest rates still sitting near record lows, now is the time to get one's financial house in order and pay down debt before rates start to rise.

He suggested that even those who aren't in financial difficulty should take an opportunity to review their finances to make sure they are on track.

“It is hard to be motivated to save money, especially when the interest that you are being paid by your financial institution maybe one or maybe one and a half per cent,” Mr. Hannah said.

“However, having savings on hand to deal with expenses like car insurance or Christmas is far better than not saving funds, using credit cards and then having to pay for those purchases at 20 or 28 per cent interest.”

The Canadian Press

Friday, January 13, 2012

Average Metro home price to jump 2.3 per cent;

Strong market means house prices to rise in major cities, realtor says
Average Metro home price to jump 2.3 per cent; widespread calls for major correction this year can't be justified, says Royal LePage CEO
Canada's housing market will continue to be strong this year, with rising property values expected in all major markets, real estate brokerage firm Royal LePage said Thursday.

The company's forecast called for prices across to country to rise 2.8 per cent by the end of 2012, after stronger gains last year.

Even pricey housing markets in Metro Vancouver and Toronto - where standard two-storey homes averaged $1.1 million and $629,188, respectively, in the last quarter - will see continued price appreciation in 2012, though the gain for Metro will be more muted, according to the broker-age firm's forecast.

Metro Vancouver is expected to see its average house price climb 2.3 per cent to $802,000 in 2012, while Toronto is expected to see a 2.6-per-cent jump.

"Widespread calls for a major real estate correction in 2012 simply can't be justified," Royal LePage CEO Phil Soper said in a statement.

"The industry has significant momentum entering the year, and buoyed by the stimulative effect of very low interest rates, we expect the market to continue to expand - albeit at a slower pace."

However, Royal LePage said stronger gains will be seen in cities benefiting from commodity-based economies, such as Calgary, Regina and Winnipeg, where price gains will be in the range of four to five per cent.

According to the company, in the fourth quarter of 2011, the average price of a standard two-storey home in Canada was $375,427, up 4.2 per cent from a year earlier.

The average rate of a detached bungalow was up 6.1 per cent to $344,392, while condominiums gained 3.6 per cent to $234,680.

Statistics Canada reported Thursday that its new housing price index rose 0.3 per cent in November, following on a 0.2 per cent increase in October, and was up 2.5 per cent yearover-year.

Price increases in Toronto, Oshawa and Montreal offset declines in Calgary, Metro Vancouver and the Ontario metropolitan regions of Sudbury and Thunder Bay, the agency said.

In Vancouver, Statistics Canada said some builders offered promotional pricing in order to sell units, which helped push new-home prices 0.3 per cent in November from October, and made the

Builders in the other areas reported lowering prices in order to stimulate sales and remain competitive, while price increases elsewhere were attributed to higher material and labour costs.

The Canada Mortgage and Housing Corp. has forecast the average price of a listed homes for resale to be $363,900 this year, up 1.2 per cent from 2011. The Canadian Real Estate Association predicted that the aver-age price would be relatively flat at $362,700.

Both forecasts were made in November.