carinsurancelethbridgeWhy do you need to buy car insurance? Perhaps the first thing that comes into your mind is that fact that you cannot drive a car without it. That’s true. You cannot go around town driving your car if it is not insured. This is primarily because you cannot get that car registered without getting a Lethbridge car insurance policy. This rule has been set in place for a very good reason.

Everyone who owns a car needs to get themselves and their car insured for the very reason that the road can be a very dangerous place. No matter how skilled you are in driving or how knowledgeable you are of the rules on the road, the risk of you being in an accident has always been there. You will never know how dangerous the road can be, because of other drivers and because of nature itself.

Car insurance at a certain point would look like it is just another one of the extra charges that you have to pay for. Some might even see that it is only valuable when you have the most expensive policy on your side. While others might even say that it is one of the many ways anyone could waste their money on. Indeed, everyone has their own way of saying that getting insurance is one of the things they regret the most.

And yet nobody could say that they don’t need insurance to save them when they meet an accident. Getting insurance is all about finding the right one. More than the money that comes with each type of policy, getting insurance is all about finding the one policy that will help save your life from becoming bad as it is. The goal is to not buy insurance for the fun of it, but to have insurance that will save you all the fun in the future.

You should be getting car insurance that will get you the best medical help ever possible. When you find yourself in an accident that may be fatal, but you are responsible for, all that you can think of is getting the kind of legal support everyone would need. At a glance, nobody would think insurance is valuable, until they realize how much it can change their life. That’s why they realize that they need insurance, no matter how expensive it may be.…

The popularity of combination Toronto mortgages – which offer both fixed and floating rate segments – is on the rise, according to RBC’s 17th Annual Homeowners Survey. In fact, 40 per cent of Canadians who are likely to purchase a home within the next two years plan to take out a combination mortgage, compared to 32 per cent in 2009.

The surging popularity of combination mortgages indicates that Canadians are trying to maximize low interest rates while at the same time retaining the security of a fixed mortgage. The poll also revealed a marked gender split with more women (46 per cent) than men (35 per cent) preferring a combination mortgage.

“Although interest rates are expected to rise, our study shows that not all Canadians intend to automatically opt for a fixed mortgage with a longer term,” said Marcia Moffat, head, Home Equity Financing, RBC Royal Bank. “As consumers begin to learn about the benefits of mortgage diversification, we’re seeing more homebuyers gain a better comfort level with adding floating rate mortgage options.”

While combination mortgages are gaining in popularity, fixed-rate mortgages continue to be the most common choice for potential buyers and are preferred by 44 per cent of Canadians likely to buy a home within the next two years. Atlantic Canadians are most likely (54 per cent) to opt for a fixed rate, with Ontarians (41 per cent) least likely to do so.

“Many Canadians believe that a fixed-rate Toronto mortgage is the only way to have a locked-in and predictable payment, but a variable rate does not always mean variable payments,” noted Moffat. “With our floating-rate mortgage, the portion of your payment that’s applied to the principal changes, as interest rates change, not the actual payment itself. This means that when interest rates go up, your payment will pay off more interest; when interest rates go down, your payment will pay off more principal.”

When current homeowners were asked about the impact of potential interest rate increases, 66 per cent said they were concerned, with women (70 per cent) more concerned than men (60 per cent).

“We expect the Bank of Canada to increase the overnight rate starting in June, with the pace of increases being fairly steady through the remainder of 2010 and 2011, which will continue to put upward pressure on borrowing costs,” added Paul Ferley, assistant chief economist, RBC Economics.

