CAAMP to Honour Angela with Award at Hall of Fame & Awards Night in Toronto
Dominion Lending Centres is proud to announce that Angela Calla, Mortgage Broker with Dominion Lending Centres BC based in Coquitlam, British Columbia, is the recipient of the prestigious Accredited Mortgage Professional (AMP) of the Year Award.
Each year, CAAMP recognizes one AMP through this award who demonstrates outstanding commitment to supporting and enhancing the designation to their peers and mortgage consumers.
Angela has been a licensed Mortgage Broker for five years – since she was 22 years old. She has been with Dominion Lending Centres since its inception in January 2006. Angela launched her career after recognizing the opportunity for mortgage brokering to marry her passion for real estate with smart financial planning.
Through her daily business practices and involvement with the media, Angela promotes herself as an AMP who strives to educate her clients and take the fear out of mortgage financing. A regular expert guest on Realty Television and Breakfast Television, Angela has also been a source for articles in the Globe and Mail, as well as several other publications and local radio stations.
Additionally, Angela hosts The Mortgage Show in Vancouver on talk 1410AM – now in its third season!
Angela will be formally recognized and presented with the AMP of the Year Award during CAAMP’s Hall of Fame and Awards Night on Sunday, November 22nd at the Metro Toronto Convention Centre.
Congrats, Angela!
Your DLC Head Office Team
This message was sent from DLC Head Office Team to acalla@dominionlending.ca. It was sent from: Dominion Lending Centres Inc., 2189 Austin Ave., Coquitlam, BC V3K 3R9, Canada. You can modify/update your subscription via the link below.
Friday, October 30, 2009
Monday, October 26, 2009
Variabel Rate the best long term option?
Study says variable-rate mortgages better deal for borrowers most times
The Canadian Press
TORONTO - Fixed mortgage rates may help you feel secure in your budgeting, but the Bank of Montreal (TSX:BMO) says the more volatile variable rate mortgages will save you money in the long run.
The bank put out a report Friday showing that, over the past 30 years, variable-rate mortgages have been more cost-effective about 82 per cent of the time.
That may come as a surprise to some after studies have shown many Canadians prefer a fixed-rate mortgage.
A fixed rate locks the borrower into a set interest rate for a certain period of time.
That gives many borrowers peace of mind knowing how much money to set aside each month for their mortgage payment.
Variable rates change along with interest-rate moves.
BMO said the Bank of Canada's overnight lending rate is at its lowest possible point now, which could mean there are fewer benefits to a variable rate in the foreseeable future.
BMO highlighted two historical periods when fixed rates were considered beneficial - in the late 1970s and late 1980s - and both were just before interest rates started rising again.
The bank added that the current interest environment is similar to both of these periods.
"Short-term rates are at extreme lows and pressure is likely to build for higher rates in the year ahead," said deputy chief economist Doug Porter in the report.
"The question of whether to lock in to a longer-term fixed mortgage rate or stay in a variable rate has become an increasingly complex and important issue."
Canada has been in a long-term declining rate environment since the early 1980s, the bank suggested.
As a result, the spread between five-year fixed mortgages and variable mortgages has been pushed wider in recent years, and is now near an all-time high.
The Canadian Press
TORONTO - Fixed mortgage rates may help you feel secure in your budgeting, but the Bank of Montreal (TSX:BMO) says the more volatile variable rate mortgages will save you money in the long run.
The bank put out a report Friday showing that, over the past 30 years, variable-rate mortgages have been more cost-effective about 82 per cent of the time.
That may come as a surprise to some after studies have shown many Canadians prefer a fixed-rate mortgage.
A fixed rate locks the borrower into a set interest rate for a certain period of time.
That gives many borrowers peace of mind knowing how much money to set aside each month for their mortgage payment.
Variable rates change along with interest-rate moves.
BMO said the Bank of Canada's overnight lending rate is at its lowest possible point now, which could mean there are fewer benefits to a variable rate in the foreseeable future.
BMO highlighted two historical periods when fixed rates were considered beneficial - in the late 1970s and late 1980s - and both were just before interest rates started rising again.
The bank added that the current interest environment is similar to both of these periods.
"Short-term rates are at extreme lows and pressure is likely to build for higher rates in the year ahead," said deputy chief economist Doug Porter in the report.
"The question of whether to lock in to a longer-term fixed mortgage rate or stay in a variable rate has become an increasingly complex and important issue."
Canada has been in a long-term declining rate environment since the early 1980s, the bank suggested.
As a result, the spread between five-year fixed mortgages and variable mortgages has been pushed wider in recent years, and is now near an all-time high.
Friday, October 23, 2009
What a strong Loonie means for interest rates
BoC focus on consumers worries analysts
Paul Vieira, Financial Post
OTTAWA -- Mark Carney, the governor of the Bank of Canada, said Thursday consumers would be at the "heart" of an economic recovery that continues to pick up steam, leaving analysts worrying a new wave of spending will only drive consumers deeper into debt.
Improved financial conditions and consumer confidence, coupled with indications that labour market conditions "may have" ceased deteriorating, has led the Bank of Canada to believe consumer spending will account for a larger share of total economic growth in the years ahead, according the central bank's quarterly economic outlook, released Thursday.
Consumer spending will offset some of the losses in the export-oriented sector, which is expected to contract 1% next year due to the strength of the Canadian dollar.
"The conundrum for the central bank is the longer they keep interest rates low, the more likely it is that it will create [a debt] problem," said Andrew Pyle, wealth advisor and markets commentator with ScotiaMcLeod.
The central bank upgraded growth projections for the second half of 2009, seeing expansion of 2% for the third quarter and 3.3% for the fourth quarter.
The bank previously expectated 1.3% and 3% in the third and fourth quarters, respectively. Then, the economy is set to expand 3% next year and 3.3% in 2011.
In 2010, consumer spending is set to contribute half of the growth in final domestic demand, which includes consumer purchases, housing, public spending and business investment. By 2011 it will climb to three-quarters.
This reliance on consumers has analysts wondering whether Canadians might find themselves caught in a debt trap, especially given the current low cost of borrowing -- as led by the Bank of Canada's record-low 0.25% policy rate.
Laurentian Bank Securities has noted that household credit as a share of GDP (currently at 90%) and the household debt-to-GDP ratio (at 140%) are "quite elevated" and kept creeping up during the recession.
At a media conference, Mr. Carney said the bank believes, all told, savers will outstrip borrowers, as incomes begin to grow on better job market conditions. He told reporters households should plan their financial affairs "prudently" on the anticipation that interest rates will eventually return to a more normal level.
That might be easier said than done, said Stewart Hall, an economist at HSBC Securities Canada. He said history and markets demonstrate consumers respond to cheap prices, whether it is for gas or for financing.
"The Bank of Canada [seems] to have removed themselves from the dynamic of cheap money ... and instead fallen back on the view that, at best, we are simply seeing pent-up demand and at worst ... that lenders and borrowers will self regulate and act in a prudent way," Mr. Hall said. "The heart wants what the heart wants and many a purchase, houses included, prove emotional rather than prudent."
Mr. Carney said the housing market dynamic has "raised some concerns" at the central bank, although it anticipates housing growth to slow down in early 2010 as pent-up demand for real estate is met, affordability declines and the federal home-renovation tax credit expires.
The strengthening dollar, the bank said, is driven in large part by the weakness in the U.S. currency. This, however, may be one of the consequences of unwinding global imbalances, as Americans will need to increase its exports and savings to generate wealth.
Large loonie hard to hurdle Strong dollar will be a drag on recovery, Carney saysBy JULIAN BELTRAME The Canadian Press
OTTAWA — The stubbornly strong loonie is the major impediment to the Canadian economy rebounding more strongly from the recent deep recession, says Bank of Canada governor Mark Carney.
In a new warning about the currency that is approaching parity with the U.S. greenback, Carney says Canada would experience noticeably stronger recovery next year and in 2011 if the loonie had stayed at the 87-cent level the bank envisaged in the summer.
Carney said Thursday that’s why the bank made it clear this week that barring an unforeseen spike in inflation, it will keep interest rates at the historic low of 0.25 per cent until at least next July.
Carney said the central bank has several tools at its disposal, including intervention in the currency market, but didn’t specify which would be put to use.
""Intervention is always an option," he said.
"Markets should take seriously our determination to set policy to achieve the inflation target. Markets sometimes lose their focus. We don’t lose our focus."
The loonie closed 0.16 of a cent lower at 95.44 cents US on Thursday, but many expect it to hit parity in the next few months, mainly because of weakness in the American dollar, which has dropped against most of the world’s major currencies.
A high loonie makes it cheaper to take U.S. vacations and buy imported goods. But it also harms the Canadian manufacturing sector because it makes exports of everything from minerals and metals to newsprint, machinery and lumber more expensive for buyers in the United States, Canada’s main export market.
Carney called the loonie’s persistent rise since July ""the major downside risk" to the economy, noting that although the loonie was higher two years ago, the difference now is that it comes during a period of severe economic weakness.
His comments came after the central bank issued a comprehensive 28-page quarterly review of the global economy, showing a sharp rebound is underway, fuelled by government stimulus and the need to restock depleted inventories.
But in Canada, the strong burst in activity will last at most a few months more before giving way to the slow and difficult climb back from the deep hole that the recession dug over the past year, the review adds.
The bank is more optimistic about the second half of this year than it was three months ago, noting modest employment gains in August and September.
In a supporting report, Statistics Canada announced that retail sales jumped 0.8 per cent in August to $34.5 billion, largely as a result of strong activity at new car dealerships and at gas stations.
"When the labour market fares well, good things tend to happen to the rest of the Canadian economy," said CIBC economist Krishen Rangasamy.
The domestic economy is now expected to record a two-per-cent gain in the third quarter — the July-September period — and 3.3 per cent during the last three months of this year. The Bank of Canada’s July forecast called for growth of 1.3 per cent and three per cent, in the third and fourth quarters respectively.
A number of things have broken right for Canada to make this happen. Commodity prices, particularly oil, have firmed up, financial markets have stabilized faster than expected, and the global economy, particularly in China, has rebounded quicker and stronger than expected.
And consumers have bounced back strongly, although the manufacturing export sector continues to struggle. There are also concerns about how future government restraint might erode growth as Ontario, Alberta and the federal government warn of spending curbs to cope with large deficits.
That will be more a problem after 2011 when many temporary stimulus measures reach sunset and governments try to work off massive deficits, said TD Bank economist Pascal Gauthier. But he believes governments will play it by ear when they start withdrawing stimulus, or enact deep spending cuts.
""I don’t think the governments themselves could cause a recession because by that time we will have some clarity on whether the private-sector recovery has some legs in it," he said.
For the next two years, however, it will be the loonie that cuts away at economic growth, the bank’s outlook argues.
Even if the dollar averages 96 cents US, and does not go above parity as some expect, the impact on the export side of the economy will severe enough to restrict growth to 3.0 per cent in 2010 and 3.3 per cent in 2011, a smaller bounce than normally follows deep recessions.
""Over the balance of the projection period, growth is slightly lower, reflecting the effect of the higher value of the Canadian dollar," the bank said, noting that a high dollar will make life difficult for manufacturers to sell in foreign markets.
