Financial Update For Sept. 30, 2009

The article below on mobile banking on your Smartphone, is more proof that shift happens.

Did you know you can also access your deals on MERIX EXPLORE on your Blackberry or Smartphone?

Look up which UW has your file,

search by client name to find what the file # is,

search Explore messages

access the latest rate sheet! (attached)

Simply download this link and access through your browser

https://secure.merixfinancial.com/explore/mobile/

To learn more, click here www.caamp.org/elections .

Also below: There is more to a mortgage than a great rate



• TSX +56.27(Reuters)

• DOW -47.16

• Dollar +.17c to 92.12USD

• Oil -$.13 to $66.71US per barrel.

• Gold +$.60 to $993.10USD per ounce

• Canadian 5 yr bond yields +.01bps to 2.58. The spread, based on 5 yr rate of 4.09% is 1.51% This is up .07bps from a week ago, so we are returning to the comfort zone
• http://www.financialpost.com/markets/market-data/money-yields-can_us.html?tmp=yields-can_us

This increase in bond yield is something to watch. If the bond yield continues to go up, the spread will continue to shrink and this could be a trigger for interest rates to rise. Ideally lenders are looking for a spread between 1.55 and 1.75

There's more to a mortgage than a low rate

by Talbot Boggs
Monday, September 28, 2009provided by

(Special) - Homeowners and buyers are in a rather enviable position these days. Interest rates are at historic lows and the cost of borrowing for a home is about as low as it can get.

That's great news. But it's not the only thing homeowners and purchasers need to think about their mortgage.

There are a number of other features to consider before signing up for a mortgage and what is probably the largest debt that most Canadians will ever take on in their lives.

"When it comes to choosing a mortgage, getting a good rate is just the tip of the iceberg," says Mary Gronkowski, regional sales director with Mortgage Intelligence Inc., a national mortgage brokerage company. "You have to be aware of all the other features that may lie below the surface. All features of a mortgage should fit a homebuyer's personal goals, both now and down the road."

One type of mortgage to consider is an assumable mortgage.

An assumable mortgage means it can be transferred to another borrower. It allows a purchaser to take on your mortgage's terms and payments as part of the sale of your home. With extremely low interest rates today, that could be a big selling feature to a potential buyer in the future.

Given the low rates today, many homeowners are thinking about refinancing their mortgage.

Whether you should refinance your mortgage in a period of low interest rates depends on how much it will cost you to break your existing mortgage compared to how much you will save in interest payments.

If you break an existing mortgage you will have to pay the greater of three month's interest or the interest rate differential (IRD).

An IRD is a penalty for early prepayment of all or part of a mortgage outside of its normal prepayment terms. Usually this is calculated as the difference between the existing rate and the rate for the term remaining, multiplied by the principal outstanding and the balance of the term.

For example, if you had a $100,000 mortgage at nine per cent interest rate with 24 months remaining and wanted to renegotiate your mortgage at 6.5 per cent for 24 months, your IRD would be $5,000 ($100,000 x 2.5% $2,500 x 2 years $5,000).

It may only make sense to refinance your mortgage if the interest rate savings over the remaining life of your mortgage exceed the value of the IRD.

Another strategy is to take a variable rate mortgage. If interest rates go down and you keep your mortgage payments the same, you will be paying off more of your principal with each payment and will pay down your mortgage faster.

Many borrowers are taking advantage of low interest rates by accelerating payments on their mortgages. Many lenders will allow you to double up payments periodically or make lump sum payments of up to 20 per cent of the principal once a year.

You should make sure you understand the size and frequency of payments your lender will allow before you sign up.

Some mortgage lenders will have an option to skip a payment without penalty, which may come in handy in today's economy.

Another option that many mortgages have is portability.

This allows you to transfer your existing mortgage over to a new property, another big advantage if you have a mortgage at current low rates.

Not all portability features are the same, however. Some lenders allow up to 120 days to transfer the mortgage while others allow for only a few days or a week.

"Choosing the right mortgage involves considering where you are now and where you may be three to five years from now," says Gronkowski. "Working with a professional can help you make sense of the many options available to you."

Mobile banking expected to rise as smartphones gain ground

By LuAnn LaSalle

MONTREAL — The growing popularity of smartphones is expected to push up the use of mobile banking, allowing consumers to check balances, transfer money and pay bills.