Mortgage findings at-a-glance:

Fixed rate mortgages are preferred by:
44 per cent of Canadians likely to buy a home within the next two years – down from 47 per cent in 2009

54 per cent of Atlantic Canadians (the highest in Canada)

Variable rate mortgages are preferred by:
16 per cent of Canadians likely to buy a home within the next two years – down from 20 per cent in 2009

19 per cent of men compared with 12 per cent of women

Mortgage term most likely to be chosen by those opting for a fixed or combination mortgage:
Five-year term: 43 per cent

More than five-year term: 29 per cent

Three-year term: eight per cent

63 per cent: the proportion of Canadian homeowners who have mortgages (compared to 56 per cent in 2005)

$124,131: the average amount remaining on Canadian homeowners’ mortgages (compared to $109,504 in 2005)

RBC recently introduced a RateCapper mortgage, in response to increased demand for mortgages options that provide both rate and payment protection. The interest rate on the RateCapper mortgage over the five-year term is based on the lower of Royal Bank of Canada’s prime rate, which is currently at 2.25 per cent, and a set maximum rate, currently capped at 5.50 per cent. Canadians can visit the mortgage centre www.rbc.com/mortgageadvice for access to advice about all aspects of their homeownership goals.…

Housing starts rebounded in the second half of 2009 and early 2010 and will stabilize over the next two years, according to Canada Mortgage and Housing Corporation’s (CMHC) second quarter Housing Market Outlook, Canada Edition.*

Following a total of 149,081 units in 2009, housing starts are expected to be in the range of 166,900 to 199,600 units in 2010, with a point forecast of 182,000 units. In 2011, housing starts will be in the range of 148,600 to 208,800 units, with a point forecast of 179,600 units.

“Canadian housing markets have recovered from the low levels posted in early 2009,” said Bob Dugan, Chief Economist for CMHC. “Moving forward, housing starts will moderate as activity becomes more in-line with long term demographic fundamentals. New measures for government-backed mortgage insurance introduced by the Government of Canada that took effect on April 19, 2010 will continue to support the long-term stability of Canada’s housing market.”

Mr. Dugan also noted that the existing home market will move towards balanced conditions over the next two years as MLS sales ease and inventory levels increase. In late 2009 and early 2010, sales activity included some pent-up demand from early 2009. Once this demand is exhausted, and as mortgage rates gradually rise, the pace of activity in the resale market will ease. As a result, existing home sales will be in the range of 484,000 to 513,300 units in 2010, with a point forecast of 497,300 units, and then move slightly lower in 2011 to be in the range of 443,500 to 504,900 units, with a point forecast of 473,500 units.

With an improved balance between demand and supply, the average MLS price is expected to stabilize through the end of 2010 and then rise modestly in 2011.…

Retired Canadians over the age of 50 with assets of at least $100,000 are enjoying retirement, with more than half (56 per cent) saying their quality of life has improved, according to the first annual RBC Retirement Myths and Realities Poll. On the other hand, only 38 per cent of pre-retirees in this same demographic group expect life to improve after retiring, with half (50 per cent) expecting no change.

“It’s natural to have concerns about retirement,” said Lee Anne Davies, head, Retirement Strategies, RBC. “With only three-in-ten pre-retirees thinking they will love retirement, it’s important to understand this is likely the fear of the unknown, an often unfounded fear. We recommend working with an advisor to plan for retirement. It can provide peace of mind knowing you have prepared.”

When it comes to regrets, just over half of retirees (55 per cent) and 65 per cent of pre-retirees have them. Some regrets among retirees include: not taking better care of themselves (13 per cent); not starting to save earlier for retirement (12 per cent); and not travelling enough (seven per cent). The main regret of pre-retirees was not starting to save earlier for retirement (18 per cent).

The vast majority of retirees say they are having a successful retirement (95 per cent), with the biggest secret to retirement success being realistic expectations (30 per cent). Other secrets to retirement success include: having saved enough money (16 per cent); good planning (13 per cent); and staying involved with people (13 per cent).

Davies gives a thumb-up to the 60 per cent of respondents who have a plan in place for retirement. “Retirement is a significant stage of your life and it’s important to keep realistic expectations when planning for the future. That’s where having a plan of action helps you make the most of your retirement dreams,” added Davies.