On Tuesday, the bank issued a similar warning when it reaffirmed, in strong words, that it intends to keep interest rates at the historic low of 0.25 per cent at least until next summer.
The language had the desired impact of driving the loonie down nearly two cents Tuesday.
Still, no economist believes Carney strong warnings will be sufficient to keep the loonie grounded for long. In the final, analysis, the bank believes it has already set back by three months the recovery period.
It won’t be until late 2011 — two full years from now — that Canada’s economy will again be hitting on all cylinders, the bank says.
Paul Vieira, Financial Post
OTTAWA -- Mark Carney, the governor of the Bank of Canada, said Thursday consumers would be at the "heart" of an economic recovery that continues to pick up steam, leaving analysts worrying a new wave of spending will only drive consumers deeper into debt.
Improved financial conditions and consumer confidence, coupled with indications that labour market conditions "may have" ceased deteriorating, has led the Bank of Canada to believe consumer spending will account for a larger share of total economic growth in the years ahead, according the central bank's quarterly economic outlook, released Thursday.
Consumer spending will offset some of the losses in the export-oriented sector, which is expected to contract 1% next year due to the strength of the Canadian dollar.
"The conundrum for the central bank is the longer they keep interest rates low, the more likely it is that it will create [a debt] problem," said Andrew Pyle, wealth advisor and markets commentator with ScotiaMcLeod.
The central bank upgraded growth projections for the second half of 2009, seeing expansion of 2% for the third quarter and 3.3% for the fourth quarter.
The bank previously expectated 1.3% and 3% in the third and fourth quarters, respectively. Then, the economy is set to expand 3% next year and 3.3% in 2011.
In 2010, consumer spending is set to contribute half of the growth in final domestic demand, which includes consumer purchases, housing, public spending and business investment. By 2011 it will climb to three-quarters.
This reliance on consumers has analysts wondering whether Canadians might find themselves caught in a debt trap, especially given the current low cost of borrowing -- as led by the Bank of Canada's record-low 0.25% policy rate.
Laurentian Bank Securities has noted that household credit as a share of GDP (currently at 90%) and the household debt-to-GDP ratio (at 140%) are "quite elevated" and kept creeping up during the recession.
At a media conference, Mr. Carney said the bank believes, all told, savers will outstrip borrowers, as incomes begin to grow on better job market conditions. He told reporters households should plan their financial affairs "prudently" on the anticipation that interest rates will eventually return to a more normal level.
That might be easier said than done, said Stewart Hall, an economist at HSBC Securities Canada. He said history and markets demonstrate consumers respond to cheap prices, whether it is for gas or for financing.
"The Bank of Canada [seems] to have removed themselves from the dynamic of cheap money ... and instead fallen back on the view that, at best, we are simply seeing pent-up demand and at worst ... that lenders and borrowers will self regulate and act in a prudent way," Mr. Hall said. "The heart wants what the heart wants and many a purchase, houses included, prove emotional rather than prudent."
Mr. Carney said the housing market dynamic has "raised some concerns" at the central bank, although it anticipates housing growth to slow down in early 2010 as pent-up demand for real estate is met, affordability declines and the federal home-renovation tax credit expires.
The strengthening dollar, the bank said, is driven in large part by the weakness in the U.S. currency. This, however, may be one of the consequences of unwinding global imbalances, as Americans will need to increase its exports and savings to generate wealth.
Large loonie hard to hurdle Strong dollar will be a drag on recovery, Carney saysBy JULIAN BELTRAME The Canadian Press
OTTAWA — The stubbornly strong loonie is the major impediment to the Canadian economy rebounding more strongly from the recent deep recession, says Bank of Canada governor Mark Carney.
In a new warning about the currency that is approaching parity with the U.S. greenback, Carney says Canada would experience noticeably stronger recovery next year and in 2011 if the loonie had stayed at the 87-cent level the bank envisaged in the summer.
Carney said Thursday that’s why the bank made it clear this week that barring an unforeseen spike in inflation, it will keep interest rates at the historic low of 0.25 per cent until at least next July.
Carney said the central bank has several tools at its disposal, including intervention in the currency market, but didn’t specify which would be put to use.
""Intervention is always an option," he said.
"Markets should take seriously our determination to set policy to achieve the inflation target. Markets sometimes lose their focus. We don’t lose our focus."
The loonie closed 0.16 of a cent lower at 95.44 cents US on Thursday, but many expect it to hit parity in the next few months, mainly because of weakness in the American dollar, which has dropped against most of the world’s major currencies.
A high loonie makes it cheaper to take U.S. vacations and buy imported goods. But it also harms the Canadian manufacturing sector because it makes exports of everything from minerals and metals to newsprint, machinery and lumber more expensive for buyers in the United States, Canada’s main export market.
Carney called the loonie’s persistent rise since July ""the major downside risk" to the economy, noting that although the loonie was higher two years ago, the difference now is that it comes during a period of severe economic weakness.
His comments came after the central bank issued a comprehensive 28-page quarterly review of the global economy, showing a sharp rebound is underway, fuelled by government stimulus and the need to restock depleted inventories.
But in Canada, the strong burst in activity will last at most a few months more before giving way to the slow and difficult climb back from the deep hole that the recession dug over the past year, the review adds.
The bank is more optimistic about the second half of this year than it was three months ago, noting modest employment gains in August and September.
In a supporting report, Statistics Canada announced that retail sales jumped 0.8 per cent in August to $34.5 billion, largely as a result of strong activity at new car dealerships and at gas stations.
"When the labour market fares well, good things tend to happen to the rest of the Canadian economy," said CIBC economist Krishen Rangasamy.
The domestic economy is now expected to record a two-per-cent gain in the third quarter — the July-September period — and 3.3 per cent during the last three months of this year. The Bank of Canada’s July forecast called for growth of 1.3 per cent and three per cent, in the third and fourth quarters respectively.
A number of things have broken right for Canada to make this happen. Commodity prices, particularly oil, have firmed up, financial markets have stabilized faster than expected, and the global economy, particularly in China, has rebounded quicker and stronger than expected.
And consumers have bounced back strongly, although the manufacturing export sector continues to struggle. There are also concerns about how future government restraint might erode growth as Ontario, Alberta and the federal government warn of spending curbs to cope with large deficits.
That will be more a problem after 2011 when many temporary stimulus measures reach sunset and governments try to work off massive deficits, said TD Bank economist Pascal Gauthier. But he believes governments will play it by ear when they start withdrawing stimulus, or enact deep spending cuts.
""I don’t think the governments themselves could cause a recession because by that time we will have some clarity on whether the private-sector recovery has some legs in it," he said.
For the next two years, however, it will be the loonie that cuts away at economic growth, the bank’s outlook argues.
Even if the dollar averages 96 cents US, and does not go above parity as some expect, the impact on the export side of the economy will severe enough to restrict growth to 3.0 per cent in 2010 and 3.3 per cent in 2011, a smaller bounce than normally follows deep recessions.
""Over the balance of the projection period, growth is slightly lower, reflecting the effect of the higher value of the Canadian dollar," the bank said, noting that a high dollar will make life difficult for manufacturers to sell in foreign markets.
On Tuesday, the bank issued a similar warning when it reaffirmed, in strong words, that it intends to keep interest rates at the historic low of 0.25 per cent at least until next summer.
The language had the desired impact of driving the loonie down nearly two cents Tuesday.
Still, no economist believes Carney strong warnings will be sufficient to keep the loonie grounded for long. In the final, analysis, the bank believes it has already set back by three months the recovery period.
It won’t be until late 2011 — two full years from now — that Canada’s economy will again be hitting on all cylinders, the bank says.
Wednesday, October 21, 2009
Carney wins round one with loonie taking currency down 2 cents with one blow
By Julian Beltrame, The Canadian Press
OTTAWA - The Bank of Canada took the wind out of the loonie's sails Tuesday, driving down the currency nearly two cents against the U.S. dollar with a warning that it was prepared to stick to low interest rates for some time.
And although the central bank's words have had short-term impacts on the currency before, this time the effect may last longer, economists said.
In one of the gloomier reports in months, the central bank's governing council declared that a strong loonie threatens Canada's economic recovery, saying its recent rise more than offset all the encouraging indicators seen over the summer.
"(The) heightened volatility and persistent strength in the Canadian dollar are working to slow growth and subdue inflation pressures," the bank said. "The current strength in the dollar is expected, over time, to more than fully offset the favourable developments since July."
As expected, the central bank kept its policy interest rate moored at the historic low of 0.25 per cent, the level it's been at since the spring.
The affect of the bank's statement could be seen immediately. The currency fell a penny against the U.S. dollar within minutes of the announcement and kept going, at one time trading down 2.17 cents U.S.
It closed on slightly better footing, though still down 1.98 cents at 95.17 cents U.S.
Economists said the reason for the big drop was not so much what the bank said about the dollar - it had made similar warnings for months - but more because markets had expected it would soon follow the lead of Australia, which has begun to raise interest rates.
Canada's central bank put a stop to that speculation Tuesday when it downgraded economic growth prospects for this year and 2011.
The bank now estimates the Canadian economy will shrink by 2.4 per cent in 2009, not 2.3 per cent as it predicted last month. Next year's forecast was unchanged at three per cent growth, but the bank downgraded its forecast for 2011 growth by two-tenths of a point to 3.3 per cent.
As significantly, it set back a full quarter its expectation for when economic output and inflation can be expected to return to where it wants them, to the fall of 2011.
"This is a somewhat more modest recovery in Canada than the average of previous economic cycles," the bank said.
With inflation nowhere in the horizon, there appears little urgency for governor Mark Carney to back off his conditional commitment to keep the central bank's policy rate at the lower bound of 0.25 per cent until next July. The thinking may be that short-term interest rates will stay at the historic floor even longer, perhaps until the end of next year.
"The delay in returning back to its target rate on inflation would allow a longer period of keeping rates on hold," said CIBC chief economist Avery Shenfeld.
"Financial markets tend to get edgy sitting still, but Carney is a man in no hurry to act."
Royal Bank currency strategist Matthew Strauss said Carney's gambit will have long-lasting impacts on the dollar.
That doesn't mean the dollar won't rise again, since the main driver will be oil prices and other external forces. But, he said, the bank governor has taken some of the speculation out of the calculation and going forward expects the loonie will underperform compared with other commodity-weighted currencies, such as the Australian dollar.
"It will definitely have an effect," he said. "Now the market knows exactly where the Bank of Canada and the Government of Canada stands."
Scotiabank economists Derek Holt and Karen Cordes said the markets should have seen it coming.
They wrote in a note to clients that it's ill-advised to lump Canada in with Australia, saying there are "night-and-day differences in the Canadian economy's export exposures and currency sensitivities."
Canada fell into a recession similar to one it experienced in the early 1990s, with its recovery prospects closely tied to the weak U.S. economy. Australia, which is benefiting from returning strong growth in China, never fell into even a technical recession.
Carney believes the Canadian dollar will keep future growth even more sluggish than it thought a few months ago.