In Canada, mobile banking is attracting small numbers of consumers who are essentially replicating their online banking habits.

Banks including RBC and Scotiabank offer the service and both say smartphones are key to its adoption.

While the Bank of Montreal says demand for mobile banking is still in its infancy and doesn’t offer it, it’s watching it with interest.

IDC Canada analyst Kevin Restivo said a lot of Canadians still don’t have access to the web on their mobile phones and that’s holding them back from trying the service.

“In the short term, it’s very new to Canadians,” said Restivo, who follows mobile devices and their applications.

Smartphones allow consumers to surf the internet, access email, watch video, listen to music, play games and run applications such as stock trading platforms and airline boarding information.

In the next three to five years, mobile banking should become more popular as more consumers get smartphones and wireless network speeds increase making the experience easier, Restivo said.

Scotiabank’s Mike Henry said its mobile banking service hasn’t had a high adoption rate, but noted that until recently cellphones didn’t have the speed or quality of browser to provide a great user experience for consumers.

“We’re seeing interest in this area growing now as smartphones become the norm,” said Henry, senior vice-president of sales and service.

Analyst Emmett Higdon said mobile banking won’t replace online banking because of the screen size and user experience.

“In most cases, it’s simply more difficult to do something on your mobile than it is to go and do it online,” said Higdon, senior analyst in electronic business at U.S.-based Forrester Research.

However, consumers who use mobile phones to do banking are doing it because “it’s in their pocket, it’s available any time, anywhere,” Higdon said from Charlotte, N.C.

Devin Sawyer, director of mobile channel for RBC, said customers using it have smartphones and an “untethered lifestyle” that often has them away from their desk and computer.

“It’s safe to say adoption is relatively low but steadily growing,” Sawyer said.

Younger consumers will push the adoption of mobile banking, he said.

“This younger generation is born to the view that there is no limit as to what a smartphone can do. So they will have an expectation going forward that there is no limit to where online banking can go.”

Aran Hamilton, of Toronto-based EnStream which has launched a mobile payment service called Zoompass, said one of the challenges to get consumers to adopt banking on cellphones is the “so what factor.”

“They don’t actually know why they want to do mobile banking,” said Hamilton, vice-president of strategic partnerships.

Hamilton believes that will change when consumers can do transactions with family and friends and businesses, making the mobile phone like a digital wallet.

EnStream is a joint venture owned by the three major Canadian wireless carriers, Bell Mobility, Rogers Communications Inc. and Telus Corp. Hamilton said he is discussing partnerships with several Canadian banks for Zoompass.

Higdon said banking on cellphones isn’t expected to really take off until mobile payments and commerce really start to take off.

“Right now, the biggest hurdle quite simply is the mobile banking that’s out there is, really, simply duplicating what the customer already has available in many other channels, be that the branch, the ATM and particularly online.”

Higdon said in the United States, about 10 per cent of consumers say they have used mobile banking.

“It’s smaller in Canada simply because the Canadian institutions haven’t pushing it as much as in the U.S.”

The Canadian Press

Financial Update For Sept. 29, 2009

• TSX +126.33(Reuters)

• DOW +124.17

• Dollar +.34c to 91.94USD

• Oil +$.82 to $66.84US per barrel.

• Gold +$2.30 to $992.50USD per ounce

• Canadian 5 yr bond yields -.03bps to 2.57. The spread, based on 5 yr rate of 4.09% is 1.52% This is up .07bps from a week ago, so we are returning to the comfort zone

• http://www.financialpost.com/markets/market-data/money-yields-can_us.html?tmp=yields-can_us

This increase in bond yield is something to watch. If the bond yield continues to go up, the spread will continue to shrink and this could be a trigger for interest rates to rise. Ideally lenders are looking for a spread between 1.55 and 1.75

With the premiums on Prime rates lowered to those of a year ago, combined with the government’s low lending rate, many clients are taking an Adjustable Rate Mortgage. The article below gives good reason to consider the benefits of the MERIX 50/50 Wise Mortgage.

A fully amortizing mortgage –half 5 yr fixed and half 5 yr ARM. Clients will have half of their balance protected at 4.09% fixed, while the 5 yr ARM rate of P+20, can be locked in at any time to match the maturity date of the fixed portion. Today the average rate for this product is 3.27%.

