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Speaking of Money… It’s Financial Planning Week

October 21st, 2011 No comments

Speaking of Money… It’s Financial Planning Week

October 17-23 is Canada’s third annual Financial Planning Week and as part of its campaign to get more Canadians engaged in their financial wellbeing, Financial Planning Standards Council (FPSC®) hit the streets to hear what Canadians are saying about money.

“Every day is financial planning day at Financial Planning Standards Council and for the 18,000+ Certified Financial Planner® professionals in Canada. But, while many Canadians may have great intentions, they fall into the procrastination trap,” says Tamara Smith, V.P. Marketing & Consumer Affairs, FPSC. “We are putting a call out to every Canadian: this Financial Planning Week, it’s time to take action — even if in small steps — to do more towards your financial wellbeing.”

 

10 THINGS YOU CAN DO TO CELEBRATE FINANCIAL PLANNING WEEK: THINK, TALK, ACT ON IT!
Even small steps can build momentum and make a difference.

THINK!

1. Reflect on your life goals (Own a home? Travel the world? Or simply get by?). Think in terms of shorter and longer-term goals. As well, consider your needs and wants. Financial planning supports your life and it involves much more than just planning for tomorrow. It’s about the continuum of your life, which includes today!

TALK!

2. Talk to your life partner. Money often comes last on the list of relationship conversations but it should be a priority and is an essential part of family life planning. Plan now to prevent money from becoming a stressor on your relationship!

3. Talk to your kids. It’s never too early to teach your kids the value of money and the importance of good financial habits.

4. Talk to a financial planning professional who can help you make sense of it all. CFP® professionals are uniquely trained to help you translate your life goals into meaningful financial strategies and in seeing how all these strategies are connected. Before engaging anyone, learn what to look for and what to ask a prospective planner. See 10 Questions to Ask for starters.

ACT!

5. Learn something new. You can start by going to a Financial Planning Week event.

6. Track your spending so you know where that darn money is going. You’d be surprised of how much you can squeeze out in savings when you are accountable for every dollar spent.

7. Create a monthly budget.

8. Pay yourself first and start a savings and/or investment program. Even small amounts add up if you save regularly.

9. Pay off debt — especially credit card debt that can result in high interest fees for late payments. Keep your credit rating healthy and don’t forget to pay those bills on time!

10. Get help creating a financial plan that looks at the whole picture. CFP professionals say it’s never too early to start, nor do you have to be wealthy to have a plan. Planning is for everyone!

11. BONUS TIP: Brainstorm a few of your own ideas of what you can do to celebrate Financial Planning Week and make them meaningful for you. Remember – it’s about your life.

NOTES TO EDITORS:

•FPSC executives are available for media interviews; also, CFP professionals from various regions across Canada are available to discuss financial planning topics.
•Looking for statistics on Canadians’ emotional and financial wellbeing? Read the highlights on FPSC’s Value of Financial Planning Study.

About Financial Planning Week

Now in its third year, Financial Planning Standards Council (FPSC) and the Institut québécois de planification financière (IQPF) have jointly declared October 17-23, 2011 as Canada’s Financial Planning Week. During the Week, each organization will be spearheading industry events and public outreach activities in their respective markets. Financial Planning Week is part of an ongoing effort by both organizations to make financial planning more a part of Canadians’ lives. Stay up-to-date at www.financialplanningweek.ca / Twitter @FPWeek, and join us on the LinkedIn and Facebook page for Financial Planning Week.

 

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‘Defying Gravity’; Household Credit Is Rising At The Fastest Rate Seen In Any Post-War Recession.

October 13th, 2009 No comments

Household credit is “defying gravity,” growing at the fastest pace of any recession since the Second World War when adjusted for inflation, a new report from CIBC World Markets shows.

A booming real-estate market that has sent outstanding mortgages surging 7.8% year-over-year in August is the primary driver, accounting for almost 70% of the 7% increase in overall household credit, said Benjamin Tal, senior economist at CIBC World Markets.

That is in stark contrast to the 1991 and 2001 slumps, when mortgage growth ground to a halt on an inflation-adjusted basis, the report notes.

“During a recession, usually mortgage markets go down, but this time it hasn’t and the reason is affordability, driven by low interest rates,” Mr. Tal said. “The Bank of Canada cut interest rates to stimulate the economy, and it’s working.”
Debt interest payments as a share of disposable income at 7.7% are also at their lowest point since 2006. In the 1991 recession, this ratio was more than 10%.
Craig Alexander, deputy chief economist with TD Economics, said a major part of the real-estate boom comes from pent-up demand as nervous Canadians started to realize this spring that the recession was not as bad as once feared.
“People were [also] responding to mortgage rates that are too good to last, so it’s stealing some of the 2010 sales,” he said. About half of that trend has already been absorbed, he said.

“Canada is in a unique situation where we are in the best position to provide credit and Canadians are in the best position to accept that credit,” Mr. Tal said. “It’s almost a crime not to take advantage of it. But we have to do it in a responsible way.”

Neither Mr. Tal nor Mr. Alexander see the current pace of growth in real estate continuing because the Bank of Canada will step in and raise interest rates if the real-estate market runs out of control.

 

Source: Eric Lam 07/10/2009 National Post

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Could bonds pull mortgage rates down even more?