Two indicators from Statistics Canada on Tuesday filled in the picture of an economy that is recovery, but not robustly.
The leading index of economic indicators rose 1.1 per cent in September, slightly less than the revised 1.2 per cent gain registered in August. And Canadian wholesalers took a hit in August as sales dropped 1.4 per cent.
The TD Bank said it now believes the Canadian economy likely contracted 0.2 per cent in August after a flat reading in July.
In September, the last time the bank pronounced on interest rates, Carney and the governing council had enthused that the recovery was going so well it was expecting to revise its July growth forecast that predicted 1.3 per-cent growth in the gross domestic product in the third quarter and three per cent in the fourth.
But that was when the bank expected the loonie to average 87 cents US through 2010.
OTTAWA - The Bank of Canada took the wind out of the loonie's sails Tuesday, driving down the currency nearly two cents against the U.S. dollar with a warning that it was prepared to stick to low interest rates for some time.
And although the central bank's words have had short-term impacts on the currency before, this time the effect may last longer, economists said.
In one of the gloomier reports in months, the central bank's governing council declared that a strong loonie threatens Canada's economic recovery, saying its recent rise more than offset all the encouraging indicators seen over the summer.
"(The) heightened volatility and persistent strength in the Canadian dollar are working to slow growth and subdue inflation pressures," the bank said. "The current strength in the dollar is expected, over time, to more than fully offset the favourable developments since July."
As expected, the central bank kept its policy interest rate moored at the historic low of 0.25 per cent, the level it's been at since the spring.
The affect of the bank's statement could be seen immediately. The currency fell a penny against the U.S. dollar within minutes of the announcement and kept going, at one time trading down 2.17 cents U.S.
It closed on slightly better footing, though still down 1.98 cents at 95.17 cents U.S.
Economists said the reason for the big drop was not so much what the bank said about the dollar - it had made similar warnings for months - but more because markets had expected it would soon follow the lead of Australia, which has begun to raise interest rates.
Canada's central bank put a stop to that speculation Tuesday when it downgraded economic growth prospects for this year and 2011.
The bank now estimates the Canadian economy will shrink by 2.4 per cent in 2009, not 2.3 per cent as it predicted last month. Next year's forecast was unchanged at three per cent growth, but the bank downgraded its forecast for 2011 growth by two-tenths of a point to 3.3 per cent.
As significantly, it set back a full quarter its expectation for when economic output and inflation can be expected to return to where it wants them, to the fall of 2011.
"This is a somewhat more modest recovery in Canada than the average of previous economic cycles," the bank said.
With inflation nowhere in the horizon, there appears little urgency for governor Mark Carney to back off his conditional commitment to keep the central bank's policy rate at the lower bound of 0.25 per cent until next July. The thinking may be that short-term interest rates will stay at the historic floor even longer, perhaps until the end of next year.
"The delay in returning back to its target rate on inflation would allow a longer period of keeping rates on hold," said CIBC chief economist Avery Shenfeld.
"Financial markets tend to get edgy sitting still, but Carney is a man in no hurry to act."
Royal Bank currency strategist Matthew Strauss said Carney's gambit will have long-lasting impacts on the dollar.
That doesn't mean the dollar won't rise again, since the main driver will be oil prices and other external forces. But, he said, the bank governor has taken some of the speculation out of the calculation and going forward expects the loonie will underperform compared with other commodity-weighted currencies, such as the Australian dollar.
"It will definitely have an effect," he said. "Now the market knows exactly where the Bank of Canada and the Government of Canada stands."
Scotiabank economists Derek Holt and Karen Cordes said the markets should have seen it coming.
They wrote in a note to clients that it's ill-advised to lump Canada in with Australia, saying there are "night-and-day differences in the Canadian economy's export exposures and currency sensitivities."
Canada fell into a recession similar to one it experienced in the early 1990s, with its recovery prospects closely tied to the weak U.S. economy. Australia, which is benefiting from returning strong growth in China, never fell into even a technical recession.
Carney believes the Canadian dollar will keep future growth even more sluggish than it thought a few months ago.
Two indicators from Statistics Canada on Tuesday filled in the picture of an economy that is recovery, but not robustly.
The leading index of economic indicators rose 1.1 per cent in September, slightly less than the revised 1.2 per cent gain registered in August. And Canadian wholesalers took a hit in August as sales dropped 1.4 per cent.
The TD Bank said it now believes the Canadian economy likely contracted 0.2 per cent in August after a flat reading in July.
In September, the last time the bank pronounced on interest rates, Carney and the governing council had enthused that the recovery was going so well it was expecting to revise its July growth forecast that predicted 1.3 per-cent growth in the gross domestic product in the third quarter and three per cent in the fourth.
But that was when the bank expected the loonie to average 87 cents US through 2010.
Tuesday, October 20, 2009
Why Canada's housing sector didn't collapse
Globe and Mail Update Published on Monday, Oct. 19, 2009
While it's tempting to think of a “housing correction” as a continent-wide phenomenon, National Bank Financial says the Canadian and U.S. markets couldn't be more different.
“The two have absolutely nothing in common,” senior economist Marc Pinsonneault wrote in an economic update Monday. “In Canada, the correction got under way much later and lasted nowhere as long.”
Mr. Pinsonneault said “prudent lending practices” in Canada prevented the housing market from falling as hard as its American counterpart, and pointed out that Canada's crisis was a side-effect of its recession rather than its cause.
Here are four ways the markets have differed:
Duration of slowdown
The Canadian market began to slide in October, 2008, while the American slump has lasted 2 1/2 years.
“People wishing to sell their homes either cut their asking price or quite simply took their property off the market,” he said of the Canadian market. “Lower interest rates, lower home prices and renewed consumer confidence led to a quick recovery in sales, so much so that as early as last May, these had surpassed pre-recession levels.
Price declines
According to Teranet, Canadian home prices fell 8.9 per cent from their August, 2008, highs to their recessionary lows eight months later. In the U.S., the S&P/Case Shiller index shows prices slid 33 per cent in 33 months.
Delinquency rates
Canadian banks have seen delinquency rates climb to 0.4 per cent, compared to the 0.65 per cent high reached in 1992. The number is far greater in the U.S., at 3.67 per cent.
Consumer spending
When home prices are under pressure, consumers tend to reel in the spending.
“According to Statistics Canada, from the end of Q3 2008 to mid-2009, the value of household real estate wealth sagged only 1.1 per cent,” he said. “The impact of this impoverishment on consumer spending has been negligible.”
In the U.S., the value of household real estate wealth dropped 18.2 per cent. The Federal Reserve estimates that for each dollar lost in housing wealth, consumer spending pulls back up to 15 cents.
Steve Ladurantaye
While it's tempting to think of a “housing correction” as a continent-wide phenomenon, National Bank Financial says the Canadian and U.S. markets couldn't be more different.
“The two have absolutely nothing in common,” senior economist Marc Pinsonneault wrote in an economic update Monday. “In Canada, the correction got under way much later and lasted nowhere as long.”
Mr. Pinsonneault said “prudent lending practices” in Canada prevented the housing market from falling as hard as its American counterpart, and pointed out that Canada's crisis was a side-effect of its recession rather than its cause.
Here are four ways the markets have differed:
Duration of slowdown
The Canadian market began to slide in October, 2008, while the American slump has lasted 2 1/2 years.
“People wishing to sell their homes either cut their asking price or quite simply took their property off the market,” he said of the Canadian market. “Lower interest rates, lower home prices and renewed consumer confidence led to a quick recovery in sales, so much so that as early as last May, these had surpassed pre-recession levels.
Price declines
According to Teranet, Canadian home prices fell 8.9 per cent from their August, 2008, highs to their recessionary lows eight months later. In the U.S., the S&P/Case Shiller index shows prices slid 33 per cent in 33 months.
Delinquency rates
Canadian banks have seen delinquency rates climb to 0.4 per cent, compared to the 0.65 per cent high reached in 1992. The number is far greater in the U.S., at 3.67 per cent.
Consumer spending
When home prices are under pressure, consumers tend to reel in the spending.
“According to Statistics Canada, from the end of Q3 2008 to mid-2009, the value of household real estate wealth sagged only 1.1 per cent,” he said. “The impact of this impoverishment on consumer spending has been negligible.”
In the U.S., the value of household real estate wealth dropped 18.2 per cent. The Federal Reserve estimates that for each dollar lost in housing wealth, consumer spending pulls back up to 15 cents.
Steve Ladurantaye
Prime Remains at 2.25%
Bank of Canada maintains overnight rate target at 1/4 per cent and reiterates conditional commitment to hold current policy rate until the end of the second quarter of 2010
OTTAWA – The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1/4 per cent. The Bank Rate is unchanged at 1/2 per cent and the deposit rate is 1/4 per cent.
Recent indicators point to the start of a global recovery from a deep, synchronous recession. Global economic and financial developments have been somewhat more favourable than expected at the time of the July Monetary Policy Report (MPR), although significant fragilities remain.
A recovery in economic activity is also under way in Canada. This resumption of growth is supported by monetary and fiscal stimulus, increased household wealth, improving financial conditions, higher commodity prices, and stronger business and consumer confidence. However, heightened volatility and persistent strength in the Canadian dollar are working to slow growth and subdue inflation pressures. The current strength in the dollar is expected, over time, to more than fully offset the favourable developments since July.
Given all of these factors, the Bank now projects that, relative to the July MPR, the composition of aggregate demand will shift further towards final domestic demand and away from net exports. Growth is expected to be slightly higher in the second half of this year than previously projected but to average slightly lower over the balance of the projection period. The Canadian economy is projected to grow by 3.0 per cent in 2010 and 3.3 per cent in 2011, after contracting by 2.4 per cent this year. This is a somewhat more modest recovery in Canada than the average of previous economic cycles.
The Bank now expects that the output gap will be closed in the third quarter of 2011, one quarter later than it had projected in July. Correspondingly, inflation is also expected to return to the 2 per cent target in the third quarter of 2011, one quarter later than in July's projection.
While the underlying macroeconomic risks to the projection are roughly balanced, the Bank judges that, as a consequence of operating at the effective lower bound, the overall risks to its inflation projection are tilted slightly to the downside.
Conditional on the outlook for inflation, the target overnight rate can be expected to remain at its current level until the end of the second quarter of 2010 in order to achieve the inflation target. Consistent with this conditional commitment, the Bank will continue to conduct longer-term Purchase and Resale Agreements based on existing terms and conditions and according to the accompanying schedule: http://www.bankofcanada.ca/en/notices_fmd/2009/notice_fad201009.pdf.
In its conduct of monetary policy at low interest rates, the Bank retains considerable flexibility, consistent with the framework outlined in the April MPR.
Information note:
A full update of the Bank's outlook for the economy and inflation, including risks to the projection, will be published in the MPR on Thursday, 22 October. The next scheduled date for announcing the overnight rate target is 8 December 2009.
OTTAWA – The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1/4 per cent. The Bank Rate is unchanged at 1/2 per cent and the deposit rate is 1/4 per cent.
Recent indicators point to the start of a global recovery from a deep, synchronous recession. Global economic and financial developments have been somewhat more favourable than expected at the time of the July Monetary Policy Report (MPR), although significant fragilities remain.