These are some of the findings the RBC Retirement Myths & Realities poll conducted by Ipsos Reid from March 10 -19, 2010. For this survey, a national sample of 2,143 adults aged 50 and over with household assets of at least $100,000 from Ipsos’ Canadian online panel was interviewed online. A survey with an unweighted probability sample of this size and a 100 per cent response rate would have an estimated margin of error of ±2.1 percentage points 19 times out of 20 of what the results would have been had the entire population of adults in Canada been polled. All sample surveys and polls may be subject to other sources of error, including, but not limited to coverage error, and measurement error.…

Home Ownership remains within reach for most Canadians but is getting increasingly difficult for families with household income less than $50,000, finds CIBC World Markets Inc.’s new Home Ownership Affordability Index.

Today, Canadians spend 15.6 per cent of their average gross personal income on mortgage payments, which is about the same as ten years ago. When adding in hydro bills and property/municipal taxes, it rises to about 22 per cent of gross income. However, this amount varies widely depending on where you live, how much you make and how old you are.

“The vast majority of home owners in Canada regardless of their age have not experienced any worsening in affordability despite the rapid increase in prices,” says Benjamin Tal, senior economist at CIBC, in his latest Consumer Watch report. “The only sub-group of households that have seen some deterioration in their affordability position is older Canadians with average income of less than $50,000. Zooming in on this group we find that on average they spend close to 60 per cent of their gross income on mortgage payments, property taxes and electricity costs. This is three times the average ratio seen among households at the same age groups but with income of over $50,000.”

While these mortgage holders have seen their affordability drop over the last year, Mr. Tal notes that, unlike the U.S., this vulnerable group of Canadian mortgage holders is on the decline. This group accounts for only 13 per cent of all mortgages in Canada, down from 19 per cent five years ago. He adds that the least vulnerable mortgage holders in Canada – those over 35 with incomes over $50,000 – now comprise some 65 per cent of mortgages in Canada, up from less than 50 per cent of the market in 2003.

“The practical implication of this finding is that the composition of the mortgage market in Canada has, in fact, improved over the past few years,” adds Mr. Tal.

In addition to percentage of income spent on mortgage payments, he also looked at house prices and interest rates in determining affordability. When it comes to prices, he finds that Canadian homes are overshooting their fair value. “The average price of a house has risen by almost 23 per cent since reaching its recent cyclical low in January 2009, and it is now almost seven per cent above the level seen before the recession. This pace of appreciation has been quicker than justified by housing market fundamentals such as income, rent or demographic changes.”

Mr. Tal estimates that, on average, Canadian home prices are now around 14 per cent over their “fair” value. This translates into more than 1.5 million houses in Canada – about 17 per cent of all dwellings in the country. He calculates that about 760,000 of these are overvalued by more than five per cent. B.C. and Alberta house prices have overshot the most with nearly one in four homes in those provinces above their fair value.

“It is hardly a surprise that British Columbia has the worst affordability reading in the nation. But note that the gap between British Columbia and Ontario is not as large as most people think. Despite strong housing markets, Manitoba and Saskatchewan still enjoy the best home ownership affordability in the nation.”

The Canadian housing market has started to stabilize in recent months. Supply is on the rise with April’s new listings climbing by close to 3.4 per cent on a smoothed month-over-month basis. The current pace of monthly increases in new units is the fastest seen since early 1990. At the same time, unit sales are now falling on a month-over-month basis following a very strong increase in mid-2009. As a result, home prices are starting to respond, with the three-month moving average growth decelerating rapidly over the past six months.

“While the booming housing market is starting to come back to earth, the fact that prices are overvalued today does not necessarily mean that they will crash tomorrow,” says Mr. Tal. “After all, a violent market correction needs a trigger such as the sub-prime crisis which ignited the U.S. real estate meltdown, or abnormally high interest rates as was the case during the 1991 property crash in Canada.

“Fortunately, that is not on the horizon this time around. While the Bank of Canada is very clear about its intention to raise rates soon, an array of limiting factors including a strong dollar, the end of fiscal stimulus, a slower pace of economic activity in the U.S., and a more rate-sensitive household sector suggest that rates will only climb very slowly over the next two years.

