Mortgage rates are near all-time lows but for the best deal, move to British Columbia.

The province has Canada’s most expensive housing but its residents are getting rockbottom rates thanks to a ferocious battle between B.C.’s credit unions and the banks.

B.C. home prices, Vancouver in particular, have long outpaced the rest of the country. The Canadian Real Estate Association said nationally home prices were up 8.9% in March from a year ago, but take out B.C. and the percentage shrinks to 4.3%.

The credit unions are another factor behind the higher prices in the province -loans from credit unions are as low as 3.64% on a five-year fixed rate closed mortgage. Canadians in other provinces, even hard negotiators, are lucky to get 4.19% from big banks.

There are several niche products that go lower but they usually come with a catch.

“I think it’s possible it could become part of the story,” said Benjamin Tal, deputy chief economist with CIBC World Markets, about the cheaper money driving up prices.

Elton Ash, regional executive vice-president of Re/Max of Western Canada, said his son-in-law is thinking about paying a penalty to break his mortgage to get a lower rate.

“The cheap rates have been a factor in condo sales in Vancouver and for first-time home buyers, not as much in larger homes,” Mr. Ash says.

The monthly payment on a 4.19%five-yearclosed$500,000 mortgage amortized over 30 years would be $2,431.65. Total interest over the mortgage period would be $99,250.85.

Lower the rate to 3.64% and see what happens. The monthly payment goes down to $2276.80 and the interest paid over the term drops to $85,956.42.

Vancouver-based mortgage broker Robert McLister said he’s never seen the gap between banks and credit unions this wide. “The credit unions are flush with cash,” he said, referring to money deposited during RRSP season. That cash has to be deployed.

Part of the discrepancy is due to banks raising rates over the last month to match five-year government of Canada bond increases. “If their cost of funding [mortgages] goes up, the banks raise their rates,” the mortgage broker said.

But bond yields have dropped 30 basis points since April 11 and the banks have been slow to compensate for the situation, waiting to see if rates go back up. Mr. McLister says the banks raise rates more quickly than they lower them.

“We just have retail deposits and that’s what we use for funding,” says Norman Krannitz, vice-president of treasury of Coast Capital. “We looked at our deposits rates and they weren’t going up so we decided to ride it out. We love the business we are getting.”

The discounting is widespread among B.C. credit unions. Vancouver City Credit Union is offering 90 basis points off prime for a five-year variable rate product, compared to 75 basis points from the banks. It will also go as low as 3.64% on a five-year fixed rate product if you bring two pieces of your banking to them.

“The money business is generally a commodity business. There is generally very little difference in price,” said Richard Seres, vice president of marketing with Vancity.

Before you get too jealous, there are good deals in other parts of Canada but also less willingness from consumers to stray from established banks.

“We had a succesful RRSP and we raised a lot of cash. It’s such a competitive marketplace we have had to stay significantly below the banks,” said Jack Vanderkooy, chief executive of Toronto-based DUCA Financial Services Credit Union Ltd. His credit union offers a five-year 3.89% fixed rate mortgage, lower when you consider profit participation. Someone with a 4% mortgage last year borrowed at 3.7%, counting profits.

John Turner, director of mortgages with Bank of Montreal, said it comes down to lending costs for banks. “In general terms, our rates are competitive,” he says.

Fair enough, but not today. And not in British Columbia for sure.

While plenty of individuals live from paycheque to paycheque, most consumers know they should be saving money and reducing debt. The recession has drummed that concept into everyone’s head as people have watched their neighbours and friends lose jobs and sometimes their home.

Many people say that money worries keep them awake at night, but that doesn’t necessarily translate to imminent bankruptcy. How do you know when you are truly teetering on the edge of a financial disaster versus simply needing to do a little belt-tightening?

Here are nine signs that indicate you are heading for trouble and may be unable to pay your mortgage in upcoming months:

1. Late Fees

If you missed a payment or let your bill go past due because you didn’t have the money to pay your mortgage or another bill on time, you need to re-evaluate your budget. Not only does this indicate an imbalance between your income and expenditures, but it will also ruin your credit score, potentially causing your creditors to increase your interest rate.

2. You Can’t Pay All of Your Bills

Every month, you are forced to decide which bills to pay and which bills to ignore. A lot of people opt to pay their credit card bill to stop harassment from the credit card company and to make sure they have available credit. But it is far more important to pay the bills that protect your home first. Always pay your mortgage first so that you will have a place to live. Next, pay for your car so that you can get to work and keep your job.

3. Making Minimum Payments on Credit Cards

In your mind, paying the minimum due on each bill may mean you are keeping up with your financial commitments, but financial experts know that minimum-only payments are a key indicator of financial distress. While this may mean that you carry too much debt, this also means that all your income is barely covering your spending. Take a careful look at your mortgage payment, other debts and your income to get back on track. Paying only the minimum on credit cards will extend your debt for years and amass expensive interest payments.

4. No Emergency Savings

While amassing six to 12 months of funds to cover you expenses, as many financial planners now recommend, may be a monumental task, every homeowner should have at least one month’s worth of expenses in the bank. At the very least, you need to have enough money in a savings account or a money market fund to pay your mortgage for one month if your income drops or disappears. If you cannot save that much money you need to seriously evaluate your overall household budget.

5. You Can’t Afford Maintenance

Your home needs to be painted and your dishwasher broke two months ago. If you are ignoring basic maintenance because you cannot afford to buy paint or call a repairman, this is a significant indication that you are in financial trouble. Not only does this show that you don’t have any emergency savings or a home maintenance budget, but this will also reduce the value of your home.

