1. What the Government giveth, the Government taketh away. Barely two years after allowing amortizations of as long as 40 years, the Finance Department has decided to cut back the longest amortization to 35 years and increased the minimum downpayment to 5%.
  2. Et, tu President’s Choice? The bank with the popular no-fee, free chequing accounts will start charging for more services. The most significant is a $25 increase to the current charge for transferring out a RRSP account. Fortunately, cheques and banking transactions are still free.
  3. According to the Wall Street Journal ETFs are getting more expensive — the average ETF MER is now 0.54%, up from 41% just over a year ago. Pretty soon the iShares CDN REIT Index Fund will be one the bargains around!
  4. With stock markets tumbling relentlessly, The Gazette’s Don MacDonald offers A Simple Plan for Riding out a Bear Market. (Thanks to Bylo for the link.)
  5. The bloggers in the Ottawa region met to swap finance stories like this. In attendance were Michael James, Larry MacDonald, Average Joe and Big Cajun Man.
  6. Preet featured a four part series on P/E ratios on the Where Does All My Money Go? blog.
  7. Jonathan at My Money Blog wrote about one way to track your progress towards Financial Independence from the popular book, Your Money or Your Life.

A fuller version of the blog round up will return next week. Don’t forget to enter your name in the draw for one copy of The Intelligent Portfolio. Entries will be accepted until 8 P.M. EDT on Friday, July 11, 2008. Have a great weekend!

This article has 15 comments

  1. Thanks for the link… the story is a classic!


  2. Thanks for the link – have a great weekend!

  3. Re: 1) Just means the gubbamunt has just directed CMHC to cease insuring these loans. GE Mortgage, the first to offer 40 year mortgage insurance terms is not prohibited from continuing to offer them. If they feel it is good for business, they may well continue!


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  5. Canadian Capitalist

    DAvid: I’m no expert but Finance’s decisions would apply to the private insurers as well. My understanding is that the private insurers have to obey the rules if the mortgage is to be guaranteed by the federal government.

  6. Too bad about PC financial. Considering it is linked with CIBC, guess we are seeing the fall-out of all these decisions banks made on subprime and ABCP which also shows it takes 6-12 months for the banking mishaps to work through the system.

  7. The background paper for the mortgage insurance coverage says “Government-Backed Mortgages” but stipulates CMHC or private insurance. So no bank is going to lend money for a high-ratio mort. if it can’t be insured:
    “… (whether issued by CMHC or private insurers) for high-ratio mortgages..”

    PC has slowly been adjusting their fees over the years, for items such as drafts, statements, transfers, etc…. but I think it would be suicide if they ever changed a monthly fee.

  8. I stand corrected!

    Thanks for the info, as I did not realize the gov’t was subsidizing the private mortgage insurance industry.


  9. I thought the article on higher ETF fees was potentially misleading. There were lot of new specialty ETFs in specific sectors, or double-long/double-short type funds, which have higher fees. It’s not that individual ETFs are raising their fees, which the headline could easily lead one to believe.

  10. David, think regulated opposed to subsidized. Fortunately the gov’t is doing the right thing in this case by ensuring those who can afford homes can buy a home w/o breaking the market.

    72, it’s true, the headline makes it sound like overall there are increases, but they do state it’s the “average.” But actually reading article only takes until the 6th line where they state the VTI is only .07%.

  11. Something should be done about the PC thing. I have an account with them and when I got it I remember asking about the fees thinking that it was just a bait tactic and in a few years that would start up with the fees “to serve me better”. But they insisted, “no fees, EVER”.

    It would be nice to refuse those fees and simply show them there original marketing material as justification.

  12. Canadian Capitalist

    DAvid: I don’t think it is a subsidy. The government backs mortgages and if default rates skyrocket the taxpayer is on hook. That’s why finance sets out conditions under which it will back mortgages (i.e. require mortgage insurance for high loan-to-value mortgages, minimum downpayment, maximum amortization etc.).

    72offsuit: Good point. VTI’s MER has dropped by half over 5 years — from 0.15% in 2003 to 0.07% now. But, the most popular ETFs these days are the fancy ones that charge higher MERs (fundamental indexes, bear market ETFs etc.).

    Eric: I’m not sure that there is anything we can do. They still offer free chequing and unlimited transactions. As long as the core offering stays free, PC Financial will be a very good choice.

  13. CC: The Government pays 90% of GE Financial’s insured losses. I consider that a subsidy! It also explains why the government (rightly) sets the rules, to protect the taxpayer, as you point out.


  14. Canadian Capitalist

    DAvid: I look at the government guarantee of mortgage obligations as similar to CDIC coverage. The government provides this guarantee for the smooth functioning of the mortgage market. When a private mortgage insurance provider makes a loss, the government won’t step in and assume their losses. Only if a provider defaults and can’t meet their obligations to lenders will the government step in. My understanding is government backing for mortgages is provided in other major economies as well.

  15. We have a 0 down, 40 year mortgage to keep our payments low for now. As our earning power increases we will decrease the amortization or do lump sum payments. My fiance and I make a combined $150k per year, have no debt outside of our car loan, and we bought a $340k house, so no one can argue that we took a 40 year mortgage because we can’t afford a house. It simply makes sense for us right now.

    I resent people saying that 40 year mortgages are for people who cannot afford to buy. You actually have to have a lower debt to income ratio and a higher credit score to qualify for a 0 down, 40 year mortgage than to qualify for a regular 25 year.

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