Unlike the U.S., the extended period of low interest rates in Canada did not lead to a surge in the number of mortgage borrowers in this country. In …

Strong commodity demand, comparatively low government and corporate debt along with favourable demographics should see Canada’s economic prospects lead those of the G-7 nations for much of the next decade, finds a new report from CIBC World Markets Inc.

The report notes that eurozone debt woes, along with geopolitical tensions in Asia, have, not surprisingly, grabbed the attention of the investor world recently. These concerns have overshadowed the strong longer-term fundamentals of Canada’s economy that could see the second decade of the 21st century be this country’s time to shine.

“Canada’s resource endowments, resilient financial system and favourable demographics relative to other G-7 nations make it an economic contender looking out over the next 5-10 years,” says Avery Shenfeld, Chief Economist at CIBC. “Another notable positive is in the healthier state of public and corporate sector balance sheets.

“These factors are no iron-clad recipe for national success in the near term, but do mean Canada is better-positioned than many of its competitors to deal with the challenges of the upcoming teen years. And where economic growth goes, corporate earnings, dividends and other rewards for investors are likely to follow.”

Mr. Shenfeld agrees with research that says economic rebounds from recessions linked to financial crises face greater headwinds than typical up-cycles. Government debt and the need to tighten fiscal policy in the aftermath of crisis rescue efforts appear to be the key transmission mechanism for this relationship. The research shows that countries that have higher indebtedness typically have slower rates of real per capita growth in the five years following the recession.

Given this, Canada is well positioned to outpace the typical major industrialized economy in the next few years, having less gross debt, and much less net debt, than most other nations. He notes that while an earlier rate hike cycle could prevent such a growth differential from showing through in 2010-11, Canada will have a longer-term advantage of dealing with a much lighter burden from fiscal restraint. Canada’s current federal deficit of three per cent of GDP (or five per cent including the provinces) pales next to double-digit deficit-to-GDP ratios for national governments in the U.S. and the U.K. The result is that if each country aimed to stabilize its debt-to-GDP ratio at 45 per cent, Canada would require a retrenchment of less than three per cent of GDP, while others would need fiscal cuts several times larger.

“That doesn’t mean that Canada won’t see a huge fiscal drag in 2011 – we estimate that the swing from stimulus to restraint represents a two per cent of GDP headwind in that year,” says Mr. Shenfeld. “But thereafter, the pain will be much lighter here than elsewhere.”

He adds that Canada’s economic growth will be driven by medium-term trends in population and productivity. “Demographers here and elsewhere are concerned about an aging work force that will slow growth ahead, but Canada is still well positioned relative to other mature economies. Japan is already seeing labour force shrinkage, and is ill-positioned to attract immigrants given language barriers and cultural homogeneity in its existing population. Fueled by immigration to a multi-cultural society, Canada’s economically active population is still set to grow faster than that of the U.S. or Europe.

“Immigration also has a side benefit, in terms of helping Canada make inroads into some of the world’s faster growing developing-economy markets. Research across countries has identified that bilateral trade tends to be enhanced between countries in response to the movement of people from one to the other. Business and cultural ties to the home country can facilitate the movement of goods, a trend that appears evident in the Canadian data. Continued in-migration from East Asia and South Asia should help build Canada’s export prospects in these fast growing markets.”

Mr. Shenfeld also expects Canada’s economy will see an output boost in the coming years as Canadian businesses invest in productivity-enhancing capital equipment. He notes that corporate Canada is carrying less debt than its U.S. counterpart leaving it more room to finance those plans. Governments have also done their part to encourage such spending, with corporate tax rates headed below those in all of the nation’s major developed-economy competitors.

“Productivity, which focuses on the volume of goods produced per hour, doesn’t, moreover, tell the whole story in terms of income and wealth,” finds Mr. Shenfeld. “In the past decade, volume gains were supplemented by an improvement in the global market value of the goods that Canada sells to the rest of the world (particularly commodities) relative to what it imports (consumer goods).”

