With mortgage rates dropping, it’s strategy time

Mortgage broker Robert McLister says variable-rate mortgages won’t fall to pre-crisis lows any time soon

It was a little less than a year ago that the global financial crisis began to hit home, which is to say that mortgage rates spiked higher.

Now, the cost of mortgages is coming down. If you're buying a home or renewing a mortgage, it's time to review your options.

Fixed-rate mortgages declined a little last week, but the most dramatic changes can be seen in variable-rate mortgages. For the first time in almost a year, it's possible to get a variable-rate mortgage at the prime rate used by most major financial institutions, which is currently 2.25 per cent.

Pre-crisis, variable-rate mortgages came with discounts that ranged from 0.75 percentage points to as much as 0.9 points off prime. By late last fall, crisis conditions prompted lenders to start charging prime plus a full percentage point or more. Now, some lenders are starting to unwind their crisis-rate premiums.

“Variable-rate mortgages are all over the map right now,” said Gary Siegle, regional manager with the mortgage brokerage firm Invis Inc. in Calgary. “We're seeing them right in the area of prime with some lenders.”

An example of a variable-rate mortgage at prime: ResMor Trust, a small player that deals through mortgage brokers, is offering four-year variable-rate mortgages at prime in all provinces except Quebec. The catch: You have to have your mortgage approved by Sept. 30 and close the purchase within 45 days.

Can variable-rate mortgages fall back to their pre-crisis lows any time soon?

“Definitely, 100 per cent, no,” said Robert McLister, a mortgage broker and author of the Canadian Mortgage Trends blog (canadianmortgagetrends.com). “Could they get a little below prime? Definitely.”

Canadian household wealth rebounds

For the first time in three quarters, Canadian household net worth grew, reflecting stock market gains; use of credit also increased, but this was more than offset by asset growth

Virginia Galt

Globe and Mail Update Last updated on Monday, Sep. 14, 2009 01:42PM EDT

Canadian households were wealthier in the second quarter of this year after losing ground in the three previous quarters, with stock market gains leading the recovery, Statistics Canada said Monday.

Household net worth advanced by $141-billion to $5.6-trillion.

“Canadian stock markets recovered partially in the second quarter, with the S&P/Toronto Stock Exchange composite index up nearly 20 per cent,” Statscan said.

“The resulting increase in the value of household financial assets (including shares, mutual funds and pension assets) was the principal factor behind the rise in household net worth,” Statscan wrote in a report on national balance sheet accounts.

The use of credit also rose more quickly in the quarter, with notable borrowing for mortgages as resale housing markets picked up, and an upswing in consumer credit as car sales increased.

“Despite the growth in credit market debt, households' debt relative to net worth edged down during the second quarter, as gains in assets more than offset the increase in liabilities,” Statscan said.

Households had 24.8 cents of debt for every dollar of net worth, compared with 24.9 cents in the first quarter.

On balance, “this was a positive report as it suggests that, with the worst of the economic and financial crises now behind us, Canadian householders are beginning the slow process of repairing the damage done to their balance sheets,” Toronto-Dominion Bank economist Millan Mulraine said in a research note.

“Moreover, with the recession appearing to have come to an end, we are likely to see further improvement in households' net worth in the coming quarters as the economy grows,” Mr. Mulraine said.

He noted that, despite the improvement in the second quarter, household net worth remains 6.1 per cent below its peak of $6-trillion, reached in the second quarter of 2008.

Although household net worth increased, Statistics Canada reported that net worth of corporations fell by $208-billion in the second quarter.

In the public sector, government levels of debt rose in the second quarter to 39.8 per cent of the economy from 38.3 per cent in the previous three months and from 36 per cent last year.

With a file from The Canadian Press

Its almost over, a natural gas rally on September 2nd

We wrote just last week about what next for natural gas, according to Bob Hoye and his team at Chart Works that had predicted a natural gas rally on September 2nd,and they’ve certainly gotten it. However, they are look-ing for a ten to 12 day event, followed by something thatmight not be a lot of joy in the natural gas sector.We caught up with Bobby Lamond, the Calgary vet-eran and long-time player in the natural gas sector whohas spent much of the last year sending people chartsand warning everyone about how ugly it could get in thissector. When we caught up with him on Friday, he says,“it’s been the perfect storm for natural gas” over the lastyear. “Anything that could go wrong” he says, “hadgone wrong” and he has never seen a worse time for thenatural gas sector.

