RateHub Roundup: March 2016

by Jordan Lavin March 7, 2016 / No Comments

Spring comes along with the spring mortgage market, and the best mortgage rates are about to get a bit better as competition heats up among the banks and the prime rate is expected to hold steady. The spring real estate market is underway too, and prices are set to ramp up over the next couple of months, especially in Vancouver and Toronto. It’s not all good news on the real estate front, but the scary stories aren’t always what they seem. Read on for our roundup of scary (and silly) stories from the world of personal finance that caught our eye.

The real estate stories that make you afraid

We’ve been hearing for years about how home prices are overvalued in Canada. In 2011, the warning was our homes were overvalued by as much as 10%. Last year, the warning was 35% (house prices went up roughly 30% over that time frame). And despite constant calls for the bubble to burst, nothing’s happened yet. So you’ll have to forgive the media for getting excited about these two stories:

The first is about a mortgage practice called Jingle Mail–the art of mailing your house keys to the bank to walk away from your mortgage. It’s legal in Alberta, where mortgage lenders can’t come after someone who defaults if the value of the house doesn’t cover the amount outstanding on the loan. Alberta also happens to be the spot where home prices are hurting most, largely thanks to the oil crash. But are Albertan homeowners really filling up their community mailboxes with house keys? Probably not. The rate of arrears in Alberta (the number of borrowers behind on their mortgage payments) is still below the national average, and in Calgary house prices are holding steady.

The second scary story is about shadow flipping–the art of buying a house, then reselling it before the deal closes. The original buyer gets to make a profit by avoiding the land transfer tax (and, you know, the expense of owning a house). The real estate agent gets to make a profit by doubling up on commissions. And the whole thing is completely legal. But is it that widespread? The Real Estate Council of British Columbia is investigating, and at least one brokerage in the Vancouver area has announced it’s internally banned the practice. Most trustworthy realtors will tell you it’s something that never needed to be banned in the first place – because it’s something they would never do.

How much is your selfie worth?

You’ve been posting them all over the internet for free for years, but soon you could use your selfies to pay for everything you buy–as long as they’re linked to the right credit card. How does it work? MasterCard has announced it’ll start piloting biometric payments in Canada this summer. Rather than using a traditional PIN or password, the system will be able to recognize features like your face and fingerprints to verify online purchases. It’ll be limited to online purchases for now. So if you see the person at the front of the coffee line snapping a selfie, just know they’re not wasting your time so they can post on Instagram.

Who pays when your designated driver crashes?

The short answer is: you do. When it comes to car insurance it doesn’t really matter who’s driving. If your car is involved in an at-fault accident, your insurance is on the hook (and you’re the one responsible for paying the deductible and higher premiums that follow). A Toronto-area resident found that out the hard way last week when his car was totalled while being driven by a designated driver service. So how do you protect your car insurance when you lend out your car? Only let other people drive who you know and trust, and consider adding an accident forgiveness rider to your policy that guarantees your rates won’t increase after your first claim.

Credit unions could become more powerful

At least in Ontario, that is, as the provincial government has announced updates to the law governing the financial institutions that will allow them to compete more closely with the banks. The changes include allowing credit unions to own insurance brokerages, and do business with cities. Deposit insurance coverage for money held in credit unions would also increase to $250,000. Credit unions in the province may also be allowed to jump into the payday loan business, which could change the landscape of short-term borrowing in Canada’s most populous province.

Canadians are cashing out

When is a falling Canadian dollar good news? When you own property in the United States. Snowbirds who scooped up real estate in markets like Arizona and Florida in 2010–when home prices were low and the Canadian dollar was high–are cashing out on their investments now that the opposite is true. The biggest determinant of how much cash these sellers will bring home depends on the value of the loonie, which is becoming more and more difficult to predict. The dollar hit its lowest mark in mid-January, then rebounded within just a few days. In 2016, the loonie has swung up and down within a 6¢ range–and with a median sale price of US$199,000 in Arizona, being at the top or bottom of that 6¢ swing in the dollar translates to almost $12,000.

Team Updates

Tomorrow (March 8) is International Women’s Day, and we’re excited to host an upcoming Women in Leadership event here at our office. The discussion is being moderated by Bloomberg news editor Stefanie Batcho-Lino, and features our founder Alyssa Furtado. Get the details on how to join us.

Love coffee? Check out our recent post on changes to the Starbucks Rewards program, and get a chance to win a $50 Starbucks Gift Card.

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