A recovery in economic activity is also under way in Canada. This resumption of growth is supported by monetary and fiscal stimulus, increased household wealth, improving financial conditions, higher commodity prices, and stronger business and consumer confidence. However, heightened volatility and persistent strength in the Canadian dollar are working to slow growth and subdue inflation pressures. The current strength in the dollar is expected, over time, to more than fully offset the favourable developments since July.
Given all of these factors, the Bank now projects that, relative to the July MPR, the composition of aggregate demand will shift further towards final domestic demand and away from net exports. Growth is expected to be slightly higher in the second half of this year than previously projected but to average slightly lower over the balance of the projection period. The Canadian economy is projected to grow by 3.0 per cent in 2010 and 3.3 per cent in 2011, after contracting by 2.4 per cent this year. This is a somewhat more modest recovery in Canada than the average of previous economic cycles.
The Bank now expects that the output gap will be closed in the third quarter of 2011, one quarter later than it had projected in July. Correspondingly, inflation is also expected to return to the 2 per cent target in the third quarter of 2011, one quarter later than in July's projection.
While the underlying macroeconomic risks to the projection are roughly balanced, the Bank judges that, as a consequence of operating at the effective lower bound, the overall risks to its inflation projection are tilted slightly to the downside.
Conditional on the outlook for inflation, the target overnight rate can be expected to remain at its current level until the end of the second quarter of 2010 in order to achieve the inflation target. Consistent with this conditional commitment, the Bank will continue to conduct longer-term Purchase and Resale Agreements based on existing terms and conditions and according to the accompanying schedule: http://www.bankofcanada.ca/en/notices_fmd/2009/notice_fad201009.pdf.
In its conduct of monetary policy at low interest rates, the Bank retains considerable flexibility, consistent with the framework outlined in the April MPR.
Information note:
A full update of the Bank's outlook for the economy and inflation, including risks to the projection, will be published in the MPR on Thursday, 22 October. The next scheduled date for announcing the overnight rate target is 8 December 2009.
Tuesday, October 13, 2009
Recovery in the works, still a ways to go!
Most economists say recession is over and recovery is beginning
By Mae Anderson
NEW YORK — More than 80 per cent of economists believe the recession is over and an expansion has begun, but they expect the recovery will be slow as worries over unemployment and high federal debt persist.
That consensus comes from leading forecasters in a survey by the National Association for Business Economics released Monday.
“The survey found that the vast majority of business economists believe that the recession has ended but that the economic recovery is likely to be more moderate than those typically experienced following steep declines,” said association president-elect Lynn Reaser, chief economist at Point Loma Nazarene University.
The forecasters upgraded the economic outlook for the next several quarters, but cautioned that unemployment rates and the federal deficit are expected to remain high through the next year. Forecasters now expect the economy, as measured by gross domestic product, to advance at a 2.9 per cent pace in the second half of the year, after falling for four straight quarters for the first time on records dating to 1947. They expect a three per cent gain in 2010.
Still, the federal deficit has ballooned and the jobless rate is expected to lag behind, as employers remain cautious.
The unemployment rate rose to 9.8 per cent in September from 9.7 per cent, the Labour Department said earlier this month, the highest point in 26 years.
Forecasters expect the unemployment rate to continue to rise, to 10 per cent in the first quarter of next year, before edging down to 9.5 per cent by the end of 2010.
The recession, the worst since the 1930s, has eliminated a net total of 7.2 million jobs.
Worries about unemployment are likely to continue to constrain household spending. Personal consumption spending likely began rising in the second half of this year, but is expected to remain low in 2010. Still, Americans aren’t expected to save as much as they have in past decades. The savings rate is expected to be above the 2 per cent average of the past four years, but below the 9 per cent average in the 1970s and 1980s.
The housing recovery is one bright spot. Forecasters expect 2010 to be the first year since 2005 that the housing sector will contribute to overall growth. Home prices are expected to rise two per cent in 2010, but panellists do not believe that will stifle the housing recovery.
Inflation is expected to remain low due to the weak labour market and other factors. Thus, the association panel — which consists of 44 economists surveyed Sept. 2 through Sept. 24 — expects the federal funds rate to remain at its current record low near zero until late next spring, before a gradual rise begins.
“The good news is that this deep and long recession appears to be over, and with improving credit markets, the U.S. economy can return to solid growth next year without worry about rising inflation,” said Reaser.
The Associated Press
By Mae Anderson
NEW YORK — More than 80 per cent of economists believe the recession is over and an expansion has begun, but they expect the recovery will be slow as worries over unemployment and high federal debt persist.
That consensus comes from leading forecasters in a survey by the National Association for Business Economics released Monday.
“The survey found that the vast majority of business economists believe that the recession has ended but that the economic recovery is likely to be more moderate than those typically experienced following steep declines,” said association president-elect Lynn Reaser, chief economist at Point Loma Nazarene University.
The forecasters upgraded the economic outlook for the next several quarters, but cautioned that unemployment rates and the federal deficit are expected to remain high through the next year. Forecasters now expect the economy, as measured by gross domestic product, to advance at a 2.9 per cent pace in the second half of the year, after falling for four straight quarters for the first time on records dating to 1947. They expect a three per cent gain in 2010.
Still, the federal deficit has ballooned and the jobless rate is expected to lag behind, as employers remain cautious.
The unemployment rate rose to 9.8 per cent in September from 9.7 per cent, the Labour Department said earlier this month, the highest point in 26 years.
Forecasters expect the unemployment rate to continue to rise, to 10 per cent in the first quarter of next year, before edging down to 9.5 per cent by the end of 2010.
The recession, the worst since the 1930s, has eliminated a net total of 7.2 million jobs.
Worries about unemployment are likely to continue to constrain household spending. Personal consumption spending likely began rising in the second half of this year, but is expected to remain low in 2010. Still, Americans aren’t expected to save as much as they have in past decades. The savings rate is expected to be above the 2 per cent average of the past four years, but below the 9 per cent average in the 1970s and 1980s.
The housing recovery is one bright spot. Forecasters expect 2010 to be the first year since 2005 that the housing sector will contribute to overall growth. Home prices are expected to rise two per cent in 2010, but panellists do not believe that will stifle the housing recovery.
Inflation is expected to remain low due to the weak labour market and other factors. Thus, the association panel — which consists of 44 economists surveyed Sept. 2 through Sept. 24 — expects the federal funds rate to remain at its current record low near zero until late next spring, before a gradual rise begins.
“The good news is that this deep and long recession appears to be over, and with improving credit markets, the U.S. economy can return to solid growth next year without worry about rising inflation,” said Reaser.
The Associated Press
Wednesday, August 12, 2009
HST and homeprices buy before it comes in!
The BC Harmonized Sales Tax in a Nutshell
– A Quick Overview of the B.C. HST 12% Tax and How It Influences New Home Buyers of Real Estate
1.The Harmonized Sales Tax (also known as the new BC HST) is 12% tax applicable to most goods and services, including new homes, real estate, and property.
2.The new B.C. HST 12% Tax is the combination of the Federal Goods and Services Tax (5% GST) and the Provincial Sales Tax (7% PST).
3.Implementation of the BC Harmonized Sales Tax will take place on July 1, 2010.
4.The BC HST is NOT a 12% real estate tax, but a provincial harmonized tax on most goods, services and consumer products including new homes.
5. Currently, new BC and Vancouver homes are subject to 5% GST (federal tax) in which first time homebuyers or investors can receive GST rebates. This 5% GST will be replaced with the higher 12% B.C. Harmonized Sales Tax (HST), a 7% difference in taxes on the total purchase price of a new British Columbia home or property.
6. The B.C. HST program will give partial rebates for new BC homes priced up to $400,000. The government will give these homebuyers a partial five per cent BC HST rebate on the provincial tax side which makes any new B.C. home or Vancouver property $400,000 or less no more expensive than it is today.
7. Homebuyers looking to buy new Vancouver property over $400,000 will receive a maximum BC HST rebate of $20,000, but will see the purchase price above that level subject to the extra five per cent tax rate system.
8. The British Columbia Harmonized Sales Tax of 12% HST is also applicable to any costs and fees associated with your property/home purchase including legal/notary fees, commissions and other closing costs.
9. The BC HST transition rules are unclear at this time. It is unknown whether new Vancouver home sales contracts written before July 1, 2010 but completed after the harmonized sales tax HST launch date will be subject to the current 5% GST only or the entire 12% HST new tax.
10. The cost of new home ownership will increase significantly in British Columbia due to the new BC HST tax of 12%. Not only will your new home or real estate cost more up front, but the 12% HST harmonized sales tax is also applicable to such things like strata fees, residential heating fuel, commercial rents, smoke detectors, fire extinguishers, repairs, cable TV, internet, electricity, gas, renovations, painting and other professional services.
Some BC Real Estate HST Numbers and How It Affects You
Scenario 1: Based on a purchase price of $600,000 for a new BC or Vancouver home, the homebuyer would pay a total of $72,000 in BC HST taxes (12% on $600,000). With the homebuyer HST rebate for purchases above $600,000, the homebuyer would receive the $20,000, thus reducing their purchase cost to $52,000 in taxes for a total of $652,000. Currently, the 5% GST applicable to the same home would cost only $30,000 (a difference of $22,000). *This does not include the HST applicable to closing fees.
Scenario 2: If a BC homebuyer wanted to purchase a new Vancouver home costing $800,000, the total 12% HST hit would be $96,000. The partial HST rebate of $20,000 (maximum allowed) will reduce this to $76,000, making the final purchase price at $876,000 plus property transfer taxes and other closing costs. Before July 1, 2010, a new home would be subject to only 5% GST which is $40,000 on a $800,000 property. With the new BC harmonized sales tax, a BC homebuyer would pay $36,000 more for the same home after implementation of the HST tax. *This also does not include the HST applicable to closing costs.
The B.C. Harmonized Tax – BC HST Will Raise New Home PricePlease comment on this blog post regarding your opinion and thoughts on how the new BC HST will influence the British Columbia and Greater Vancouver real estate home prices next year. Announced in August 2009, the BC HST will come into effect July 1st, 2010. The BC Harmonized Tax is simply the combination of the two current sales taxes: the 7% provincial BC sales tax and the 5% federal goods and services tax. The BC HST is 12% (twelve per cent) and will be added to the purchase price of new BC homes and Greater Vancouver real estate. In addition to applying 12% on new home prices, the BC HST will also be applicable to real estate closing costs and fees, which will in turn increase the price of any new home in British Columbia and throughout the Greater Vancouver property market. Currently, new homes in BC and Greater Vancouver are only subject to the 5% GST federal tax (and not the 7% provincial sales tax) Some analysts say that as the BC real estate markets start their long recovery from the global economic crisis and housing bubble of 2008-2009, the introduction of the BC HST 12% tax on new homes in Vancouver and the province of BC will halt first time homebuyers from making the largest purchases of the life. In addition, the 12% HST will also affect Greater Vancouver housing affordability, which is already the highest of any city in Canada. Overall, BC housing affordability is also the highest in Canada, which means that British Columbians and Vancouverites spend the most after tax dollars on their homes and real estate purchases. The introduction of the BC HST on new Vancouver homes for July 1st, 2010 will likely damper the sales volume of new real estate in the city in addition to making property more unaffordable for first time homebuyers while making it that much more expensive for current homeowners looking to upsize into larger new Vancouver homes. The other thing to keep in mind is that many retirees are getting to retirement age, and the addition of the 12% BC HST will likely influence what these empty nesters can afford to purchase if they are looking for a new home in BC or Greater Vancouver real estate markets.
