Gamble on variable-rate mortgages, says prof

When it came time to seek advice on mortgages and government investment certicates, the National Post and Toronto Star turned to Moshe Milevsky, finance professor at York’s Schulich School of Business, for expert opinion stories April 15.

The Post said Milevsky still insists the gamble of staying short with variable rate mortgages is worth it. Floating rate mortgages are lower than five-year fixed rates 85 per cent of the time, said the professor in his 2001 report, “Mortgage Financing: Floating your way to prosperity.” There he compared two borrowers, Shelly Short and Linda Long, with $100,000 mortgages amortized over 15 years. The five-year fixed rate then was 7.5 per cent and variable 6.5 per cent. Over the last three years, both paid a total of $28,749 in principal and interest, but far more of Shelly Short’s payments went to paying down principal because of her one per cent lower rate.

Milevsky is well aware of the cyclicality of interest rates and the chances of an inverted yield curve reoccurring, but is sticking to his guns and staying short personally. He advises consumers not to speculate on the future direction of rates but to focus on their budgeting ability to withstand fluctuating mortgage payments. First-time home owners should lock in, he suggested, but “risk averse worrywarts” should diversify by splitting their mortgages into two parts: one variable and one fixed. Milevsky points out that those with variable rate mortgages always have the option of locking in future financing, while the reverse is not true. “Consumers that borrow long but decide to terminate (break) their mortgage in order to refinance at lower costs, usually face three to four months of interest penalty.” This lack of symmetry is another reason to go short, Milevsky said.

The Star also cited Milevsky’s floating strategy in an April 15 story comparing fixed and variable mortgage rates. “What people tend to lose sight of is that a fixed-rate mortgage is insurance,” said Milevsky. “If you need protection, if you don’t think you’ll be able to handle the higher payments should rates begin to rise, then that’s definitely a better option.”

In a separate story about slow-earning guaranteed investment certificates, the Star cited a new study that looks back over the past 30 years by Milevsky, Amin Mawani and Josh Landzberg. The researchers say, if anything, things have improved as interest and tax rates have fallen. They have calculated that savers with a tax rate of more than 35.5 per cent would have lost buying power if they invested money in one-year GICs in 1972, then rolled the proceeds into a new GICs at the start of each year until 2003. Milevsky said he was frankly surprised at the bad results for GICs held outside of a registered retirement savings plan or registered education savings plan. He jokes that even stamps, fine wine, art and classic cars would be better than GICs. “At least you’re not taxed every year.”

At Coca-Cola Bottling Co., they call it a vending machine in a box. Designed to fit in the fridge and automatically dispense the pop, the Fridge Mate is the biggest innovation in packaging in a decade at the world’s largest soft-drink company, reported the Toronto Star April 15. The Canadian unit is investing $10 million to convert its production lines and launch a marketing campaign. It’s banking on a big payoff. Marketing expert Alan Middleton isn’t surprised. Packaging can play a significant role in consumers’ decisions about which products to buy, said the professor of marketing in York University’s Schulich School of Business. The three things that most influence consumers are the package’s appearance, ease of use and disposability, he said, citing several examples.

Centre court may be buried under a pile of rubble, but construction is on schedule at the Rexall Centre tennis complex at York University, reported the Toronto Sun April 15. The first of 12,500 seats has been snapped into place as the contractors work to complete the building for the Tennis Masters tournament, which starts July 24. The existing tennis complex will be demolished and turned over to York University.

The National Ballet of Canada is now preparing a Toronto mounting of the classic Cinderella(May 8-16 at the Hummingbird Centre) as envisioned by artistic director James Kudelka, reported the Globe and Mail April 15. The familiar Prokofiev score will underpin a Kudelka modernization in which the prince is ambivalent about the pomp in which he’s trapped, while the elusive girl of the fireplace cinders ultimately provides wisdom about a simpler approach to home and hearth. aAs the artistic director explained to Penelope Reed Doob, Chair of York’s Dance Department, he wanted to find a happiness for his protagonists that wasn’t about “being rich and famous” in the usual happily-ever-after sense of the story.

The story goes that Toronto music-promoter legend Gary Topp gets handed a CD of songs by a young guy who’s a counsellor at Camp Tamakwa in Algonquin Park, begins a Globe and Mail story April 15 about Andrew Haughton. Since then, Topp has had the kid playing around town, starting with neighbourhood gigs at a Timothy’s coffee shop, opening at clubs for such bands as the Rheostatics and, in the career apogee to date, opening for Chris De Burgh at a sold-out Hummingbird Centre. He now has a fiancée and plans for a wedding this summer. “It might be tough at first but I’ve found the person I want to spend my life with,” declared Haughton of the “wonderful, beautiful” Joanna, the young woman he “had a crush on from afar” while a first-year student at York University. (He graduated with a BA in cultural studies in 2003.)

• Debra Pepler, psychology professor and youth aggression expert with York’s Lamarsh Centre for Research on Violence & Conflict Resolution, and a psychologist with the Hospital for Sick Children, discussed good and bad aspects of zero-tolerance policies in schools, and resultant suspensions and expulsions on CBC Radio’s “Metro Morning” April 14.
  
• Timothy’s Coffee is to split revenues from shade-grown, South American coffee with York University, reported CFTR-AM’s “Early AM Business” April 14.