Author: Avalene Connelly

Buying a home, for most of us, is usually a onetime affair, so there are not many of us who can claim sufficient experience with this activity to make the transaction happen smoothly.

Now, you can get help from professionals who fully understand the ins and outs of mortgages. At G.A. Farrell & Associates we have a special program, Mortgage Assistance Plan (MAP), available to every client requiring a valuation report to purchase a property, at no extra cost to you.  G.A. Farrell & Associates offers expert guidance, garnered through years of experience in the mortgage industry, to help you through the entire mortgage process,

If you are in the market for a new home, here are some of things you should be doing:

• Decide early what you need, in terms of size, remembering to plan for the future before you start looking at homes. For example: – will you need a larger home because –
  1. Your children are growing up;
  2. You plan to have more children soon;
  3. Your elderly parents or in-laws will be moving in with you shortly.
• Get pre-approved from the mortgage-lending-institution of your choice. This way you will know exactly how much you can afford to pay for a home, not only help you with your real estate agent, as they will realize your actual intent therefore trying harder to find you a home that you like. Knowing your budget could also assist in negotiations with the seller since they know the chances of the deal closing are very good.

• Shop around, it is a good idea to look at several homes before making a decision. Besides seeing what is available, it also gives you an idea as to the value of homes.
• Do not be afraid to negotiate, it is the key to getting the best deal possible! Also, if you know why the owner is selling, it may help you in your negotiations.  Similarly, do not reveal too much information about your motivation for buying as it could work against you!
• When calculating the price of the home, do not forget to cater for Closing Costs on the transaction.  These can come up to a significant amount depending on the selling price of the property.  For a free estimate of these costs, please feel free to contact G.A. Farrell & Associates.

• When you decide on a property, get a valuation before signing the agreement. If not possible, then try and have a clause inserted in the Agreement that allows you to walk away from the deal, without financial loss, if the valuation report shows a figure lower than the price in the Agreement.  If this clause is not there, your loan amount could be affected and could result in your losing your deposit!
• It is very important that you get an attorney before you sign the agreement. Let your attorney review the agreement and advise you if there are any changes necessary.  It should be mentioned here that should the attorney that is preparing your Deed of Conveyance or Assignment be the same one that the bank uses to prepare the Deed of Mortgage, then the fees for the latter will be discounted 50% assuming the property does not fall under the Real Property Act (RPA) formerly Real Property Ordinance (RPO).

Buying a home might be the biggest investment of your life and at times, the task can seem very daunting to first-timers. It is a good idea to obtain expert guidance on the different steps and documents necessary, such as offered by the professionals at G.A. Farrell & Associates.

After years of keeping the benchmark federal funds rate at historic lows, the Federal Reserve has been raising it gradually. As you may be aware, rising rates can affect you as a consumer and investor.

The federal funds rate is the interest rate at which banks lend funds to each other overnight to maintain legally required reserves. Although the federal funds rate is an internal rate within the Federal Reserve System, it serves as a benchmark for many short-term rates set by banks and can influence longer-term rates as well. The Federal Reserve and the Federal Open Market Committee (FOMC) operate under a dual mandate to conduct monetary policies that foster maximum employment and price stability. Adjusting the federal funds rate is one way the central bank can influence economic growth and inflation.

In December 2008, the heart of the recession, the FOMC dropped the federal funds rate to a 0.00% to 0.25% range in an effort to stimulate the economy and generate job growth. Recently, the FOMC began to raise the funds rate because it believed that the employment situation was strong enough to begin the transition from emergency measures toward a more “normal” interest rate environment.

As they have indicated that this trend of increasing the federal funds rate is likely to continue, the Central Bank of Trinidad & Tobago has taken notice and has stated that the upward movement in international interest rates have not been matched by a commensurate movement in domestic rates. They go on to state that this narrowing of interest rate differentials could give rise to capital flow reversals.

The prime rate which US commercial banks charge their best customers is typically tied directly to the federal funds rate. Though actual rates can vary widely, small-business loans, adjustable rate mortgages, home equity lines of credit, auto loans, credit cards, and other forms of consumer credit are often linked to the prime rate, so the rates on these types of loans typically increase with the federal funds rate.

Although rising interest rates make it more expensive for consumers and businesses to borrow, retirees and others who seek income could eventually benefit from higher yields on savings accounts and CDs. However, banks have been faster to raise rates charged on loans than to raise rates paid on deposits.