6. Reduced Income

Money is already tight and now your work hours have been reduced or you have been laid off. If meeting your monthly budget depends on every dime you earn, then even a small reduction in income can be a disaster. Search for a new job or a second job and, at the same time, start slashing your budget as much as you can.

7. Using Credit or Cash Advances to Pay Bills

You are using your credit cards or, even worse, cash advances on credit cards to pay other bills such as a utility bill or to buy groceries or just to have cash in your pocket. This is a strong indication that your spending is outpacing your income and it is extremely expensive. You need to put yourself on a debt management program or perhaps meet with a credit counselor to straighten out your finances.

8. Using Your Retirement Fund

You have borrowed money from your retirement account for your mortgage payment or other debt. This could seriously jeopardize your future financial security.

9. You’re Maxed Out

One or more of your credit card balances has reached or, worse, gone over the limit. If you are transferring your balances to new accounts in order to avoid paying the debt, this is a sign of a financial imbalance. If you are applying for new credit cards because your other cards have reached their limit, you are in serious danger of a financial meltdown. While you may be making your mortgage payments just fine, if you cannot control your use of credit cards it can be an indication that housing payments are too high.

While these financial woes can mean that you cannot afford your home, they may also be a sign that your spending is out of control. For most people, the mortgage payment is the largest monthly bill, so they often assume that the size of their mortgage is the problem. If your housing payment fits into that budget but you are having difficulty making your payment, then the issue may be that you have taken on too much other debt. Whether the problem is your mortgage or your other debt, you need to find a way to reduce your spending and/or boost your income before the situation gets worse.

The Bottom Line

Handling financial problems is never easy, but the first step is always to know what you owe. Solutions can only become clear once you have every bill written down with the amount owed, the monthly payment and the interest rate you are being charged. Pencil and paper work just fine, or you can create a spreadsheet or invest in some personal finance software. The important thing is to know where you stand so you can create a plan that will get your money under control.

The housing bust horror flick is now giving way to a very unwelcome sequel: a big squeeze on the cost of renting.

The number of renters paying more than half of their income towards rent has hit record levels, according to a new study by the Joint Center for Housing Studies (JCHS) of Harvard University.

Rental affordability is a critical issue for seniors, who live on fixed incomes and already are coping with low yields on their savings, fast-rising healthcare expenses and stagnant Social Security benefits. Yet the struggle with affordability is found most often among low-income Americans; JCHS found that 75 percent of renters in the lowest quartile of income are spending more than half of their income on housing. JCHS also found that lower-middle class renters also are having trouble finding affordable rental housing.

For example, 33 percent of renters with annual income of $14,500 to $30,000 are facing “severe burdens” in finding affordable rent. And the problem is growing most rapidly among demographic groups traditionally less likely to have affordability problems, including younger households, married couples with children and renters with some college education.

“These are astounding numbers,” says Eric Belsky, managing director of JCHS. “If you are spending half of your income on housing, you have very little to spend on everything else.”

The problem stems from a mismatch of supply and demand of affordable rental housing in the wake of the housing crash. The recession pushed up vacancy rates, and depressed rents, property values and new multi-family unit construction. Meanwhile, the foreclosure crisis has sparked a substantial increase in the number of former owners who now need to rent— just at a moment when development of new affordable housing units has stalled:

The supply gap for very low-income renters (with incomes up to 50 percent of area medians) also increased. In 2003, 16.3 million of these households competed for 12.0 million affordable, available, and adequate units. In 2009, these renters numbered 18.0 million while the supply of units dipped to 11.6 million, widening the gap from 4.3 million to 6.4 million units.

Meanwhile the recession has depressed income, further affecting affordability. Median monthly renter income, adjusted for inflation, has fallen during this decade from $2,950 in 2000 to $2,659 last year.

 Rental rates fell through the economic downturn, but were rising at a 2.3 annualized rate last year, according to data quoted by JCHS from MPF Research (see chart). And that rate is expected to accelerate further as the recovery gains steam.

Households headed by adults over age 65 account for about 13 percent of renters, according to JCHS, with another 10 percent headed by adults age 55-64.

How are seniors coping? In part by sharing housing with family members, according to Richard Baron, chief executive officer of McCormack Baron Salazar, a St. Louis-based for-profit developer of affordable housing. “People are doubling up, because they don’t have other options.”

The AARP Public Policy Institute reported earlier this month that the recession has sparked a sizable increase in intergenerational households, from 6.2 million in 2008 to 7.1 million last year – a faster rate of growth than AARP found in the last eight years combined.

The country’s looming age wave also will be a factor driving rents upward in the years ahead, notes Christopher Herbert, director of research at JCHS. “The retirement of boomers will push up the total number of older renters,” Herbert says. “It’s not that more of them will convert from home ownership to renting, but simply that those who rent now will continue to do so – and they represent some very large numbers.”

Like all housing matters, federal programs and policy loom large in matters of affordable rentals. But federal housing policy hasn’t kept pace with the changing rental market. The most significant existing federal program is the Low Income Housing Tax Credit (LIHTC), which aims to stimulate availability of capital for the purpose of replenishing affordable housing stock. An array of vouchers and other subsidies also help some renters.

But the JCHS study notes that the federal programs are focused mainly on the lowest-income renters, so won’t address the growing need in higher income brackets.