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Canadians weighed down by lines of credit they don’t understand

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Over the past 15 years, home equity lines of credit have emerged as the driver of mounting non-mortgage debt in Canada — yet many Canadians don’t understand what they’ve signed up for and are not moving to pay them off, a new survey suggests.

The more than three million Canadians holding a HELOC owed an average amount of $65,000, the study released Tuesday by the Financial Consumer Agency of Canada (FCAC) found.  About one quarter of HELOC holders had a balance of more than $150,000.

Yet 25 per cent of respondents said they only made the interest payments month to month.

Ipsos conducted the online survey of 4,800 Canadians, most of them homeowners, from June 5-28, 2018, on behalf FCAC, a federal agency that promotes financial education.

HELOCs are revolving credit products secured against the equity in a home. Banks can lend up to 65 per cent of the value of a home. Such lines of credit have been easy to get and banks offer them as a default credit option to anyone with home equity.

Of the homeowners surveyed, 54 per cent had a mortgage and 35 per cent had a HELOC.

Cheap source of credit

“You can’t deny the fact that for the consumer it is a cheap source of credit. However, you have to use it well,” said Michael Toope, communications strategist for FCAC.

The problem is that people borrow more than they intended and end up struggling with the debt, he said.

The survey suggested there is a lack of understanding among consumers of how these lines of credit work.

Only half of respondents knew basic facts about the terms of HELOCs, such as:

  • Banks can raise the rate of a HELOC at any time.
  • The bank can demand the balance of a HELOC at any time.
  • There are fees to transfer a HELOC to another institution.
  • The bank can raise or lower the credit limit on a HELOC.

Interest rates began climbing in 2017 and 2018 and are likely to rise further this year. That affects the interest cost of these loans and the overall cost of paying them off.

“Each bank sets its own prime rate based on the Bank of Canada rate and HELOCs are usually set at prime plus a premium, but the bank can change that premium at their discretion,” Toope said.

For some, HELOCs are risky

Almost two-thirds of respondents said they used their HELOC only or mostly as intended, as a revolving line of credit.

Yet for some, HELOCs are a risky product that eats away at their ability to build wealth, Toope said.

The equity they build in their home as they pay off a mortgage is a way for Canadians to build wealth over time, but that won’t happen if they have a debt secured by the house.

“In the end, you’re losing the long-term value of the mortgage you have in your home,” Toope said.

In a 2017 report, FCAC found home equity lines of credit may be putting some Canadians at risk of over-borrowing.

That report found most consumers do not repay their HELOC in full until they sell their home.

About 19 per cent of respondents to the new survey said they’d borrowed more than they intended.

How much do I owe?

And 18 per cent said they did not know the full balance on their HELOC.

Among those who paid only the interest on the debt, the majority were young Canadians, aged 25 to 34. That’s not unusual, as people at that stage of life tend to have lower incomes and may be burdened with student debt as well as a mortgage, but it still indicates a lack of understanding, Toope said.

About half of respondents said they used their HELOC for a renovation, but another 22 per cent consolidated other debt. (Elise Amendola/Associated Press)

The survey found 62 per cent of those who paid only the interest expected to repay their HELOC in full within five years, a plan Toope called a “mathematical impossibility.”

Half of Canadians borrowed against their HELOCs for renovations, but another 22 per cent dipped into it for debt consolidation, with vehicle purchases and daily expenses also common uses, according to the survey.

“People should know what they are going to use it for and how to pay it down, so it doesn’t become an eternal revolving debt,” Toope said.

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How Law Firms Can Become Successful Marketing Stories

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Today, the legal industry has become saturated due to the growing number of law firms springing up on every corner. This has made it a lot more difficult for smaller legal organizations to contend with their bigger counterparts and gain the visibility they need to grow their business.

Subsequently, most law firms are adopting digital marketing strategies to attract customers and position themselves above their competitors. However, building the specific online marketing strategy that would be a perfect fit for your firm takes a lot of effort and experience.

Search engine algorithms are still quite opaque, and the dynamic nature of the internet means that marketing strategies are constantly evolving. How then can a law firm determine the best marketing technique for themselves?

Below are some expert tips on how to build a successful marketing strategy for your law firm and attract more clients:

Increase organic traffic to your website

The advent of the internet makes it very easy for individuals to search online for whatever products or services they require. Therefore, it is important for law firms to employ effective online marketing strategies that can increase the number of visitors to their website.

Matt Bowman, [resident of Thrive Internet Marketing Agency, says videos, content and free ebooks that deliver value to your target audience can increase traffic to your website and make it a one-stop shop for all legal information.