No guarantee rates will stay low, Carney warns

Paul Vieira, Financial Post

OTTAWA -- Governments will be required to undertake "concerted" and "sharp" efforts to restore fiscal sustainability once a market-led recovery is assured, Bank of Canada governor Mark Carney said Monday.

This will particularly apply to countries with ageing populations and "unsustainable entitlement programs," he said in a speech to the Victoria Chamber of Commerce.

While Mr. Carney was speaking about the need of governments to get their fiscal houses in order in the post-crisis landscape, the central banker also went to some lengths to reiterate that the central bank's pledge to keep interest rates at 0.25% until the end of June 2010 is "conditional" on meeting inflation targets. He told reporters afterward it would be unwise to assume current rates are "normal."

"It is an expectation, not a promise," Mr. Carney said in his remarks.

In recent weeks, analysts have debated whether the bank may move before that June 2010 deadline to raise rates given the strength in the economic rebound; or whether it may extend its pledge to keep a lid on growth in the Canadian currency, which it identifies as a risk to growth.

His speech touched on familiar ground, such as the risk of the rising loonie, but also attempted to set the landscape for the "hand off" from government-led growth to the private-sector-led expansion. His remarks suggested that stimuli - whether through government spending or low interest rates - should be kept in place "until the recovery is assured."

When that recovery is assured, certain countries have much work to do to clean up their public finances, Mr. Carney indicated. He did not cite specific countries in his remarks, but jurisdictions that fall under this category could include the United States and western Europe.

"Once the recovery is assured, concerted efforts will be necessary in most economies to restore fiscal sustainability," he said, adding it would be "particularly sharp" for some countries. "The fiscal cost of arresting the downfall will need to be first contained and then repaid over many years."

In Canada, the federal government has set out a framework under which it would remain in a deficit position until at least the 2014-15 fiscal year. But, the Conservative government said it would be able to reduce the amount of red ink in the coming years through cost controls and better growth.

More difficult decisions await legislators in Washington, which is recording shortfalls in the trillion-dollar range. Analysts warn of the need for U.S. legislators to cut spending and raise taxes, which could further keep U.S. consumers timid and undermine global growth.

Without aggressive efforts to keep the U.S. debt in check, bond investors will demand fatter yields that, in turn, could drive up inflation and weaken the U.S. currency.

But some governments are indicating they are prepared to take the steps Mr. Carney is calling for. Alistair Darling, Britain's finance minister, said Monday the country will make annual budget deficit reduction a legal commitment in order to bind future governments to getting the national debt down.

"Policy makers will have to act deftly to maintain stimulus long enough for private demand to take up the burden of growth, but not too long to undermine confidence in and the sustainability of that growth," Mr. Carney said. "The aftermath of the crisis will make considerable demands on structural policies in all countries, including Canada."

Among the structural changes in Canada would be the need for businesses to rely more on emerging markets as a source of demand as open access to the U.S. market becomes "less valuable," Mr. Carney said.

Afterward, he told reporters the U.S. economy would not be as "dominant" because that economy is going through a multiyear adjustment.

Close

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Finanical Update For Sept. 28, 2009

GDP will be highlight of economic week ahead

OTTAWA -- The coming week's menu of economic data will be highlighted in Canada by the broadest measure of economic performance available -- gross domestic product. On Wednesday morning, Statistics Canada will release July figures for GDP, and most economists expect to see growth of 0.4% -- indicating some acceleration from the O.1% expansion reported for June, which was the first month of growth since July 2008.

• TSX -73.37(Reuters) as shares of RIM plummeted 16.8% after the BlackBerry maker came up short of expectations for revenue, new subscribers and outlook

• DOW -42.25

• Dollar -.23c to 91.60USD

• Oil -$.13 to $66.02US per barrel.

• Gold -$7.30 to $990.20USD per ounce

• Canadian 5 yr bond yields -.02bps to 2.60. The spread, based on 5 yr rate of 4.09% is 1.49%

• http://www.financialpost.com/markets/market-data/money-yields-can_us.html?tmp=yields-can_us

This increase in bond yield is something to watch. If the bond yield continues to go up, the spread will continue to shrink and this could be a trigger for interest rates to rise. Ideally lenders are looking for a spread between 1.55 and 1.75

Flaherty uses caution on the mortgage front

Tara Perkins Globe and Mail

As global economists debate the right time to scale back stimulus measures, Canadian banks are loath to give up Ottawa's $125-billion mortgage program

Ottawa plans to extend the biggest emergency measure it created to help the banks weather the financial crisis, a sign that the government and the banking industry are not yet prepared to call an end to the economic upheaval.

