**Fixed Rates Have Slight Edge, Says Economist – Canadian Mortgage Trends – November 26, 2010
Deeply-discounted variable rates have historically beat out 5-year fixed rates roughly 77% of the time.*
But CIBC economist Benjamin Tal suggests the coming five years may “slightly” favour fixed rates.
He displayed the following chart at the CAAMP Forum on Monday.
It projects that the typical variable-rate mortgage (VRM) will be more expensive over five years than the typical 5-year fixed. That’s based on forward swap rates and a closing date in January 2011, says Tal.
Tal was careful to point out that this isn’t a blanket recommendation of fixed rates; it’s more of a commentary on how narrow the gap has become between fixed and variable mortgages, based on market rate expectations.
Some people will undoubtedly look at this and see no point in assuming the risk of a VRM given the minimal projected cost difference.
Others will remain skeptical, with the belief that North America’s economy isn’t strong enough to spark sustained 3%+ inflation (and the rapid rate increases that would come with it). This minority would rather plow their up-front payment savings back into their VRM for 1-2 years, and take their chances later in their term.
Whatever the case, rates are near the bottom and the market is clearly betting on future hikes. However you look at it, going variable is no longer as clear-cut a strategy as it once was.
In determining what’s best for you, check suitability first. Then have your mortgage professional run some rate simulations. If a 3% increase in prime would stress your cash flow, a VRM is absolutely not worth the risk.
* Based on Moshe Milevsky’s mortgage rate research.
Written by: Robert McLister, CMT
What you should know about RRSPs
By Yuki Hayashi (canadianliving.com)
Interested in RRSPs but don't know how to get started? This quick and easy introduction to RRSPs is a great first step.
Do RRSPs have you scratching your head? Don't worry: You're not alone. Although 68 per cent of Canadians have a Registered Retirement Saving Plan (RRSP), that leaves nearly one-third of Canadian without. Some non-RRSPers choose to plan for retirement in other ways (primarily through employer-sponsored pensions) and others are financially savvy types managing their
investments using other vehicles.
But there's also another group who aren't buying in because they think they can't afford it, or they simply have no idea how to get started. If you're in that group, this article is for you.
Why you need an RRSP
Whether you're
financially savvy or not – but especially if you're not – RRSPs are a fantastic way to save for retirement. Think of an RRSP account as a lockbox for your savings, only better. Here's why.
• Contributions are tax deductable, bringing down your gross income for income tax purposes.
• Your RRSP is a tax shelter. You don't pay tax on your investment income (until it's withdrawn), meaning the overall value grows much faster.
• You won't be taxed on your RRSP until you make withdrawals, presumably during retirement. It will be taxed as income – most likely at a lower rate since you'll be earning less then as compared to now, your peak earning years.
How do I set up an RRSP account?
You can set up your RRSP through any financial institution: Your bank, credit union, trust or insurance company.
Meet with a personal
banking advisor so they can walk you through the process and the different types of RRSPs they offer.
RRSPs are investment portfolios, and returns will vary depending on market conditions. Your RRSP portfolio may contain mutual funds, savings deposits, treasury bills, GICs, equities and/or other options.
Talk with your expert to find the mix that works best for you given your tolerance for risk (and potential reward), as well as whether an individual or spousal RRSP would be best for you.
2 Ways To Check Your Credit Rating
Your credit rating is an important tool for qualifying for loans or credit and provides a picture of your financial health. Check your credit report once a year to confirm the accuracy of your personal and financial information, such as your loan payment history. It's easy to do. Here's how.
1. View your credit report online with Canada's two major credit-reporting agencies: Equifax (www.equifax.ca) and TransUnion (www.transunion.ca). Equifax charges $15.50 for the online service; TransUnion charges $14.95.
2. For a free report send in a request form by mail (the form is available online) with photocopies of two pieces of identification. You'll receive a full report in the mail in about two weeks.
If you spot any errors, contact the agency and correct the information. By doing this you can also make sure that you have not fallen victim to identity theft.
by Sara Ditta