Interest rates

August 22, 2021

Investors fail to realize how rising rates kill bonds: report

If the results of the latest research are any indication, investors are in for a big shock once interest rates start rising and bond prices start falling.

In a survey of U.S. investors, investment firm Edward Jones found that two-thirds of the respondents don't understand how rising interest rates will affect their investment portfolios. Twenty-four per cent admitted they “feel completely in the dark about the potential effects.”

And it gets worse.

One-third of those between the ages of 18 and 34 admitted they have "no idea" how interest rate changes will impact their investments. While the level of awareness increased a bit with age, one-quarter of those 65 and older -- who typically gravitate to the income and perceived safety of bonds -- also indicated they had "no idea."

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August 19, 2021

Mortgage investment corporations could be in for a fall: report

If you are like most investors hungry for yield, you likely have at least one real estate investment trust stashed away somewhere.

The shine has come off REITs recently, however, as bond yields have started to tick upwards. This has  prompted prospective buyers to worry about the impact that rising rates will have on REITs mortgage costs down the road.

Despite this, yield starved investors are hoping that mortgage investment corporations won't be hit in the same way. But tread carefully here, warns Hamilton Capital Managers analyst Rob Wessel in a recent report. Most MICs are riskier than you might think.

Unlike REITs, which buy income-producing properties and then use the rents to pay distributions to investors, MICs are generally more interested in funding land development and real estate construction, and they attract retail investors by offering much higher yields as a result, often in the range of 7 to 8 per cent.

A typical borrower might be someone who owns a multi-residential property owner and needs short-term cash for construction, for instance -- a loan the big bank simply can't be bothered with.

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July 25, 2021

Should you be locking in your mortgage sometime soon?

Over the last few weeks, longer-term fixed rates have jumped by roughly half a percentage point.

The fixed-rate five-year closed mortgage, which was once as low as 2.99%, has risen steadily in the past few weeks and is closer to 3.5% at most banks. That may not seem like a big difference but it means a larger payment.

Even though rates aren't expected to jump significantly until next year, if you're coming up for renewal then it may be time to at least work in higher rates into your budget.

Mortgage debates used to centre around whether to go fixed or variable but the discussion these days is often not whether to lock in a rate but for how long? Most people choose a 5-year term. But is that the best option? You could, for instance, lock up a 7-year rate ... or even a 10-year term.

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July 04, 2021

Rise in interest rates expected in 2014

Buying your first home is one of the biggest decisions you will ever make.

While 31 per cent of first-time homebuyers expect interest rates to stay the same over the next five years, that just may not be the case, according to market projections.

BMO Economics reports that interest rate hikes are expected in the second half of 2014.

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June 03, 2021

What's ahead for the last half of the year?

Broadly rising equity markets coupled with increasing interest rates will lead to more near-term volatility, predicts investment firm Edward Jones in a recent report.

In other words, there's still money to be made in 2013: "We believe stocks are primed to deliver attractive total returns going forward, particularly compared to bonds and cash."

However, while there are compelling opportunities in today’s market, there are also some clearcut mistakes investors need to avoid, the firm warns

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May 30, 2021

Just how much will it cost to get out of your current mortgage?

Interest rates are down sharply, which means your existing mortgage rate is likely higher than prevailing rate. Is this then a good time to renegotiate?


With a five-year fixed rate now around 2.7% in some spots, the savings can be significant – particularly if you’re still far away from paying things off.

But while the improved interest rate you might get is tempting, it's important to calculate how much you'd pay in penalties and how long it would take you to recoup the cost of financing. 

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May 29, 2021

Are tougher mortgage rules keeping you out of the market?

Canadians end up paying off their mortgages in about two-thirds of the time originally intended, according to research from The Canadian Association of Accredited Mortgage Professionals.

Looking at mortgages paid off over the past three years, the original amortization length was roughly 18  years but, on average, homebuyers ended up with an actual amortization length of just less than 12 years. In other words, we can handle debt pretty well, according to CAAMP's view.

Nonetheless, Finance Minister Jim Flaherty tightened mortgage rules four times in the last five years amid concern that oversupply in some markets could lead to a sharp drop in prices.

The group feels the government's recent changes — raising the minimum down payment for mortgages insured through the government-backed CMHC and lowering the amount of time borrowers have to pay them back to 25 years (it was as high as 40 years only five years ago) — is overdone and is preventing many potential homebuyers from entering the market.

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February 27, 2022

Credit cards: the good, the bad and the ugly

206579_2170Credit cards can be your best friend or turn into your worst enemy if not used responsibly.

Getting your first credit card is a big deal when you're coming of age. But learning how to use them responsibly is something that requires a little bit of maturity and a little bit of credit card know-how.

"Credit cards are powerful tools to help build credit and financial skills," says Jeffrey Schwartz, executive director of Consolidated Credit Counseling Services of Canada, Inc. "Unfortunately, they can also be dangerous if not used responsibly."

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February 20, 2022

Trimming the little things can make a big difference

CalculatorWhat if you made your morning coffee instead of heading to the drive-thru on your way to work? Crazy idea isn't it?

But is saving some extra money really so crazy?  Believe it or not, those trips to the coffee shop really do add up.

According to the Office of Consumer Affairs (OCA), if you save the $5 instead of buying that latte -- even at 1.5 per cent interest -- you will save about $5,500 over 25 years. Not too shabby, eh?

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January 15, 2022

Canadian home sales drop dramatically year over year: report

Sales of existing homes in Canada fell again last month, the Canadian Real Estate Association announced today, one more example that Canada’s runaway housing market is slumping.

What’s more interesting, however, is that actual sales for December, while not seasonally adjusted, were off 17.4% from a year earlier. That's quite a drop, given that interest rates remain essentially unchanged over the period. 

But rates don't matter if you can't get a mortgage in the first place.

It seems that Finance Minister Flaherty’s latest round of rule changes, which included cutting the maximum length of insured mortgages to 25 years from 30, may be making even more of a dent than expected.

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Gordon PowersGordon Powers

A long-time fund company executive, Gordon Powers now heads up the Affinity Group, a financial services consulting firm. Gordon was a personal finance columnist for the Globe & Mail for many years, has taught retirement planning...