Overall, the combination of the PST and GST into the British Columbia HST new Harmonized Sales Tax will ultimately affect the majority of the BC population looking to purchase new homes and real estate property, including those Vancouver condo home buyers. On average, a consumer looking for new BC property will end up spending 7% more because of the difference between the 12% HST harmonized sales tax versus the current 5% GST goods and services tax that are applied to new property. British Columbia already has the award for the most expensive real estate in Canada. The Okanagan region, Victoria and Greater Vancouver also all fit within the top ten most priciest property markets in the country.
The integration of the new provincial BC HST of 12% on new real estate will further increase and bump up the price for new homes in the province, thereby decreasing affordability throughout the region.
– A Quick Overview of the B.C. HST 12% Tax and How It Influences New Home Buyers of Real Estate
1.The Harmonized Sales Tax (also known as the new BC HST) is 12% tax applicable to most goods and services, including new homes, real estate, and property.
2.The new B.C. HST 12% Tax is the combination of the Federal Goods and Services Tax (5% GST) and the Provincial Sales Tax (7% PST).
3.Implementation of the BC Harmonized Sales Tax will take place on July 1, 2010.
4.The BC HST is NOT a 12% real estate tax, but a provincial harmonized tax on most goods, services and consumer products including new homes.
5. Currently, new BC and Vancouver homes are subject to 5% GST (federal tax) in which first time homebuyers or investors can receive GST rebates. This 5% GST will be replaced with the higher 12% B.C. Harmonized Sales Tax (HST), a 7% difference in taxes on the total purchase price of a new British Columbia home or property.
6. The B.C. HST program will give partial rebates for new BC homes priced up to $400,000. The government will give these homebuyers a partial five per cent BC HST rebate on the provincial tax side which makes any new B.C. home or Vancouver property $400,000 or less no more expensive than it is today.
7. Homebuyers looking to buy new Vancouver property over $400,000 will receive a maximum BC HST rebate of $20,000, but will see the purchase price above that level subject to the extra five per cent tax rate system.
8. The British Columbia Harmonized Sales Tax of 12% HST is also applicable to any costs and fees associated with your property/home purchase including legal/notary fees, commissions and other closing costs.
9. The BC HST transition rules are unclear at this time. It is unknown whether new Vancouver home sales contracts written before July 1, 2010 but completed after the harmonized sales tax HST launch date will be subject to the current 5% GST only or the entire 12% HST new tax.
10. The cost of new home ownership will increase significantly in British Columbia due to the new BC HST tax of 12%. Not only will your new home or real estate cost more up front, but the 12% HST harmonized sales tax is also applicable to such things like strata fees, residential heating fuel, commercial rents, smoke detectors, fire extinguishers, repairs, cable TV, internet, electricity, gas, renovations, painting and other professional services.
Some BC Real Estate HST Numbers and How It Affects You
Scenario 1: Based on a purchase price of $600,000 for a new BC or Vancouver home, the homebuyer would pay a total of $72,000 in BC HST taxes (12% on $600,000). With the homebuyer HST rebate for purchases above $600,000, the homebuyer would receive the $20,000, thus reducing their purchase cost to $52,000 in taxes for a total of $652,000. Currently, the 5% GST applicable to the same home would cost only $30,000 (a difference of $22,000). *This does not include the HST applicable to closing fees.
Scenario 2: If a BC homebuyer wanted to purchase a new Vancouver home costing $800,000, the total 12% HST hit would be $96,000. The partial HST rebate of $20,000 (maximum allowed) will reduce this to $76,000, making the final purchase price at $876,000 plus property transfer taxes and other closing costs. Before July 1, 2010, a new home would be subject to only 5% GST which is $40,000 on a $800,000 property. With the new BC harmonized sales tax, a BC homebuyer would pay $36,000 more for the same home after implementation of the HST tax. *This also does not include the HST applicable to closing costs.
The B.C. Harmonized Tax – BC HST Will Raise New Home PricePlease comment on this blog post regarding your opinion and thoughts on how the new BC HST will influence the British Columbia and Greater Vancouver real estate home prices next year. Announced in August 2009, the BC HST will come into effect July 1st, 2010. The BC Harmonized Tax is simply the combination of the two current sales taxes: the 7% provincial BC sales tax and the 5% federal goods and services tax. The BC HST is 12% (twelve per cent) and will be added to the purchase price of new BC homes and Greater Vancouver real estate. In addition to applying 12% on new home prices, the BC HST will also be applicable to real estate closing costs and fees, which will in turn increase the price of any new home in British Columbia and throughout the Greater Vancouver property market. Currently, new homes in BC and Greater Vancouver are only subject to the 5% GST federal tax (and not the 7% provincial sales tax) Some analysts say that as the BC real estate markets start their long recovery from the global economic crisis and housing bubble of 2008-2009, the introduction of the BC HST 12% tax on new homes in Vancouver and the province of BC will halt first time homebuyers from making the largest purchases of the life. In addition, the 12% HST will also affect Greater Vancouver housing affordability, which is already the highest of any city in Canada. Overall, BC housing affordability is also the highest in Canada, which means that British Columbians and Vancouverites spend the most after tax dollars on their homes and real estate purchases. The introduction of the BC HST on new Vancouver homes for July 1st, 2010 will likely damper the sales volume of new real estate in the city in addition to making property more unaffordable for first time homebuyers while making it that much more expensive for current homeowners looking to upsize into larger new Vancouver homes. The other thing to keep in mind is that many retirees are getting to retirement age, and the addition of the 12% BC HST will likely influence what these empty nesters can afford to purchase if they are looking for a new home in BC or Greater Vancouver real estate markets.
Overall, the combination of the PST and GST into the British Columbia HST new Harmonized Sales Tax will ultimately affect the majority of the BC population looking to purchase new homes and real estate property, including those Vancouver condo home buyers. On average, a consumer looking for new BC property will end up spending 7% more because of the difference between the 12% HST harmonized sales tax versus the current 5% GST goods and services tax that are applied to new property. British Columbia already has the award for the most expensive real estate in Canada. The Okanagan region, Victoria and Greater Vancouver also all fit within the top ten most priciest property markets in the country.
The integration of the new provincial BC HST of 12% on new real estate will further increase and bump up the price for new homes in the province, thereby decreasing affordability throughout the region.
Thursday, July 9, 2009
Who is driving housing demand??
New Immigrants Driving Housing Demand,
according to Scotia EconomicsTORONTO, July 9 /CNW/ -
Canadian immigrants are narrowing the homeownership gap with their Canadian-born counterparts, according to the latest Real Estate Trends report released today by Scotia Economics. The most recent census data available show that in 2006, almost 72 per cent of immigrants lived in a dwelling owned by a household member, up from 68 per cent in 2001. The comparable share for the Canadian-born population rose a more modest two percentage points over this period, from 73 per cent to 75 per cent. "Homeownership tends to increase the longer one has lived in Canada, with the majority of new arrivals first settling in rental accommodation," said Adrienne Warren, Senior Economist, Scotia Economics. "Over time, immigrant families eventually make the move to homeownership, at rates similar to the Canadian-born population. However, between 2001 and 2006, the homeownership rate rose for all immigrant groups, regardless of how long they had resided in Canada. The biggest increase was among those living in Canada for less than 10 years. "As recent immigrants to Canada make the transition from renter to owner, they will increasingly drive housing demand," states Ms. Warren. According to the report, the faster transition to homeownership has been supported in part by strong labour markets. The employment rate for core working-age recent immigrants jumped 3 1/2 percentage points between 2001 and 2006 (to 67.0 per cent). This was faster than the 1 1/2 percentage point gain among their Canadian-born counterparts (to 82.4 per cent). The employment rate for all immigrants also increased over this period, but by a more modest one percentage point (to 77.5 per cent). "The better labour market performance of recent immigrants may reflect a favourable skills mix, with many employed in high-growth industries such as engineering, construction and skilled trades. It may also reflect a greater geographic mobility to meet shifting regional labour requirements," said Ms. Warren.The report also states that, of the more than one million immigrants that came to Canada between 2001 and 2006, 69 per cent settled in the three largest census metropolitan areas (CMAs) - Toronto, Montreal and Vancouver - and their surrounding municipalities. Meanwhile, a growing proportion (28 per cent) of immigrants settled in smaller CMAs, most notably Calgary, Ottawa-Gatineau, Edmonton, Winnipeg, Hamilton and Kitchener. Less than three per cent chose to live in a rural area. "Given Canada's aging population and relatively low fertility rates, longer-term household formation and housing needs will be largely determined by immigration," concluded Ms. Warren. "Using standard assumptions regarding immigration, fertility and mortality rates, the share of Canada's population growth coming from immigration could rise to three-quarters a decade from now, up from 60-65 per cent today and almost all by 2030. Most of this growth will be in Canada's urban areas." Scotia Economics provides clients with in-depth research into the factors shaping the outlook for Canada and the global economy, including macroeconomic developments, currency and capital market trends, commodity and industry performance, as well as monetary, fiscal and public policy issues.
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according to Scotia EconomicsTORONTO, July 9 /CNW/ -
Canadian immigrants are narrowing the homeownership gap with their Canadian-born counterparts, according to the latest Real Estate Trends report released today by Scotia Economics. The most recent census data available show that in 2006, almost 72 per cent of immigrants lived in a dwelling owned by a household member, up from 68 per cent in 2001. The comparable share for the Canadian-born population rose a more modest two percentage points over this period, from 73 per cent to 75 per cent. "Homeownership tends to increase the longer one has lived in Canada, with the majority of new arrivals first settling in rental accommodation," said Adrienne Warren, Senior Economist, Scotia Economics. "Over time, immigrant families eventually make the move to homeownership, at rates similar to the Canadian-born population. However, between 2001 and 2006, the homeownership rate rose for all immigrant groups, regardless of how long they had resided in Canada. The biggest increase was among those living in Canada for less than 10 years. "As recent immigrants to Canada make the transition from renter to owner, they will increasingly drive housing demand," states Ms. Warren. According to the report, the faster transition to homeownership has been supported in part by strong labour markets. The employment rate for core working-age recent immigrants jumped 3 1/2 percentage points between 2001 and 2006 (to 67.0 per cent). This was faster than the 1 1/2 percentage point gain among their Canadian-born counterparts (to 82.4 per cent). The employment rate for all immigrants also increased over this period, but by a more modest one percentage point (to 77.5 per cent). "The better labour market performance of recent immigrants may reflect a favourable skills mix, with many employed in high-growth industries such as engineering, construction and skilled trades. It may also reflect a greater geographic mobility to meet shifting regional labour requirements," said Ms. Warren.The report also states that, of the more than one million immigrants that came to Canada between 2001 and 2006, 69 per cent settled in the three largest census metropolitan areas (CMAs) - Toronto, Montreal and Vancouver - and their surrounding municipalities. Meanwhile, a growing proportion (28 per cent) of immigrants settled in smaller CMAs, most notably Calgary, Ottawa-Gatineau, Edmonton, Winnipeg, Hamilton and Kitchener. Less than three per cent chose to live in a rural area. "Given Canada's aging population and relatively low fertility rates, longer-term household formation and housing needs will be largely determined by immigration," concluded Ms. Warren. "Using standard assumptions regarding immigration, fertility and mortality rates, the share of Canada's population growth coming from immigration could rise to three-quarters a decade from now, up from 60-65 per cent today and almost all by 2030. Most of this growth will be in Canada's urban areas." Scotia Economics provides clients with in-depth research into the factors shaping the outlook for Canada and the global economy, including macroeconomic developments, currency and capital market trends, commodity and industry performance, as well as monetary, fiscal and public policy issues.
