- The Bank of Canada decided to keep interest rates steady and the prime rate charged by the major banks stays at 6%. The statement seems to indicate that the Bank will maintain the current interest rate in its next meeting.
- The federal government has enacted a legislation that drops the minimum down payment required to get a conventional mortgage from 25% of the value of a home to 20%. Earlier, the mortgage loan insurance would have cost 1% for a homebuyer who wants to get a mortgage of more than 75% but less than 80% of the property value.
- Ellen Roseman writes in The Toronto Star that mortgage life insurance is usually a bad deal for consumers.
- A report in The Globe and Mail says that “high costs, questionable benefits and lax disclosure regulations” of principal protected notes (PPNs) are attracting the attention of regulators and the federal government.
- Steady Hand’s Tom Bradley opines that foreigners are overpaying for our public companies and Canadians will have a good opportunity to buy back these assets at lower prices in the future.
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10 responses so far ↓
1 Jon D. // Apr 27, 2007 at 10:22 am
#3 is a good one to read for everyone who has a mortgage. There’s some good points in there, like the one about non-smokers and smokers are grouped for the banks’ policies.
Also, another bad reason to have mortgage insurance is that your premium payment stays the same, but the payout drops with each mortgage payment you make! And contrary to term life insurance, your beneficiary does not gets to choose what to do with the policy payout.
2 FinancialJungle // Apr 27, 2007 at 12:05 pm
I enjoy #3 as well. Have you heard of an offer where the insurance company will give you a discount if you buy both the life and disabilitiy policies from them? The idea is that a person cannot claim both disability and dealth simultenously, so from the company’s point of view, it is statistically less risk to sell both policies to the same person then to 2 different people. I wish I can remember where I read that.
3 Steve Heath // Apr 27, 2007 at 1:24 pm
Ok, I have a question. A combination of the decline of the USD and the desire to avoid hedging fees in Canadian ETF’s had me wondering why we have to buy, for example, Euro ETF’s in USD. I found that ishares, for example, offers European ETF’s, but that Canadians cannot buy them. Does anyone know why we are forced to use NA currencies?
4 Steve Heath // Apr 27, 2007 at 1:26 pm
Rereading my message again I realize I should have said “why we have to buy Euro ETF’s in USD or pay a hedging premium and buy it in CDN”. I’d like to avoid both the premium of hedging and bypass the conversion to/from USD.
5 Canadian Capitalist // Apr 27, 2007 at 1:31 pm
Steve: Any depreciation of the USD should have no effect on European (or other foreign) ETFs are denominated in USD when converted to Canadian dollars. I hold EFA and the exchange rate that matters is the CAD and a basket of foreign currencies like Euros, Pounds and Yen.
I suppose there might be a way to buy securities listed on European exchanges but the steep currency conversion fees, brokerage charges may not make it worth the trouble.
6 ThickenMyWallet // Apr 27, 2007 at 2:10 pm
The cynic in me wonders if the move in #2 means that the mortgage companies will push mortgage insurance harder on the reasoning that a home purchaser can now afford it with all the money they saved!
#3 is a great reason why people should invest in insurance companies…
7 Steve Heath // Apr 27, 2007 at 2:49 pm
CC, wouldn’t that assume that the CDN:USD rate fluctuates in the same way the CDN:EUR rate fluctuates?
Haha… I typed up this elaborate example about how this could be a problem and that answered my own question. I was concerned that the USD->CDN would get out of whack with the EUR->CDN, but if that happened, the currency speculators would quickly take advantage and drive it back up, which means aside from a little friction and minor timing basically it would be the same thing.
Thanks CC!
Although it still would have been nice to have some of it in Euros just so I could convince the Mrs. it’s time to go to Europe again whenever I liquidate some funds… if it’s all in USD it’ll be winters in Florida instead
8 Wolf Stone // Apr 27, 2007 at 6:11 pm
Hello Capitalist,
I did not know about #2 (probably slipped under my radar)but now that i do, it can help someone i know tremendously. Thanks for the tidbit.
9 boobytrapped // Apr 29, 2007 at 1:43 pm
We just agreed to purchase a house, and I’m really glad to have found #2. I had missed this news. We were paying down ~15%, and given this news it gives us more incentive to pay another 5% and save on the CMHC insurance.
10 Ottawa boy // May 1, 2007 at 2:09 pm
thanks for #3. We just got a pre-approved mortgage from TD Canada Trust Bank and they sprung this life insurance stuff on us and just added it to the pre-approved mortgage figures… oh figure (pun intended). Now I’m going to shop around before getting life insurance from the lender. thanks!
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