Statistics Canada reported that retail sales were up slightly in May, countering a slight decline in April. Overall, retail sales were up about 1%. (See http://www.statcan.gc.ca/daily-quotidien/090722/dq090722a-eng.htm for the complete news release.) This will likely send some retail-related stocks higher for a short period.
Retails sales should not be confused with Gross Domestic Product, which is the total value of all output for the Canadian economy, including exports.
It is important to note the increase in retail sales will produce neutral results for the next 6 months. As a result, it is likely that the Bank of Canada will hold its overnight lending rate at the current level until 2010. The Bank eluded to this in their recent policy announcement on Tuesday of this week, stating that if the economy keeps tracking the way it is, that they will keep their rate the same until Spring 2010. (See http://www.bankofcanada.ca/en/fixed-dates/2009/rate_210709.html for the press release.)
The wild-card in all this is inflation. Inflation is driven by a number of factors, and as inflation rises, or the expectation for inflation builds, so to will mortgage rates. Be prepared for steadily increasing interest rates starting in 2010. With fixed rates where they are today, fixed-rate mortgages are a good option for some. Variable-rate mortgage shouldn't be overlooked as there are immediate interest savings for at least the next year.
The recession is a good time to revisit your net worth and look for opportunities where others are retreating.I’ve summarised three opportunities that I see exist in the marketplace when it comes to increasing your net worth.
1.It’s cheap to borrow money to increase your net worth
I’m a believer of using someone else’s money to make money for you.What I mean is the time is good to borrow money against your home to invest. If you’ve owned a home for 10 years or more, you’ve gotten good appreciation value in that home.Using that equity to invest into the market or to purchase real estate as an investment is a sound decision.Keep in mind the we are near the bottom of low interest rates, and there will likely be rate increases the latter part of 2010.If you’re borrowing against your home through a Secured Line of Credit, ensure you take into account the 10 year averages of the prime rate.Remember the lowest the prime rate has been is now at 2.25%, the highest it’s been is 7.5% and the 10-year average is 5.22%.
2.Aren’t happy with your investments...invest in a private mortgage
If you’re still wondering how to get back some of the money you may have lost in the market, lending money through private mortgages is a good way to limit your risk and make good returns.In this market place borrowers who don’t have a good credit history and job stability, have few options available.That’s where private lenders come in. If you have money to invest, private mortgages can offer returns from 9 % to 15 % depending on the borrower risks.The default ratio in Canada is low on mortgages – nearly .5% and at The Mortgage Centre we have a good track record on helping our private investors lend money to higher-risk borrowers.
Reverse mortgages have a stigma attached to them, which is that they are the lender-of-last-resort for seniors.That’s not the case anymore.If you’re over the age of 60 and require money for day-to-day living expenses, a reverse mortgage can be a good option.A reverse mortgage allows you to borrow money against your home at a certain percentage of the home’s value.You can then take the money and bring it to a reputable financial planner who can show you ways to use the money to generate cash flow for your living expenses.The benefit of a reverse mortgage over a secured-line-of credit or traditional mortgage is that there are no monthly payments to be made on the mortgage until the house is sold or the borrower passes away – at which time the estate will handle the money.I’ve found that many seniors are reluctant to do this because they are worried about leaving something behind for their children.Although I’m of the generation that appreciates this sentiment – I do also hope that my parents, who are in their 60’s, are also able to live their life to the fullest, for their years of hard work.