Finance Minister Jim Flaherty has decided to keep in place the government's $125-billion program to buy mortgages from lenders, a program that had been slated to end next week, according to sources familiar with the matter.

The banking industry has been pressing the Finance Minister to extend the length of the program because they continue to benefit from it and because there is still the possibility that liquidity pressures could re-emerge.

The move comes amid a global debate among political leaders, central bankers and economists about when to scale back various measures that have been put in place to boost the flow of credit and stimulate economies.

The credit crunch has faded, and Canadian banks have been earning higher profits than expected. As a result, banks have scaled back use of the mortgage program. They've only sold $64-billion worth of mortgages into the program to date, about half the $125-billion the government was prepared to buy.

“While circumstances have changed for the better, the program remains valuable,” said Toronto-Dominion Bank chief economist Don Drummond.

“It lowers the cost of funds for the banks. Yes, not as much as at one time, given that spreads have come in, but it still helps.”

Both bankers and Ottawa are quick to point out that the program is creating a profit for the government, although the returns are diminishing as conditions improve.

“Usage has abated, but it's still a very useful tool in the tool kit for financial institutions who may require assistance on liquidity,” said Nancy Hughes Anthony, chief executive officer of the Canadian Bankers Association. “It would be premature to stop this program right now.”

Mr. Flaherty first unveiled the program in October, 2008, at a time when it was extremely difficult for banks around the world to fund their lending operations. It was intended as an emergency measure to boost the flow of credit – one that would also decrease the price of mortgages. Ottawa extended it in the 2009 budget, saying it planned to buy mortgages through the first half of this fiscal year (the halfway point is next Wednesday).

Economists praise the program. “It supported the banks at a critical juncture in the global financial crisis , and played a big role in keeping mortgage rates from flaring higher late last year, when many global borrowing costs were surging,” said Douglas Porter, deputy chief economist at Bank of Montreal. That, in turn, was a key factor supporting the quick turnaround in the country's housing market.

However, Mr. Porter also noted that financial markets are now returning to something closer to normal.

Funding costs are not back to where they were prior to the crisis, but they have dramatically improved. As a group, the big banks have seen profit margins from their Canadian lending businesses rise in each of the last two quarters, thanks to lower funding costs as well as their decision to increase prices on many loans.

In the latest quarter, which ended July 31, Royal Bank of Canada – the biggest bank – had record profit of $1.56-billion, while Toronto-Dominion Bank's Canadian lending business took in more money than it ever has before.

Banks stopped making full use of the mortgage purchase program in February, as their ability to fund improved. The government purchases take place in periodic auctions in which Ottawa, through Canada Mortgage and Housing Corp. (CMHC), tells the industry how much it is willing to buy – for example, $5-billion in mortgages – and then the banks each indicate what they would be willing to pay, in the form of interest, to sell mortgages. CMHC takes the most profitable bids. In the latest auction on Monday, Ottawa said it was willing to buy up to $4-billion, but banks only sold it $2-billion.

“Of the various government initiatives under the Extraordinary Financing Framework, the [mortgage program] has had the most significant impact, and at no incremental risk to the taxpayer,” said Jack Aubry, a spokesman for the Finance Ministry. It “has been successful in moderating the impact of the global financial turmoil on credit conditions in Canada,” he added.

Residential mortgage lending in May was 7.8 per cent higher than a year earlier, and total consumer credit was up 7.7 per cent, the Finance Ministry said.

Banks in other countries have relied on guarantees from their governments to raise financing, but in Canada, the mortgage program has obviated the need for banks to take Ottawa up on its offer to, in certain circumstances, guarantee their debt, something that would pose more risk for taxpayers, Mr. Aubry said.

The six largest banks now securitize – or essentially sell off their balance sheets – more than 25 per cent of their mortgages, compared with less than 15 per cent four years ago, according to RBC Dominion Securities Inc. analyst André-Philippe Hardy.