Interesting article in the Globe and Mail on how younger Canadians are not “respecting” mortgages as much as our parents did. Here it is:

For me and most of my friends, mortgages represent the single large expense in our family budgets. We are staring at many long years of amortized mortgage payments on our homes. Yet, we are all still spending on vacations, cars and electronic goods. We spend even as we pay large sums of interest to service the biggest debt load of our lives.

Mortgages used to be treated with more respect. My grandparents led what we would consider to be austere lives until their mortgage was paid in full. They didn’t own a car or travel. Their single nod to consumerism was the purchase of a television set in the 1960s. Until their last payment was made to the bank, they didn’t even put aside money for retirement.

According to consumer advocate and financial expert Linda Leatherdale, our modern approach to spending is making us “house poor”.

“Your goal in life is to have a mortgage free house, especially by the time you retire,” she says. Money should be saved and applied to your mortgage, rather than spent on frivolities like trips.

Some financial experts make a strong case for paying off your mortgage before paying into an RRSP or buying equities. After all, it’s a guaranteed return and a safe bet. After seeing the value of my portfolio dribble away last year, it’s not difficult to convince me to invest in my mortgage first. But it will be challenging to curb the spending on holidays and other creature comforts.

“To be house rich, you need to be disciplined,” Ms. Leatherdale counsels. “There’s nothing better than paying your mortgage. You give money to yourself, not to the banks.”

She has some stern advice for those who want to own their home before they retire. First, don’t even consider buying a home unless you have 20 per cent of the purchase price. A down-payment less than that will result in the added expense of mortgage insurance.

Next, make mortgage payments on a bi-weekly, rather than a monthly, schedule. The heightened pace is comparable to making 13 monthly payments, which will lead to a faster payoff and lower overall interest costs. If you can, double up on mortgage payments as often as possible.

“There is nothing better in life than being mortgage free,” says Ms. Leatherdale.

I’ll have to keep her words in mind the next time I feel the urge for a holiday.

The Globe and Mail reported that Vancity’s online banking arm, Citizens Bank, will stop offering residential mortgages and focus solely on credit cards and foreign exchange services for non-retail members. This has resulted in Vancity selling the majority of its retail loans, including mortgages, personal loans and secured lines of credit, to TD Canada Trust. This follows on the news back in November when Citizens Bank announced they were retreating from the broker channel.

Vancity President and CEO, Tamara Vrooman , says it is a good business decision because it returns capital that can be reinvested to enhance member services at the credit union. It also focuses Citizens Bank on what it does best.

“We pioneered online banking in Canada, but it’s become a crowded marketplace,” says Vrooman. “Our members have told us repeatedly that they want us to focus on our core strengths. We’re local, we’re community-focused, and our offering is based on building relationships and providing service. In a national, online market, we were unable to achieve the scale necessary to succeed. Therefore, the bank’s business model wasn’t making full use of our strengths.”

The sale, which closed on August 5, 2009, means that:

None of Citizens Bank’s 30,000 members need to take any immediate action. Citizens Bank will work closely with each membr to minimize any inconvenience and provide the support they need to transfer their business over the coming months.

TD released a report yesterday looking at Canadian household credit in June 2009. Their major findings included:

Canadian housing market

Canadian mortgages

Loans & personal lines of credit

They also included this table outlining the growth of various forms of Canadian household debt:

RBC Royal Bank has announced that they have dropped their residential mortgage rates by an average of 0.30% and the changes were effective on April 25, 2009.

The changes are as follows:

Special Offers(*)

In addition, the Royal Bank of Canada announced new mortgage rate specials as follows:

(*) The rates indicated are special discounted rates and are not the
posted rates of Royal Bank of Canada. To calculate a rate discount
compare the Special Offer rate against the posted rate for the
applicable term.

Special Offers may be changed, withdrawn or extended at any time,
without notice. Not available in combination with any other rate
discounts, offers or promotions.

You can compare RBC mortgage rates against the market now.