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Current DUCA rates (2014)
August 24, 2014
5:16 pm
Jack Manning
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August 5, 2014
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Loonie, Canadian banks are making record profits and yet they want to be bailed out when of if things go the other way, losing money.

The little guy and small investor has to be careful of being sucked in to unrealistic rates of returns or interest rates guaranteeing little to no risk. In my opinion 6% to 10% a year. Ponzi schemers are profiting off this.

I don't think we will see 6% term deposits, GIC's, bonds etc. for a long while. It could be 7 to 10 years if we are lucky. I believe the last time was between 1999 to 2001.

August 24, 2014
5:40 pm
xxxx
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Jack Manning
Not sure you can make a general statement that housing prices in Canada will drop 7% to 12% - perhaps in some markets but in other areas (such as the major cities), housing will likely keep increasing by at least small % - land costs more, labour and material cost more....... Even with the melt down in the US a few years ago while some markets incurred huge drops, other markets/cities maintained their prices very well.
I do agree with you that CSBs are a terrible place to put cash, particularly with daily interest accounts paying higher rates. As well, I do agree we may never see GICs of 6% for a very long time.

August 24, 2014
7:11 pm
Jack Manning
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Brian, I can't remember exactly which bank economists were forecasting falling house prices in Canada over the next 2 to 3 years but they were talking about overall Canadian housing prices and not specific markets in Canada.

I am not sure myself what will happen to overall Canadian housing prices so I was just passing along what I read and heard about this subject.

I would say that it has been a long time maybe 21 to 22 years since we have seen a deep 25% or more drop in Canadian housing prices.

August 24, 2014
8:05 pm
Loonie
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Brian said

Loonie
If your 90 year old relative is on GIS and using her CSB money (which is earning nothing much) to pay for house repairs, perhaps it might be better for her to sell the house and either live with a family member, or go into an apt or into a seniors residence. The proceeds from the sale of the house could be used to supplement her income/ pay the rent whatever.
The reality is that interest rates are going to stay on the low side for a long time. The positive is that will make the selling of her house much easier as buyers (young or old) can afford to buy.

Oh, yes, we've had the discussion about moving to an apartment etc many times. In the end, it's her decision. But the ideal answer is not as clear as it seems at first, for a variety of reasons. It would take too long to explain. Bottom line, it's not what she wants to do, and she doesn't yet have to do it.

August 24, 2014
8:16 pm
Loonie
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I am in the process of trying to convince my relative to cash in the CSBs, which are already past due and earning nothing whatsoever at this point. Then we'll see what is the best thing for her to do with the money. She will need to keep it liquid as long as she lives in that house, for sure. I am wondering if any improved interest that she may earn would just be deducted from the GIS. I will have to look into that.

Yes, house prices could decline in the foreseeable future, although I think that is less likely in the town where she is located. I think they are actually on the low side at the moment considering location etc.

I don't see interest rates rising in the foreseeable future either.

As for my relative, I just think that trying to manage a house at this age on your own is just too much, and I wish she would move. No telling for sure where house prices are going, but it's best to wind up this phase of life, I think, although she could easily live to 100+. As I'm sure you all know, most people in this position remain where they are because family members help them to do so. Every time something needs fixing or replacing, she is not able to manage this herself. But with such a short life span ahead of her, nobody wants to upset her unduly.

August 24, 2014
8:28 pm
Jack Manning
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Loonie, I hear you about aging relatives and family members about moving from their house that they probably lived for 20, 30, 40, 50 years.

It is hard to talk to them and explain that selling the house maybe the best option. In my opinion, reverse mortgages don't really work for most people because of higher rates of 5.00% to 5.40% compounding for years plus fees involved.

Nobody wants to move where they are comfortable and call sweet home. As for the Canada savings bonds, it is good that a discussion about getting a much higher rate of interest maybe 3.75 to 4 times from much better alternatives is happening.

A good strategy that I know for sure will not cut your relative's monthly GIS is see if she has room to put savings accounts, 30, 60 day etc. term deposits, cashable GIC's 30, 90 days 1.75% to 2.00% in TFSA's.

All interest in TFSA's will not be included in her income and is not taxable either. The one thing I would caution you is make sure there are no fees, penalties etc. to withdraw money from her TFSA's if she can go that way.

August 24, 2014
9:29 pm
Loonie
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Yes, good point about the TFSA. I did convince her to put a few thousand into a TFSA a few years ago, but she has lots of room left and it would accommodate all the CSB money easily. Problem is, she opened the TFSA as a savings account at one of the Big 5, where it earns next to nothing anyway. It will be a trick to convince her to move the money to banks she has never heard of, which don't have branches in her town, and have funny names like "Oaken" or "Hubert"! Also, some of these lesser-known institutions don't want to deal with powers of attorney, which will likely be required within the next 2 or 3 years. Peoples, for instance, will not. As always, it's not easy to get the best return.

Agreed that reverse mortgages are a bad idea, too expensive, and especially undesirable for someone this old who will not have much time left in that house no matter how you slice it. However... her mother's first cousin just turned 100 last month, so who knows?

August 24, 2014
9:33 pm
Jack Manning
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Loonie, it seems that it gets harder and harder for the small investor, depositor that have a simpler, straight forward life not complicated by annual distributions and tax slips, legal issues etc.

At least your relative enjoys living in her home for many years until she may have to leave.

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