He adds that even including the setback from softer energy and metal prices during the recent global recession, those terms-of-trade gains accounted for about a third of Canada’s domestic income growth since 2002. That trend almost certainly has further to run …

Strong sales gains have driven the global auto industry back to profitability, according to the latest Global Auto Report released today by Scotia Economics.

“The five largest auto manufacturers posted earnings of US$5.5 billion in the first quarter of 2010, a sharp turnaround from annual losses averaging in excess of US$22 billion from 2007 through 2009,” said Carlos Gomes, Senior Economist, Scotia Economics.

In the report, Mr. Gomes noted that profitability improved in every region last quarter, especially in North America, with the five largest automakers returning to profitability in the region. However, despite the turnaround in North America, Asia remains not only the auto market with the greatest potential, but is already the most profitable market in the world.

“The global economy continued to gain momentum through the first quarter of 2010, with growth picking up to roughly four per cent year-over-year – the fastest pace in two years,” commented Mr. Gomes. “This acceleration lifted global car sales 25 per cent above a year earlier, to a level only marginally lower than in early 2008. However, volumes still remain nearly five per cent below the industry peak set in mid-2007.”

Profitability per vehicle in North America jumped to more than US$1,500 in early 2010, compared with losses through September of last year, and will likely improve further in coming years as volumes expand. For example, light vehicle purchases in Canada, the United States and Mexico totaled an annualized 13.3 million in the opening months of 2010, and are expected to climb to 13.9 million for the full year, before rising to 14.6 in 2011.

“Of note, the jump in profitability occurred despite nearly a US$200 increase in industry-wide U.S. incentives through March, to more than US$2,800 per vehicle,” said Mr. Gomes.

The report also states that the five largest automakers reported a first-quarter operating profit of more than US$2.3 billion in emerging Asia – roughly 40 per cent of their overall total.

“This is particularly surprising, as the average car price in countries such as China and India averages less than US$12,000 compared with US$24,000 in North America and about US$20,000 in Europe,” stated Mr. Gomes. “In contrast, the industry still continues to lose money in Europe.”

The five largest automakers are still losing about US$400 per vehicle in Europe, with losses likely to increase in coming months, as recent austerity measures introduced in several countries act as a drag on economic growth and vehicle sales.

“We expect full-year sales in Western Europe to decline to 12.3 million units in 2010, down from an annualized 13.6 million in the opening months of the year,” concluded Mr. Gomes. “In fact, car sales in Europe fell six per cent year-over-year in April, led by a sharp fall-off in Germany. However, outside of Europe, purchases continue to strengthen – rising 23 per cent year-over-year – led by a 27 per cent gain in the BRIC nations.”…

Canadian Economic Recovery in Full Force in Q1

– Canadian real GDP grew by a stunning 6.1% (annualized) in Q1/2010, slightly above the market consensus expectation of 5.8%. This is the strongest quarterly gain in over a decade. A robust monthly gain of 0.6% in March provides a strong hand-off into Q2.

– The strength was broad-based with domestic demand at the top of the list. Consumer spending (+4.4%) and residential investment (+23.6%) contributed the most to economic growth. Meanwhile, led by a 7.6% gain in investment in machinery and equipment, business investment grew by 0.9% following a 9.8% decline in the previous quarter. Nonresidential construction is one component of GDP yet to head down the road of recovery.

– In nominal terms, GDP expanded by 10.4%, after posting a 9.9% gain in Q4/2009. A contributing factor was the positive swing in the terms of trade, bolstered by rebounding commodity prices and an appreciating currency. This helped to support strong gains in corporate (+39.1%) and personal (+2.2%) income.
– Compared to pre-recession levels, real GDP remains 0.5% lower while nominal GDP still has 2.2% to make up.

Key Implications

– After two consecutive quarters of above 5% real GDP growth, the blockbuster performance in unlikely to be repeated. However, the strong momentum heading into the second quarter suggests growth of around 4%.