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Globe says Barrick, others show deal making is back

Globe says Barrick, others show deal making is back

2009-09-14 07:26 ET - In the News

See In the News (C-ABX) Barrick Gold Corp

The Globe and Mail reports in its Saturday edition that deal making is back. The Globe's Boyd Erman and Tara Perkins write revitalized capital markets allowed a sudden burst of major financings last week, on top of continued rallies in equity and debt markets. Canadian companies, led by Barrick Gold and Fairfax Financial, raised nearly $5.9-billion by selling stock -- more than in any other week in history. Thanks to a receptive credit market, energy giant EnCana revived its plan to split into two companies, which requires $5-billion in loans.

Long-dead initial public offerings are once again doable, with Montreal retailer Dollarama filing to go public in a transaction expected to raise $250-million. The corporate financing resurgence has a more sober, purposeful tone compared with the capital casino that underpinned the credit bubble.

Compton Petroleum raised $172-million Friday. The flurry of deals is not likely to end soon, said Paul Donnelly at Macquarie Capital Markets. "I don't think the pipeline is exhausted for a second," Mr. Donnelly said.

However, for now stock sales will mostly be of a relatively low-risk variety designed to appeal to investors who are still wary after being once burned.

Canada's new national lottery, Lotto Max, launches ticket sales next Saturday

As new contest launches nationwide next week, a look at some pitfalls of having winning ticket

September 13, 2009

Nancy J. White

The winner's curse looms large in lottery lore.

There's Buddy Post, a former circus cook who won $16.2 million in a 1988 Pennsylvania lottery. Six years later, he was bankrupt, divorced and the subject of a bungled murder plot – his brother had hired a hit man to kill him.

Ontario's Ibi Roncaioli claimed a $5 million lottery prize in 1991. Last year, her husband was convicted in her 2003 poisoning death.

Jack Whittaker from West Virginia scored $315 million in a Powerball jackpot in 2002. In addition to numerous legal run-ins, he suffered terrible personal loss: his beloved only granddaughter, with whom he shared the fortune, turned drug addict and was found dead. "I wish," Whittaker told ABC News, "I'd torn that ticket up."

Ah, the perils of sudden wealth. As Canada's new national lottery, Lotto Max, launches ticket sales next Saturday with a first draw on Sept. 25, there will be big jackpots and more million-dollar prizes, more happy dance delirium and more down-the-road pitfalls.

"None of us appreciate the difficulties and challenges," says financial planner Susan Bradley, founder of the Florida-based Sudden Money Institute. A lottery win, "ends the way life is for you."

Boo-hoo. A financially-flush new life sure sounds appealing: Caribbean getaways, a Paris pied-à-terre, a spanking new medical wing in your very own name. The downside? An identity crisis, increased wariness, strained relationships and a flood of strangers' sob stories.

"We should all have their problems," laughs H. Roy Kaplan, a sociologist at the University of South Florida, who has written about lottery winners.

Over the years, he has met about 500 of them, the prudent and the impulsive. While American winners tend to buy showy mansions, Canadians, he found, renovate.

"Although there may be tough times," says Kaplan, "by and large people's lives are enhanced by winning."

That was Jan's experience. The office worker, who asked that her last name not be used, is one of Bray Motors' 25 employees – the entire full-time staff – who shared $22.5 million last summer. A sweet $900,000 each.

She bought a new Chevrolet Equinox, renovated the house and put away a nest egg. Some of the older employees retired from the GM dealership in Sundridge, but others are still on the job.

"Life is just a little easier," she says. "I think we all benefited because it wasn't enough money to go wild and crazy. No one did."

So how much do you need to go wild and crazy?

One person's chump change is another's pot of gold. Bradley, whose clients include professional athletes and heirs, as well as the lottery lucky, has witnessed people spin out of control after a prize of a few hundred thousand.

One woman, a city worker in her early 30s, won $250,000 in a settlement and started buying houses and cars. Says Bradley: "She told me, `People like me need a Lexus.' She got herself into financial trouble that will take the rest of her working career to get out of."

Instant millionaires can easily slide into ruin, she says. "There's a stress response with winning. The fight or flight part of your brain starts operating. The person's ability to see the big picture is diminished."

Personality quirks come into play. The party person lives large until the money runs out. A shy, inhibited person may withdraw further, suspicious of people's motives.

Bad feelings are not uncommon. Few winners are prepared for all the expectations of largesse, says Kaplan.

Raymond Sobeski, of Princeton, Ont., had an inkling of this in 2003. He waited almost a year to claim his $30 million during which time he divorced his wife. His ex then launched a lawsuit for her share that turned into an ugly legal battle. They did reach a support settlement in 2005.

Winning is an isolating experience, explains Bradley. "You're suddenly different than your peers."

So if you win the lottery, what should you do?

Nothing precipitous, say the experts. Forget the one-way ticket to the Riviera. Get a good financial planner and stay calm.

"I've met people who complained that winning was full of headaches," says Kaplan. "But nobody ever told me they were giving it back."