Daily Market Update

Paying down your mortgage may be poor economics
Paying down debt may seem like the best idea but if that’s at the expense of retirement funds it may be a bad decision. CIBC Wealth Advisory Services managing director Jamie Golombek said: "You may not be doing yourself any favours by rushing to pay off your home while mortgage rates are at rock-bottom levels. If you're able to take some risk in your investment portfolio, you might be tens of thousands of dollars richer by investing any extra money in an RRSP or TFSA." A new poll by CIBC found that 72 per cent of Canadians would rather put spare cash into reducing debt rather than an RRSP, with 56 per cent saying that their aim is to retire without debt. Golombek’s new report ‘Mortgages or Margaritas: Is paying down debt putting your retirement at risk?’ suggested that many Canadians could be tens of thousands of dollars better off by investing for their retirement while making mortgage payments at the current low rates. Read the full report.
Canadian cities fail to make sustainable top 10
Across the world cities are failing to meet the needs of their people, according to the inaugural Sustainable Cities Index from consultancy firm Arcadis. The index explores the three demands of social (people), environmental (planet) and economic (profit) to develop an indicative ranking of 50 of the world’s leading cities. This year’s study found that there is no single city gaining top scores on all three metrics, which highlights the difficult balance between the three. The top three cities overall are Frankfurt, London and Copenhagen. European cities dominate the top 10 with North America failing to rank in the top 10 at all. Toronto is the only Canadian city to feature in the top 50, coming in at 12 overall, nine for environmental sustainability and in the top 20 for people and profit. Read the full report.
Canadians weigh up big profits on snowbird homes
At the height of the financial crisis, as the U.S. housing market crashed, many Canadians were able to pick up some bargain properties south of the border. Now with the U.S. housing market recovering and the Canadian dollar weaker it could be the time to weigh up the benefits of having a snowbird home against the potentially bigger benefits of selling. Florida, Arizona, California and Texas are among the most popular locations for Canadians and also among the places where prices have increased. In Phoenix, Arizona, Canadian-born real estate agent Diane Olson has noticed more of her fellow countrymen considering selling up. She told The Globe and Mail: “Some of my clients have doubled the price [they paid for the property]. They also obtained their money at or close to par when they first bought, so they basically have a 15-per-cent-plus foreign exchange gain.” However, there are also those who believe that economic conditions are only going to improve and that it may be a while yet before they can sell at the top of the market. Read the full story.

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  • by Terry 2015-02-23 9:45:59 AM

    As for paying down your mortgage , I think it's a wise decision because you would like to get it down as fast as possible before you renew at a much higher interest rate...Just imagine in 5 years from now and lets just say it increases by 2%, then you have to renew. A lot of people buying at such a low rate will not qualify. By paying it down you will have a lot more principle payed off , making it easier to handle , besides your already used to paying more on your payments.
    I believe this is just the Government trying to get us to buy more RRSP'S and Bonds!

  • by NicD 2015-02-23 11:43:19 AM

    Paying down debt, starting with debt with the highest rate of interest first, is always a good idea. However, if mortgage debt is the only debt you have, then what the article is suggesting, is that if you are able to invest at perhaps a 5% net rate of return, with a mortgage rate of 2.75%, then keep paying your mortgage at its current level and invest any extra money at the higher rate of return. That way, if interest rates are higher when you need to renew your mortgage, you will be able to use the investment funds to make a lump sum payment towards your mortgage. Just remember to take into account the fact you will likely need to pay income tax on investment growth, unless it is obtained in a tax exempt vehicle such as a TFSA.

  • by Ken Koss 2015-02-23 12:34:54 PM

    This article is written by a banker for a banker. Using a rate of return of 6% over 30 years and keeping mortgage rates at 3% over 30 years while dealing with a person in the 30% bracket over the same period of time works in your examples. Try dealing with reality or did they not teach you that in school?

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