Search engine optimization (SEO) is another great way to increase your firm’s online reputation. Ranking your website on the first page of a search engine for a relevant keyword can increase the visibility of your law firm but can be difficult to achieve due to the ever-changing nature of search engine algorithms. Nonetheless, just like Chicago lawyer Russell Knight learned, writing quality articles and incorporating quality backlinks to your content are some of the ways you can increase your page rankings.

Additionally, improving your social media presence is another way to increase the number of visitors to your website. By regularly posting updates and sharing quality content across different social media channels, it can motivate followers to check out your website. According to David Reischer, Esq., a lawyer at LegalAdvice, posting infographics is a perfect way for law firms to increase traffic to their website.

Build brand credibility

For every prospective client, one of the criteria for selecting a law firm to engage is how trustworthy and reputable they are. To adequately portray your firm as trustworthy, having a modern, optimized website is important.

Your website is typically an online representation of your firm and once it appears outdated and unattractive, it sends a negative message to your prospective clients. Therefore, always ensure that your website is easy to navigate, aesthetically pleasing, mobile-friendly and has quick loading time.

Constantly sharing legal information on niche topics and contributing answers to questions on forums like Quora can position your firm as a subject-matter expert. Senior legal partner at Miracle Mile Law Group Steven Isaac Azizi, Esq., also says including client testimonials on your website is very useful as it not only showcases your quality but improves your firm’s reputation

Increase brand awareness

As a law firm, it is necessary to adopt a dynamic marketing approach and evolve with the times if you intend to remain relevant. As highlighted previously, having a website that’s properly optimized for mobile devices is critical to achieving widespread recognition.

According to Statista, of all website traffic generated globally in 2018, more than 50 percent came from mobile devices; they are now currently accounting for 50 per cent of all web page visits served globally. Therefore, having a mobile-friendly website is imperative when creating online awareness for your law firm.

Giving prospective clients the ability to easily access information about legal issues on their mobile devices will naturally attract visitors to your website. Also, ensure that all content on your website is easy to read on a mobile phone at different resolutions.

This article is provided by dNovo Group.

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Hong Kong protests create potential problems for Ottawa, says academic

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There are four or five flights a day from Vancouver to Hong Kong during the summer season. When they land this weekend, passengers will be met by a sea of protesters staging a three-day occupation of the Hong Kong airport’s arrivals hall.

The protesters are seeking international attention as the city enters its tenth straight weekend of political demonstrations that have, at times, been chaotic and violent.

Airport authorities are taking extra security measures and the Canadian government has raised its travel advisory.

Aside from monitoring local media and avoiding areas where large protests are unfolding, there are several issues for Canadians and Ottawa to consider.

“It’s a perfect storm of domestic tensions playing into international views on Beijing’s intentions and policies,” said Paul Evans, a global affairs professor at the University of B.C. “The dissatisfaction fuelling the protests is, in part, about feelings about freedom, democracy and Hong Kong’s autonomy. But it is also about material concerns related to housing, social services and career prospects.”

The oft-quoted number of Canadian passport holders in Hong Kong is about 300,000. This is an estimate made in 2011 by the Asia Pacific Foundation, which, at the time, said it was based on “conservative assumptions” and that a higher estimate would be over half a million.

There are concerns that, should the situation spiral out of control, there would be protection issues for the federal government to manage. After the Tiananmen Square massacre in Beijing in June 1989, several thousand Canadians were airlifted out of China. But the large number of Canadians in Hong Kong would make evacuation and consular protection much more challenging.

A more immediate issue is Ottawa’s response to the prospect of protesters fleeing arrest by Hong Kong authorities and seeking refuge in Canada.

“Vancouver is already in the global spotlight as a result of the (Huawei executive) Meng Wanzhou arrest and hearings,” said Evans. “Considering the huge number of connections between the two cities, managing requests for political asylum has the potential to put Vancouver in the spotlight in an even bigger way.”

Despite the advisory, many in Hong Kong report a sense of order now that they have adjusted and life is continuing around the protests.

“Local social media is providing good updates regarding the locations and times of the protests,” said Eric Li, a professor of marketing at the University of B.C. Okanagan who is visiting family in Hong Kong and doing some research.

He added that some visitors might be getting limited information if they are only relying on official announcements from government channels.

Li said he feels safe, but “there has been more tension and conflict between the government and police and citizens as well as businesses. The pro-(Beijing) camp and protesters are criticizing each other and there are also (arguments) within families and between friends and colleagues.”

Li has been trying to be “neutral” as a “personal choice. As a person who calls Canada ‘home,’ and Hong Kong ‘my hometown,’ I should say the young protesters are very well-organized and disciplined. The government should actively engage youth in their planning rather than excluding them in the process or putting them in an opposition position.”