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Wednesday, July 8, 2009
Improved Affordability = Great time to buy
Improved affordability helps spur Canadian housing market, says RBC Economics
Every major city in Canada enjoying a housing market resurgence
TORONTO, July 8 /CNW/ - Home affordability in Canada recorded some of the biggest quarterly improvements on record in the first quarter of the year, with aggressive economic policy and softening home prices drawing buyers back into the market, according to the latest housing report released today by RBC Economics.
"With the turmoil in financial markets partially subsiding and the flow of credit increasing, home resale activity has rallied impressively since the late-winter," said Robert Hogue, senior economist, RBC. "What's most impressive is how widespread this rebound has been, with all major cities in Canada experiencing a revival."
Declining costs of home ownership during the last year were driven by significant cuts in mortgage rates along with the federal government taking an active role in supporting the mortgage securities market. In the first quarter, monthly payments on a typical detached bungalow in Canada had decreased by close to 17 per cent from a year earlier.
The RBC Housing Affordability measure captures the proportion of pre-tax household income needed to service the costs of owning a home. During the first quarter of 2009, the RBC Affordability measure at the national level improved across all housing segments, as the benchmark detached bungalow moved to 39.4 per cent, the standard townhouse to 31.9 per cent, the standard condo to 27.1 per cent and the standard two-storey home to 44.7 per cent respectively.
The report found that rates of housing affordability improved at the national level from 2.8 percentage points for standard condominiums and 5.0 percentage points for two-storey homes, marking the third consecutive quarterly decline in home ownership costs.
"Housing markets generally appear to be on the mend in Canada but the road to full recovery still has obstacles," added Hogue. "With property values stabilizing and the effect of the steep drop in mortgage rates likely behind us, further improvement in affordability will depend on greater gains in family income. Those gains will be dictated by the speed of the economic recovery expected during the second half of this year."
RBC's Affordability measure for a detached bungalow for Canada's largest cities is as follows: Vancouver 62.6 per cent, Toronto 45.9 per cent, Ottawa 39.1 per cent, Montreal 36.5 per cent and Calgary 35.1 per cent. The property benchmark for the Housing Affordability measure, which RBC has compiled since 1985, is based on the costs of owning a detached bungalow. Alternative housing types are also presented including a standard two-storey home, a standard townhouse and a standard condominium. The higher the reading, the more costly it is to afford a home. For example, an Affordability reading of 50 per cent means that homeownership costs, including mortgage payments, utilities and property taxes, take up 50 per cent of a typical household's monthly pre-tax income.
Highlights from across Canada:
- British Columbia: In the first quarter, housing affordability in B.C. showed the sharpest improvements since 1991. Sales of existing homes have picked up vigorously since the November-January lows, prices appear to be leveling off and more balanced supply and demand conditions are expected to emerge in coming months.
- Alberta: The drop in mortgage rates and sinking home prices have fully restored homeownership affordability in the province. Sales of existing units have rebounded smartly this spring from earlier depressed levels and market conditions have tightened. Alberta's housing market is likely at the point of turning the corner.
- Saskatchewan: Significant improvement in affordability has helped the Saskatchewan housing market pick up pace again after bottoming at the start of the year. Moderately stronger sales of existing homes this spring and a slower pace of home sale listings have restored some balance into the market.
- Manitoba: Supported by relatively favourable affordability rates, Manitoba's market continues to be among the most resilient in the country. A relatively robust economy, steady population growth and recent improvement in affordability should support housing demand in the period ahead.
- Ontario: Spring resales figures show a surprising amount of activity in Ontario, with average prices for existing homes climbing back to where they were mid-2008. Much of this resurgence in the province is due to greater affordability, with homeownership costs for detached bungalows and condominiums dropping below long-term averages.
- Quebec: Resale activity has rebounded quickly in Quebec, reflecting a homeownership market that is now more accessible than has generally been the case in the province since the mid-1980s. Home prices have generally stayed their upward course, even through the period of weaker resale activity earlier this year.
- Atlantic region: The costs of owning a home in Atlantic Canada continue to improve, with housing affordability rates among the best in the country. Favourable affordability levels in Atlantic Canada have given the region some protection against the housing storm with minimal declines in property value.
Every major city in Canada enjoying a housing market resurgence
TORONTO, July 8 /CNW/ - Home affordability in Canada recorded some of the biggest quarterly improvements on record in the first quarter of the year, with aggressive economic policy and softening home prices drawing buyers back into the market, according to the latest housing report released today by RBC Economics.
"With the turmoil in financial markets partially subsiding and the flow of credit increasing, home resale activity has rallied impressively since the late-winter," said Robert Hogue, senior economist, RBC. "What's most impressive is how widespread this rebound has been, with all major cities in Canada experiencing a revival."
Declining costs of home ownership during the last year were driven by significant cuts in mortgage rates along with the federal government taking an active role in supporting the mortgage securities market. In the first quarter, monthly payments on a typical detached bungalow in Canada had decreased by close to 17 per cent from a year earlier.
The RBC Housing Affordability measure captures the proportion of pre-tax household income needed to service the costs of owning a home. During the first quarter of 2009, the RBC Affordability measure at the national level improved across all housing segments, as the benchmark detached bungalow moved to 39.4 per cent, the standard townhouse to 31.9 per cent, the standard condo to 27.1 per cent and the standard two-storey home to 44.7 per cent respectively.
The report found that rates of housing affordability improved at the national level from 2.8 percentage points for standard condominiums and 5.0 percentage points for two-storey homes, marking the third consecutive quarterly decline in home ownership costs.
"Housing markets generally appear to be on the mend in Canada but the road to full recovery still has obstacles," added Hogue. "With property values stabilizing and the effect of the steep drop in mortgage rates likely behind us, further improvement in affordability will depend on greater gains in family income. Those gains will be dictated by the speed of the economic recovery expected during the second half of this year."
RBC's Affordability measure for a detached bungalow for Canada's largest cities is as follows: Vancouver 62.6 per cent, Toronto 45.9 per cent, Ottawa 39.1 per cent, Montreal 36.5 per cent and Calgary 35.1 per cent. The property benchmark for the Housing Affordability measure, which RBC has compiled since 1985, is based on the costs of owning a detached bungalow. Alternative housing types are also presented including a standard two-storey home, a standard townhouse and a standard condominium. The higher the reading, the more costly it is to afford a home. For example, an Affordability reading of 50 per cent means that homeownership costs, including mortgage payments, utilities and property taxes, take up 50 per cent of a typical household's monthly pre-tax income.
Highlights from across Canada:
- British Columbia: In the first quarter, housing affordability in B.C. showed the sharpest improvements since 1991. Sales of existing homes have picked up vigorously since the November-January lows, prices appear to be leveling off and more balanced supply and demand conditions are expected to emerge in coming months.
- Alberta: The drop in mortgage rates and sinking home prices have fully restored homeownership affordability in the province. Sales of existing units have rebounded smartly this spring from earlier depressed levels and market conditions have tightened. Alberta's housing market is likely at the point of turning the corner.
- Saskatchewan: Significant improvement in affordability has helped the Saskatchewan housing market pick up pace again after bottoming at the start of the year. Moderately stronger sales of existing homes this spring and a slower pace of home sale listings have restored some balance into the market.
- Manitoba: Supported by relatively favourable affordability rates, Manitoba's market continues to be among the most resilient in the country. A relatively robust economy, steady population growth and recent improvement in affordability should support housing demand in the period ahead.
- Ontario: Spring resales figures show a surprising amount of activity in Ontario, with average prices for existing homes climbing back to where they were mid-2008. Much of this resurgence in the province is due to greater affordability, with homeownership costs for detached bungalows and condominiums dropping below long-term averages.
- Quebec: Resale activity has rebounded quickly in Quebec, reflecting a homeownership market that is now more accessible than has generally been the case in the province since the mid-1980s. Home prices have generally stayed their upward course, even through the period of weaker resale activity earlier this year.
- Atlantic region: The costs of owning a home in Atlantic Canada continue to improve, with housing affordability rates among the best in the country. Favourable affordability levels in Atlantic Canada have given the region some protection against the housing storm with minimal declines in property value.
Monday, June 29, 2009
Renovation Tax Credit a hit with consumers
OTTAWA–A new poll suggests more than one in three Canadians plan to take advantage of the federal government's home-renovation tax credit.
More than eight in 10 questioned in the Harris-Decima/Canadian Press survey said they were aware of the program, under which eligible applicants can receive a tax rebate of as much as $1,350 if they invest up to $10,000 in renovations on their home.
"Unlike many new tax policies, which only get noticed by accountants and actuaries, the government of Canada has successfully communicated the introduction of the home-renovation tax credit to Canadians," said Harris-Decima's senior vice-president, Jeff Walker.
"This program appears to be helping stimulate the economy as well."
Nationally, 82 per cent of respondents were aware of the home-renovation tax credit, while 17 per cent said they were unaware. Those under age 35 and those with annual incomes below $60,000 were least likely to know of the tax credit.
Overall, 35 per cent of respondents said they planned on taking advantage of the program, while 60 per cent said they would not.
The ratio of those who planned to take advantage of the program increased with income.
More than half of those earning more than $100,000 a year (51 per cent) responded positively, compared with 41 per cent of those making between $60,000 and $100,000 and just 27 per cent of those earning less than $60,000.
Respondents west of Ontario were the most likely to be taking advantage of it.
Some 1,000 Canadians were surveyed June 18-21, with a margin of error of plus or minus 3.1 percentage points, 19 times in 20.
More than eight in 10 questioned in the Harris-Decima/Canadian Press survey said they were aware of the program, under which eligible applicants can receive a tax rebate of as much as $1,350 if they invest up to $10,000 in renovations on their home.
"Unlike many new tax policies, which only get noticed by accountants and actuaries, the government of Canada has successfully communicated the introduction of the home-renovation tax credit to Canadians," said Harris-Decima's senior vice-president, Jeff Walker.
"This program appears to be helping stimulate the economy as well."
Nationally, 82 per cent of respondents were aware of the home-renovation tax credit, while 17 per cent said they were unaware. Those under age 35 and those with annual incomes below $60,000 were least likely to know of the tax credit.
