This was emailed out on New Years Eve to all my current clients directly. I am posting it now in order to have an easier access record of predictions to review.
Happy New Year!
I have always subscribed internally to ‘The 1% Difference‘. The theory being that whatever challenge, if approached with just 1% more effort than the average person, then (thanks to the magical beauty of compounding) I will find success. If not immediately, then almost certainly over the longer term.
For years whenever returning home from the gym I have always thrown in a few extra sets of push-ups prior to showering. While at the gym I would do sets of 11 reps rather than sets of 10. (Yes I realise this is greater than a 1% difference: 1% is the baseline.)
Has this extra rep resulted in an amazing physique? Not exactly, but it has perhaps allowed me to get away with consuming 1% extra at the dinner table.
And so it goes with your mortgage. Increasing your payment as little as 1% each year, or ideally 1% each quarter, will allow you to leverage ‘compounding’ in your favour.
For many Canadians, paying off their home is truly their only form of savings. Why not kick it up a notch? Save more. Save faster. Save now.
If you have received past New Year’s Eve emails from me then you have heard this all before, here is a link to specifics on the topic from 365 days ago.
If you have acted on this advice in years gone by, then you are starting to see the rewards. Kudos to you!
Aside from paying down the balance faster you are also building in a buffer against the potential of rising interest rates… which leads to the crystal ball portion of this post.
Property Values & Interest Rates
My predictions for 2015;
Property Values: Detached homes will continue to rise in price, a direct reflection of a somewhat stagnant supply considering the overwhelming majority of new dwelling units under construction are multi-family.
Multi-family unit values will continue to flatline in most areas as newer more attractive supply continues to come online. This said, supply through 2015 of new multi-family product is being steadily absorbed. There is no sign of overbuilding, which indicates no sign of softening values either.
During 2015, variable-rate mortgage holders will continue to rejoice. The Bank of Canada is as likely to increase Prime by 0.25% as they are to reduce Prime by 0.25%. Steady as she goes is the most likely outcome.
Fixed interest rates, which track the bond market, are a bit more of a wildcard, although that said ‘wild’ is likely defined within the .50% – .75% bandwidth. As with last year’s prediction, I believe we will end 2015 with fixed rates below 4%.
The lending landscape will continue to tighten. Expect (still) less application of common sense around mortgage approvals, as bigger picture thinking by lenders takes a back seat to increasingly rigid underwriting practices imposed by the Federal Government,
Beware of letting ‘fast-news’ do to your brain what ‘fast-food’ does to your body. i.e., a short increase in blood pressure for no good reason.
Just like eating vegetables, reading (non-fiction) books can be difficult to get used to, but is so very worthwhile. Here is a stellar source for quality content that will expand your outlook, and assist with finding calm in a world of short attention spans and anecdotal hyperbolic tales.
Thank you for a remarkable 2014!
May your 2015 be your most awesome year yet!