“It’s crucial for the Hong Kong government to take a few steps to resolve conflicts through providing open conversation with key stakeholders and young leaders. And protesters should remind themselves the purpose of the (protests) as well as the consequences of their (actions).

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PROREIT buying office, industrial buildings in Ottawa, Halifax

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(PROREIT) will use some of the proceeds from its latest, and largest, share offering to help it purchase two office and industrial properties in Ottawa, and five industrial properties in Halifax for $97.8 million.

(PROREIT) will use some of the proceeds from its latest, and largest, share offering to help it purchase two office and industrial properties in Ottawa, and five industrial properties in Halifax for $97.8 million.

“These acquisitions provide meaningful increases in our industrial sectors and expand our presence in Ontario and the strengthening Halifax market,” president and chief executive officer James Beckerleg told RENX.

PROREIT (PRV-UN-T) is acquiring a fully occupied boutique office building in Ottawa’s central business district. It’s surrounded by tourist sites, multiple restaurants and retail offerings.

PROREIT is also purchasing a class-A mixed-use, multi-tenant flex industrial property in the west-end Ottawa suburb of Kanata. It includes an office and a research and lab facility with what the trust calls exceptional power, air handling and cooling specifications.

The building is fully leased and its tenants are in the material sciences, defence, communications and medical technology fields.

The two Ottawa properties have a combined gross leasable area of 338,000 square feet and a weighted average lease term of 6.6 years. Many of the leases include contracted rent steps.

While the property addresses and additional details are confidential until the deals close, which is expected this quarter, Beckerleg said they’re both institutionally owned and have been maintained to high standards.

The addition of the Ottawa properties will increase PROREIT’s portfolio exposure to the Ontario market to 29.1 per cent by gross leasable area and 29.3 per cent by base rent, making it the REIT’s largest provincial market. It increases the Ottawa portfolio to approximately 620,000 square feet.

“We entered the Ottawa market with our $52-million portfolio acquisition of five office properties last year,” said Beckerleg. “This fits our strategy of investing in strong markets where we can increase our exposure to both of these industry sectors.

“Ottawa is seeing significant growth in office and industrial properties.”


PROREIT’s new Halifax acquisitions

PROREIT has a contract to acquire five light industrial buildings with clear heights of between 18 and 24 feet in Halifax’s Burnside Industrial Park. The portfolio represents 358,000 square feet of gross leasable area.

The buildings are 93 per cent occupied with a weighted average lease term of 4.1 years. Many of the leases include contractual rent steps.

While more details won’t be made available until the deals close, which is expected this quarter, Beckerleg said the condition of the buildings is similar to its Ottawa office purchases. The five buildings have been institutionally owned and maintained at a high level.

“The Halifax industrial market has enjoyed declining vacancies in line with the expanding Halifax economy,” said Beckerleg. “There has been a marked increase in institutional interest in the Halifax industrial sector.

“We like this market. Again, it fits our strategy of focusing on mid-size cities with strong investment metrics.”

PROREIT’s $50-million offering

As part of its funding for the purchases, PROREIT will issue 7.15 million shares on a bought-deal basis at a price of seven dollars per unit, for gross proceeds of approximately $50 million, to a syndicate of underwriters.

PROREIT has also granted the underwriters an over-allotment option to purchase up to an additional 1,072,500 units on the same terms and conditions, exercisable at any time, in whole or in part, up to 30 days after the closing of the offering. It’s expected to close on or about Aug. 16.

“This capital raise, our first since graduating to the TSX, is the largest in PROREIT’s six-year history,” said Beckerleg. “We believe listing on the TSX and consolidating our units to trade in the seven-dollar range has substantially broadened our potential investor base. We believe the success of this capital raise confirms that.”

The Ottawa and Halifax acquisitions will be funded with approximately $30.8 million in cash from the offering and approximately $67 million in new mortgage financing at a weighted average interest rate of 3.4 per cent.

PROREIT intends to use $13 million from the offering to repay debt.

Impact of acquisitions on PROREIT’s portfolio

Upon completion of the acquisitions, PROREIT will own 91 income-producing commercial properties representing approximately 4.4 million square feet of gross leasable area and $625 million of gross book value, with a weighted average lease term of 5.7 years.

The acquisitions will also increase PROREIT’s industrial and mixed-use exposure by another 636,726 square feet to more than 2.8 million square feet. That represents 64 per cent of its total gross leasable area and 46 per cent of its total base rent.

While PROREIT has no other immediate acquisition plans, Beckerleg said opportunities are always being reviewed.

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