– We are of the view that much better-than-expected consumer spending and housing market performances so far this year came at the expense of future growth. The recent spending spree has left consumers even more fatigued and highly-indebted than ever. As interest rates begin to rise (as early as this weak) and households have to devote a greater share of their income to servicing their debt, this may well constrain future consumer spending growth.

– The resumption in business investment was a missing ingredient until Q1, and is encouraging. Firming up of business investment and a continued healthy performance in Canadian exports related to a strengthening U.S. economy through the second half of this year should help to offset some of the weakness stemming from domestic demand.

– Putting it all together, real GDP growth will likely moderate into the range of 2.5-3% in the second half ofthis year.…

The Bank of Canada today announced that it is raising its target for the overnight rate by one-quarter of one percentage point to 1/2 per cent. The Bank Rate is correspondingly raised to 3/4 per cent and the deposit rate is kept at 1/4 per cent, thus re-establishing the normal operating band of 50 basis points for the overnight rate.

The global economic recovery is proceeding but is increasingly uneven across countries, with strong momentum in emerging market economies, some consolidation of the recovery in the United States, Japan and other industrialized economies, and the possibility of renewed weakness in Europe. The required rebalancing of global growth has not yet materialized.

In most advanced economies, the recovery remains heavily dependent on monetary and fiscal stimulus. In general, broad forces of household, bank, and sovereign deleveraging will add to the variability, and temper the pace, of global growth. Recent tensions in Europe are likely to result in higher borrowing costs and more rapid tightening of fiscal policy in some countries – an important downside risk identified in the April Monetary Policy Report (MPR). Thus far, the spillover into Canada from events in Europe has been limited to a modest fall in commodity prices and some tightening of financial conditions.

Activity in Canada is unfolding largely as expected. The economy grew by a robust 6.1 per cent in the first quarter, led by housing and consumer spending. Employment growth has resumed. Going forward, household spending is expected to decelerate to a pace more consistent with income growth. The anticipated pickup in business investment will be important for a more balanced recovery.

CPI inflation has been in line with the Bank’s April projections. The outlook for inflation reflects the combined influences of strong domestic demand, slowing wage growth, and overall excess supply.

In this context, the Bank has decided to raise the target for the overnight rate to 1/2 per cent and to re-establish the normal functioning of the overnight market.

This decision still leaves considerable monetary stimulus in place, consistent with achieving the 2 per cent inflation target in light of the significant excess supply in Canada, the strength of domestic spending, and the uneven global recovery.

Given the considerable uncertainty surrounding the outlook, any further reduction of monetary stimulus would have to be weighed carefully against domestic and global economic developments.…

Over the last few weeks, thousands of Canadian high school students have been deciding on whether or not to accept university and college entrance offers. Given that total expenses for a four-year degree can run as high as $60,000 or more, some families may be struggling to find the funds to finance post-secondary education.

As the costs of a post-secondary education increase, BMO advises Canadians to consider opening a Registered Education Savings Plan (RESP).

RESPs allow a parent or guardian to save money for their child’s university or college education. They offer several advantages, including:

– Tax-free growth (while the investments remain in the RESP)

– Up to $500 a year in Canada Education Savings Grants ($7,200 lifetime per child)

– A wide range of investment options

– Lower tax rates when the growth and grants are withdrawn for post-secondary education purposes (taxed at the student’s marginal tax rate)

However, simply opening an RESP is not enough. “Given the mounting costs associated with a post-secondary education, it’s critical that parents not only open an RESP as early as possible, but contribute to it regularly as well,” says David Sharone, Product Manager, Registered Plans and Solutions, BMO Mutual Funds.

BMO Financial Group offers the following RESP savings tips for parents and their campus-bound children:

– Give the gift of an education – Encourage family members and close friends to contribute to your child’s RESP on birthdays and holidays instead of, or in addition to, conventional gifts

– Know your limits – Parents, or young couples with plans to have children, should work together to determine a monthly budget that accounts for long-term savings, with a focus on RESPs

A paper bag lunch is all gravy – Bringing a lunch from home every day can save upwards of $100 per month, resulting in extra funds which can be used to increase your pre-determined RESP contributions…