Overall, 35 per cent of respondents said they planned on taking advantage of the program, while 60 per cent said they would not.
The ratio of those who planned to take advantage of the program increased with income.
More than half of those earning more than $100,000 a year (51 per cent) responded positively, compared with 41 per cent of those making between $60,000 and $100,000 and just 27 per cent of those earning less than $60,000.
Respondents west of Ontario were the most likely to be taking advantage of it.
Some 1,000 Canadians were surveyed June 18-21, with a margin of error of plus or minus 3.1 percentage points, 19 times in 20.
Friday, June 19, 2009
Rates, Inflation....what does this mean?
Recently a reader of my blog asked me to comment further on the relationship between interest rates and inflation, and the performance of the market.
With respect to the first part on how interest rates and inflation are related you need to understand that there are economic laws at play with these two itmes. Inflation ALWAYS affects both short term AND long term interest rates in two very different ways.
With respect to long term rates, you need to remember what drives long term rates, that is long term bonds. Therefore one needs to know that as inflation rises bond yields ALWAYS go up. When bond yields go up (as they have been steadily for the past 6 weeks) then fixed rates ALWAYS go up. As for how that affects the stock market, TRADITIONALLY as bond yields rise people flee the stock market which then does bring the stock market down in lockstep as bonds rise. Couple this with the expectation that there will be periodic profit taking from the stock market as there has been recently and you can wit certainty predict that the stock market will continue to be volatile for 12-18 months as we navigate inflation rising.
With respect to short term rates remember that variable rates are priced off short term t-bills or Bankers Acceptance rates. Those rates are determined solely by the central banks overnight rate. TRADITIONALLY, the central banks ONLY weapon against inflation is to raise the overnight rate. As this happens of course then variable rates go up.
What does all this mean with respect to the real estate market then?
Well, first we would all do well to understand and accept that the ONLY reason we have seen a quicker recovery to the real estate market is SOLELY based on the fact that both long and short term interest rates are at significantly historical lows. That means readers would say “based on what Angela said above if inflation rises (which EVERYONE expects that it will) then interest rates will rise respectively, which will cool the recent rebound in real estate.”
The answer to this is “not necessarily”. Let me explain in point form below:
1) Short term rates may not go up as fast as inflation this time around
There are two reasons for this, number one is that the Bank of Canada has repeatedly said recently that they are not going to touch the overnight rate until June of 2010. However they have also been adding the caveat recently that they may change this stance if inflation surges out of control. My guess is that they will let inflation get slightly ahead of their comfort zone, and then attack it, which means we will get a the rest of this year and maybe Q1 of 2010 at these unbelievably low variable rates.
The second reason is that as the banks cost of funds continue to drop and they start reducing the risk premium they have been attaching to their loan pricing they will drop their premiums over prime to gain more market share. This has already been happening as a few months ago the best deal you could get was Prime +.80% and today you can get Prime +.45%. Look for this premium to be dropped all together in the coming months, and likely we will be back into Prime Minus within a year or so.
2) Interest rates are sooo low now
What I mean here is that even if interest rates were to rise by 1 to 1.5% in the coming year we would STILL be below “normal” historically. Therefore how much would this cool the real estate market?
3) Never bet against momentum
As interest rates start their slow climb back to normal levels many people will panic and get into the market to buy “before rates go higher” this momentum will gain steam as it goes. We will likely continue to see a strong real estate market with strong demand as rates rise. Of course as rates rise above say the 5% level again then affordability becomes an issue. If strong demand causes a bigger then expected rise in average price, coupled with a decline in affordability then remember what we learned in the last crash as soon as average home prices start to overshoot our growth in family income then you can absolutely predict with certainty a real estate correction. This time we will be ready.
With Oil rising quietly lately and the fact that it will likely be over a $100 or close to it by years end and the fact that the US money multiplier will rise (more of the billions they printed to get out of the banking crisis enter the market) you can count on inflation. But don’t count on that shutting down the real estate market in the short run. It will be a few years before we will see a cooling or an outright correction. Tread carefully.
As a final note, PLEASE anyone taking a new mortgage today, or any of my colleagues selling mortgages today, make sure you can afford the house you are contemplating if interest rates were in the 5 to 5.5% range. better yet, set your payments today as if the rate WAS 5.5%. Why?
because when you renew five years from now, count on the fact that it will be that or maybe higher, and that you will likely have moderate equity gain in that time period and you will not be able to count on a refinance to bail you out.
Let’s not repeat our past mistakes, gluttony is a cardinal sin remember.
With respect to the first part on how interest rates and inflation are related you need to understand that there are economic laws at play with these two itmes. Inflation ALWAYS affects both short term AND long term interest rates in two very different ways.
With respect to long term rates, you need to remember what drives long term rates, that is long term bonds. Therefore one needs to know that as inflation rises bond yields ALWAYS go up. When bond yields go up (as they have been steadily for the past 6 weeks) then fixed rates ALWAYS go up. As for how that affects the stock market, TRADITIONALLY as bond yields rise people flee the stock market which then does bring the stock market down in lockstep as bonds rise. Couple this with the expectation that there will be periodic profit taking from the stock market as there has been recently and you can wit certainty predict that the stock market will continue to be volatile for 12-18 months as we navigate inflation rising.
With respect to short term rates remember that variable rates are priced off short term t-bills or Bankers Acceptance rates. Those rates are determined solely by the central banks overnight rate. TRADITIONALLY, the central banks ONLY weapon against inflation is to raise the overnight rate. As this happens of course then variable rates go up.
What does all this mean with respect to the real estate market then?
Well, first we would all do well to understand and accept that the ONLY reason we have seen a quicker recovery to the real estate market is SOLELY based on the fact that both long and short term interest rates are at significantly historical lows. That means readers would say “based on what Angela said above if inflation rises (which EVERYONE expects that it will) then interest rates will rise respectively, which will cool the recent rebound in real estate.”
The answer to this is “not necessarily”. Let me explain in point form below:
1) Short term rates may not go up as fast as inflation this time around
There are two reasons for this, number one is that the Bank of Canada has repeatedly said recently that they are not going to touch the overnight rate until June of 2010. However they have also been adding the caveat recently that they may change this stance if inflation surges out of control. My guess is that they will let inflation get slightly ahead of their comfort zone, and then attack it, which means we will get a the rest of this year and maybe Q1 of 2010 at these unbelievably low variable rates.
The second reason is that as the banks cost of funds continue to drop and they start reducing the risk premium they have been attaching to their loan pricing they will drop their premiums over prime to gain more market share. This has already been happening as a few months ago the best deal you could get was Prime +.80% and today you can get Prime +.45%. Look for this premium to be dropped all together in the coming months, and likely we will be back into Prime Minus within a year or so.
2) Interest rates are sooo low now
What I mean here is that even if interest rates were to rise by 1 to 1.5% in the coming year we would STILL be below “normal” historically. Therefore how much would this cool the real estate market?
3) Never bet against momentum
As interest rates start their slow climb back to normal levels many people will panic and get into the market to buy “before rates go higher” this momentum will gain steam as it goes. We will likely continue to see a strong real estate market with strong demand as rates rise. Of course as rates rise above say the 5% level again then affordability becomes an issue. If strong demand causes a bigger then expected rise in average price, coupled with a decline in affordability then remember what we learned in the last crash as soon as average home prices start to overshoot our growth in family income then you can absolutely predict with certainty a real estate correction. This time we will be ready.
With Oil rising quietly lately and the fact that it will likely be over a $100 or close to it by years end and the fact that the US money multiplier will rise (more of the billions they printed to get out of the banking crisis enter the market) you can count on inflation. But don’t count on that shutting down the real estate market in the short run. It will be a few years before we will see a cooling or an outright correction. Tread carefully.
As a final note, PLEASE anyone taking a new mortgage today, or any of my colleagues selling mortgages today, make sure you can afford the house you are contemplating if interest rates were in the 5 to 5.5% range. better yet, set your payments today as if the rate WAS 5.5%. Why?
because when you renew five years from now, count on the fact that it will be that or maybe higher, and that you will likely have moderate equity gain in that time period and you will not be able to count on a refinance to bail you out.
Let’s not repeat our past mistakes, gluttony is a cardinal sin remember.
Monday, June 15, 2009
Do not handcuff your mortgage
Don't handcuff your mortgage
Gary Marr, Financial Post Published: Saturday, June 13, 2009
Would you like to pay an extra $300 per month on your mortgage? Not likely.
That hasn't stopped a number of Canadians, with the deal of a lifetime on a variable-rate mortgage, from switching over to a more expensive fixed-rate product and paying the extra freight.
A fear of rising rates is driving the rash decision. But if you've finally managed to pin your banker to the ground, why on Earth would you let him off the mat?
More than 28% of Canadians have a variable-rate product tied to prime, according to the Canadian Association of Accredited Mortgage Professionals (CAAMP). If you negotiated a deal before October of last year, chances are you are now borrowing money for as little as 1.35%. That's based on deals that at one point saw the banks giving 90 basis points off prime. Prime is now 2.25%.
The average sale price of a home last month in Canada was $306,366. Based on a 25% downpayment and a 25-year amortization, your monthly payment would be $962.61 at 1.35%. Convert that to a five-year fixed-rate term and you're probably going to have to consider a 4% mortgage rate and a monthly payment of $1,289.04.
Rates are rising fast. Most major banks upped their five-year rate by 40 basis points this week, although discounters were still offering 4% this past week.
"It's not a mass rush yet, but we are starting to see ... people locking in. But variable rates are still so good," says Joan Dal Bianco, vice-president of real estate-secured lending, TD Canada Trust. She stops short of questioning why a consumer would pull out of these "deals" that are no longer available on the market.
Try to get a variable-rate mortgage today and the best you can probably hope to get is 60 basis points above prime, or 2.85%.
The landscape changed dramatically in October during the credit crunch. As the Bank of Canada lowered rates, the major banks reluctantly lowered prime because of the massive amount of customers with variable-rate products negotiated under the old, higher terms.
"Bonds yields are going up rapidly and people are starting to realize the rates are going to go up," Ms. Dal Bianco says. Throw in the fact the Bank of Canada used the weasel word "conditional"(on inflation rates)when it promised not to raise rates until June, and you can understand why some people think today's record-low prime rate might not hold.
But if you're someplace between 60 to 90 basis points below prime, the rate is going to have to go up pretty fast to justify locking in today at 4%, even though that is just slightly above the all-time low hit last month for a five-year term.
"I don't understand why you would lock in," says Jim Murphy, chief executive of CAAMP. "Sure, if they start to rise, but [Bank of Canada governor Mark] Carney says they won't rise, so you've got another year at that prime-minus rate."
Don Lawby, chief executive of Century 21 Canada, says even when rates do start to increase, they are not going to jump significantly right away. You are not going to get 4% on a fixed rate again, but double-digit rates seem unlikely. "The only logic two locking in would be for someone very sensitive to any rate change and they just want to be secure," Mr. Lawby says.