July 13th, 2009 No comments

RITA TRICHUR Toronto Star:    Falling bond yields could spur a slight drop in medium-term residential mortgage rates this summer, but bargain-hungry consumers would be foolish to count on considerably cheaper borrowing costs, experts say.

About a month ago, banks blamed soaring bond yields for two sizeable hikes to key residential mortgage rates.

Those moves drove up posted rates on five-year fixed-rate loans by 60 basis points to 5.85 per cent. 

While yields have reversed course in recent weeks, banks have yet to pass on those savings to consumers. Meanwhile, there are fresh signs of life in the housing market, fuelling increased demand for mortgages.

Some economists and rate strategists believe that yields could fall a bit further and speculate that mortgage rates might follow suit. But there are no guarantees and experts surmise those potential declines would be minimal at best.

Doug Porter, deputy chief economist at BMO Capital Markets, says banks will be more inclined to tweak their rates if yields continue heading south

Typically, they want to be convinced that it is not a flash in the pan and that any retreat in yields is sustained,” he said.

“I believe that we are probably not too far away from that point. It might take a little more of a deeper rally (in bond prices) to make it completely convincing.”

Bond yields move inversely to prices. While variable-rate mortgages are largely influenced by the banks’ prime rates, conventional fixed-rate mortgages are linked to the bond market.

Banks generally try to match maturities when they finance mortgages with bonds. That means five-year mortgages are paired with five-year bonds.”

 

Charmaine’s comment:  I have highlighted certain phrases, as can be seen by the above article, banks are fast to increase their fixed rates when the bond rate increases however are very slow to reduce them as cited by Doug Porter of BMO Capital Markets, “they want to be convinced that it is not a flash in the pan and that any retreat in yields is sustained”.  

Also note the decrease in the premium on the variable rate from a couple of months ago:

Today I can offer you Prime plus 0.20 – most of the bank’s are at prime plus 0.40 – 0.60!

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Fed not likely to raise rates

June 16th, 2009 No comments

Recently, there has been some loud talk about inflation and how the U. S. Federal Reserve is going to have to start raising interest rates soon in order to nip inflation in the bud.

When first confronted with this news, you may have said, “Hogwash! No way in this economic backdrop could the Fed raise rates, slow down growth and risk sending us into a steep ‘double-dip’ recession.”

That certainly would be my view. It’s unclear at this point even if we are coming out of recession, so it really would be premature to slow things down at this point before any growth traction has been achieved.

However, let’s not just make assumptions. Let’s delve into history to see what the Fed has done in prior cycles.

The last U. S. recession was from March, 2001, to November, 2001, a period of eight months. The Fed funds rate was 6.5% from June, 2000, to January, 2001. In January of that year, the Fed lowered the rate to 6%, then went on a 12-month lowering frenzy during the recession and in the aftermath of the 9/11 attacks. By year-end 2001 the Fed funds rate was 1.75%, with the Fed still maintaining an easing bias.

Despite the official ending of the recession in November, 2001, the Fed maintained very low interest rates for almost three more years. In fact, it kept lowering rates, down to 1% from June, 2003 to May, 2004. This strategy of keeping rates low despite no recession is now widely blamed as the reason for the creation of the housing bubble that popped in 2007. The Fed finally raised rates in June, 2004, a full 30 months after the recession had ended.

In the recession of July, 1990 to March, 1991 (eight months) the Fed had been easing or maintained a neutral bias since February, 1989. At the start of that recession, the Fed funds rate was 8.25%. By the end of the recession, it was down to 6%. Again, despite the recession being over, the Fed kept jamming rates lower, all the way down to 3% in December, 1993. The Fed didn’t raise rates again until February, 1994. In that recession, again the Fed kept lowering rates for 30 months after the end of the recession.

Going back further into history, in the recession of July, 1981 to November, 1982 (16 months) the Fed acted a little more quickly. In May, 1981 the Fed rate was 20.0%. By December of that year, the Fed had moved rates down to 12%. In the spring of 1982, though, rates were back to 15%. But, showing signs of confusion, by the end of the summer 1982, rates were much lower, at 9.5%. The Fed was tightening rates again by September, 1982, and for a period of time investors had no idea what to expect, as the Fed moved rates up or down seemingly at random for a period of 18 months.

In the energy crisis of the early 1970s, the recession lasted from November, 1973, to March, 1975 (16 months). In November, at the start of the recession the Fed funds rate was 9.00% but by May, 1974, because of inflation fears the Fed had already raised the rate to 13%. Recession fears, however, ultimately ruled the day, and by year-end 1975 the Fed rate had been cut in half, to 4.75%. The tightening began anew, however, in April, 1976, 13 months after the official end of the recession.

What can we conclude? One, it seems sometimes that the Fed is just winging it, moving rates at random in response to short-term events. But it does seem the Fed is unwilling to raise rates too quickly after any recession.

Based on the severity of this economic downturn, you would have to conclude the Fed is unlikely to risk a double-dip recession, and will keep the Fed funds rate very low (now 0% to 0.25%) for a long time.

This may, of course, cause inflation, but for the time being, that is still better than a giant de-leveraging economic death-spiral.

Source: Peter Hodson, Financial Post 

 

 

 

 

 

 

 

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