Interest rate changes can have broad effects on investments, but the impact tends to be more pronounced in the short term as markets adjust to the new level. When interest rates rise, the value of existing bonds typically falls. Equities may also be affected by rising rates, though not as directly as bonds. It is however important to maintain a long-term perspective and make sound investment decisions based on your own financial goals, time horizon and risk tolerance.

(Based on an article dated June 21, 2017 by Delray Financial Group LLC –  http://delrayfinancialgroup.com/ )

How Much Has The Local Economy Declined In 2016?

Strangely enough, the answer seems to depend on whom you ask!  In the November 2016 Monetary Policy Report published by the Central Bank of Trinidad & Tobago, it was stated that “Following an overall decline of 0.6 per cent in 2015, GDP is estimated to have fallen by 6.7 per cent (year-on-year) in the first half of 2016, led by a contraction in the energy sector (10.8 per cent).” (https://www.central-bank.org.tt/sites/default/files/MPR%20November%202016%20-%20Draft.pdf).

The magnitude of the estimated drop caused a certain amount of alarm and concern in many quarters.  The main reason for the concern was that in the 2017 Budget Speech by the Minister of Finance, it was stated that real GDP is estimated to have declined by around 2.3 per cent in 2016.  The level of concern was apparently so great that the Central Bank has issued a “Public Education Statement” in an attempt to explain the apparent discrepancy. (https://www.central-bank.org.tt/sites /default/files/MPR-GDP%2014_11_16.pdf)

In a nutshell, the Central Bank of Trinidad and Tobago (CBTT) has stated that the Central Statistical Office (CSO) is the official source of GDP data (and is the data source that was used in the Budget) and produces same on an annual basis.  With a view to having such information on a more regular basis, the CBTT compiles a GDP index on a quarterly basis.  However, and this is very important to note, according to the CBTT, their quarterly GDP index “..does not include price effects…” and “…does not comprehensively cover all sub-industries measured by the CSO….”

It therefore means that the decline in the local economy might not be as bad as painted by the CBTT.  However, only time will tell.

Following an overall decline of  0.6 per cent in 2015, the Central Bank of Trinidad and Tobago has stated that GDP is estimated to have fallen by 6.7 per cent (year-on-year) in the first half of 2016, led by a contraction in the energy sector (10.8 per cent).  There is some uncertainty regarding the quantum of the decline which was addressed earlier by us and can be found at http://gafarrell.com/how-much-has-the-local-economy-declined-in-2016/.

The contraction in the energy sector was due to falls in both prices and production.  Not only have oil and gas prices fallen dramatically over the last year, but oil production has also declined steadily since late 2006 while natural gas production peaked in late 2009.  The decline has been attributed to three main factors: mature acreage, increased emphasis on safety and infrastructural upgrade.  The decline has also resulted in a 20% decrease in foreign exchange inflow from the energy sector.

This current environment of slowing economic activity has also led to:

• Worsening conditions in the labour market.  The latest data from the CSO indicate that the rate of unemployment increased to 4.4 per cent in the second quarter of 2016 from 3.8 per cent in the first quarter of 2016 and 3.2 per cent in the second quarter of 2015.
• Subdued inflationary pressures. According to the CSOs Index of Retail Prices (RPI), headline inflation on a year-on-year basis measured 3.0 per cent in September 2016, down from 3.5 per cent in April 2016.
• A 6.7% decline in the local stock market over the first nine months ending September 2016.
• A significant drop in the demand for commercial real estate rentals.  It is currently estimated that there are over 300,000 sq. ft. of vacant, commercial office space available for rent in and around Port of Spain.
• The slowing of real estate mortgage lending.  This has been exacerbated by higher interest rates as well as the worsening weaker labour market conditions referred to above.

On the bright side, there are several new energy projects such as the recently commissioned Angostura Phase 3 project by BHP Billiton, bpTT’s Juniper Project and EOG Resources’ Sercan Development.  It is anticipated that these should add a fair amount of natural gas to the local production horizon by early 2017. In addition, OPEC is currently attempting to agree to a decrease in oil output.

It would therefore seem that until such time that there is a recovery in energy prices and local production, the economy, and by extension the real estate market, could be in for a rough period.