But at what price? If you're using the "feeling secure" logic, why not go for the 10-year fixed-rate product? Rates on that product can be locked at 5.25%, ridiculously low by historical standards. Yet fewer than 10% of Canadians consider a 10-year product.
There are some compromises you can make. For starters, there is nothing to prevent consumers from having a blended mortgage at most Canadian banks. Some banks will let you take half your outstanding debt and lock it in. Diversity is preached for stock portfolios, but few people seem to adhere to the same philosophy when managing their debt.
Consumers might want to take their cue from business. Few companies would want all of their debt coming due at the same time -- it presents too much risk. The other option is knocking down principal: Make payments based on a 4% rate and have that extra $300 go straight to your principal every month.
The bottom line is if you've got a deal on your mortgage, why would you give it back?
Dusty wallet Double check your credit card statements. DW is in a bit of a skirmish with Visa over a taxi cab bill. Of course, DW is too cheap to use cabs, but does succumb to them to get to and from airports on vacation. Last trip, the family took an airport limousine and paid the $56 charge. Guess what? The same amount was billed a month later. So far, the taxi cab company has yet to produce a second receipt. In the interim, DW had to pay the second $56 charge.
gmarr@national-post. Com
Fed not likely to raise rates
Peter Hodson, Financial Post
Recently, there has been some loud talk about inflation and how the U. S. Federal Reserve is going to have to start raising interest rates soon in order to nip inflation in the bud.
When first confronted with this news, you may have said, "Hogwash! No way in this economic backdrop could the Fed raise rates, slow down growth and risk sending us into a steep 'double-dip' recession."
That certainly would be my view. It's unclear at this point even if we are coming out of recession, so it really would be premature to slow things down at this point before any growth traction has been achieved.
However, let's not just make assumptions. Let's delve into history to see what the Fed has done in prior cycles.
The last U. S. recession was from March, 2001, to November, 2001, a period of eight months. The Fed funds rate was 6.5% from June, 2000, to January, 2001. In January of that year, the Fed lowered the rate to 6%, then went on a 12-month lowering frenzy during the recession and in the aftermath of the 9/11 attacks. By year-end 2001 the Fed funds rate was 1.75%, with the Fed still maintaining an easing bias.
Despite the official ending of the recession in November, 2001, the Fed maintained very low interest rates for almost three more years. In fact, it kept lowering rates, down to 1% from June, 2003 to May, 2004. This strategy of keeping rates low despite no recession is now widely blamed as the reason for the creation of the housing bubble that popped in 2007. The Fed finally raised rates in June, 2004, a full 30 months after the recession had ended.
In the recession of July, 1990 to March, 1991 (eight months) the Fed had been easing or maintained a neutral bias since February, 1989. At the start of that recession, the Fed funds rate was 8.25%. By the end of the recession, it was down to 6%. Again, despite the recession being over, the Fed kept jamming rates lower, all the way down to 3% in December, 1993. The Fed didn't raise rates again until February, 1994. In that recession, again the Fed kept lowering rates for 30 months after the end of the recession.
Going back further into history, in the recession of July, 1981 to November, 1982 (16 months) the Fed acted a little more quickly. In May, 1981 the Fed rate was 20.0%. By December of that year, the Fed had moved rates down to 12%. In the spring of 1982, though, rates were back to 15%. But, showing signs of confusion, by the end of the summer 1982, rates were much lower, at 9.5%. The Fed was tightening rates again by September, 1982, and for a period of time investors had no idea what to expect, as the Fed moved rates up or down seemingly at random for a period of 18 months.
In the energy crisis of the early 1970s, the recession lasted from November, 1973, to March, 1975 (16 months). In November, at the start of the recession the Fed funds rate was 9.00% but by May, 1974, because of inflation fears the Fed had already raised the rate to 13%. Recession fears, however, ultimately ruled the day, and by year-end 1975 the Fed rate had been cut in half, to 4.75%. The tightening began anew, however, in April, 1976, 13 months after the official end of the recession.
What can we conclude? One, it seems sometimes that the Fed is just winging it, moving rates at random in response to short-term events. But it does seem the Fed is unwilling to raise rates too quickly after any recession.
Based on the severity of this economic downturn, you would have to conclude the Fed is unlikely to risk a double-dip recession, and will keep the Fed funds rate very low (now 0% to 0.25%) for a long time.
This may, of course, cause inflation, but for the time being, that is still better than a giant de-leveraging economic death-spiral.
peter@sprott.com--- - Peter Hodson is a senior portfolio manager at Sprott Asset Management.
Gary Marr, Financial Post Published: Saturday, June 13, 2009
Would you like to pay an extra $300 per month on your mortgage? Not likely.
That hasn't stopped a number of Canadians, with the deal of a lifetime on a variable-rate mortgage, from switching over to a more expensive fixed-rate product and paying the extra freight.
A fear of rising rates is driving the rash decision. But if you've finally managed to pin your banker to the ground, why on Earth would you let him off the mat?
More than 28% of Canadians have a variable-rate product tied to prime, according to the Canadian Association of Accredited Mortgage Professionals (CAAMP). If you negotiated a deal before October of last year, chances are you are now borrowing money for as little as 1.35%. That's based on deals that at one point saw the banks giving 90 basis points off prime. Prime is now 2.25%.
The average sale price of a home last month in Canada was $306,366. Based on a 25% downpayment and a 25-year amortization, your monthly payment would be $962.61 at 1.35%. Convert that to a five-year fixed-rate term and you're probably going to have to consider a 4% mortgage rate and a monthly payment of $1,289.04.
Rates are rising fast. Most major banks upped their five-year rate by 40 basis points this week, although discounters were still offering 4% this past week.
"It's not a mass rush yet, but we are starting to see ... people locking in. But variable rates are still so good," says Joan Dal Bianco, vice-president of real estate-secured lending, TD Canada Trust. She stops short of questioning why a consumer would pull out of these "deals" that are no longer available on the market.
Try to get a variable-rate mortgage today and the best you can probably hope to get is 60 basis points above prime, or 2.85%.
The landscape changed dramatically in October during the credit crunch. As the Bank of Canada lowered rates, the major banks reluctantly lowered prime because of the massive amount of customers with variable-rate products negotiated under the old, higher terms.
"Bonds yields are going up rapidly and people are starting to realize the rates are going to go up," Ms. Dal Bianco says. Throw in the fact the Bank of Canada used the weasel word "conditional"(on inflation rates)when it promised not to raise rates until June, and you can understand why some people think today's record-low prime rate might not hold.
But if you're someplace between 60 to 90 basis points below prime, the rate is going to have to go up pretty fast to justify locking in today at 4%, even though that is just slightly above the all-time low hit last month for a five-year term.
"I don't understand why you would lock in," says Jim Murphy, chief executive of CAAMP. "Sure, if they start to rise, but [Bank of Canada governor Mark] Carney says they won't rise, so you've got another year at that prime-minus rate."
Don Lawby, chief executive of Century 21 Canada, says even when rates do start to increase, they are not going to jump significantly right away. You are not going to get 4% on a fixed rate again, but double-digit rates seem unlikely. "The only logic two locking in would be for someone very sensitive to any rate change and they just want to be secure," Mr. Lawby says.
But at what price? If you're using the "feeling secure" logic, why not go for the 10-year fixed-rate product? Rates on that product can be locked at 5.25%, ridiculously low by historical standards. Yet fewer than 10% of Canadians consider a 10-year product.
There are some compromises you can make. For starters, there is nothing to prevent consumers from having a blended mortgage at most Canadian banks. Some banks will let you take half your outstanding debt and lock it in. Diversity is preached for stock portfolios, but few people seem to adhere to the same philosophy when managing their debt.
Consumers might want to take their cue from business. Few companies would want all of their debt coming due at the same time -- it presents too much risk. The other option is knocking down principal: Make payments based on a 4% rate and have that extra $300 go straight to your principal every month.
The bottom line is if you've got a deal on your mortgage, why would you give it back?
Dusty wallet Double check your credit card statements. DW is in a bit of a skirmish with Visa over a taxi cab bill. Of course, DW is too cheap to use cabs, but does succumb to them to get to and from airports on vacation. Last trip, the family took an airport limousine and paid the $56 charge. Guess what? The same amount was billed a month later. So far, the taxi cab company has yet to produce a second receipt. In the interim, DW had to pay the second $56 charge.
gmarr@national-post. Com
Fed not likely to raise rates
Peter Hodson, Financial Post
Recently, there has been some loud talk about inflation and how the U. S. Federal Reserve is going to have to start raising interest rates soon in order to nip inflation in the bud.
When first confronted with this news, you may have said, "Hogwash! No way in this economic backdrop could the Fed raise rates, slow down growth and risk sending us into a steep 'double-dip' recession."
That certainly would be my view. It's unclear at this point even if we are coming out of recession, so it really would be premature to slow things down at this point before any growth traction has been achieved.
However, let's not just make assumptions. Let's delve into history to see what the Fed has done in prior cycles.
The last U. S. recession was from March, 2001, to November, 2001, a period of eight months. The Fed funds rate was 6.5% from June, 2000, to January, 2001. In January of that year, the Fed lowered the rate to 6%, then went on a 12-month lowering frenzy during the recession and in the aftermath of the 9/11 attacks. By year-end 2001 the Fed funds rate was 1.75%, with the Fed still maintaining an easing bias.
Despite the official ending of the recession in November, 2001, the Fed maintained very low interest rates for almost three more years. In fact, it kept lowering rates, down to 1% from June, 2003 to May, 2004. This strategy of keeping rates low despite no recession is now widely blamed as the reason for the creation of the housing bubble that popped in 2007. The Fed finally raised rates in June, 2004, a full 30 months after the recession had ended.
In the recession of July, 1990 to March, 1991 (eight months) the Fed had been easing or maintained a neutral bias since February, 1989. At the start of that recession, the Fed funds rate was 8.25%. By the end of the recession, it was down to 6%. Again, despite the recession being over, the Fed kept jamming rates lower, all the way down to 3% in December, 1993. The Fed didn't raise rates again until February, 1994. In that recession, again the Fed kept lowering rates for 30 months after the end of the recession.
Going back further into history, in the recession of July, 1981 to November, 1982 (16 months) the Fed acted a little more quickly. In May, 1981 the Fed rate was 20.0%. By December of that year, the Fed had moved rates down to 12%. In the spring of 1982, though, rates were back to 15%. But, showing signs of confusion, by the end of the summer 1982, rates were much lower, at 9.5%. The Fed was tightening rates again by September, 1982, and for a period of time investors had no idea what to expect, as the Fed moved rates up or down seemingly at random for a period of 18 months.
In the energy crisis of the early 1970s, the recession lasted from November, 1973, to March, 1975 (16 months). In November, at the start of the recession the Fed funds rate was 9.00% but by May, 1974, because of inflation fears the Fed had already raised the rate to 13%. Recession fears, however, ultimately ruled the day, and by year-end 1975 the Fed rate had been cut in half, to 4.75%. The tightening began anew, however, in April, 1976, 13 months after the official end of the recession.
What can we conclude? One, it seems sometimes that the Fed is just winging it, moving rates at random in response to short-term events. But it does seem the Fed is unwilling to raise rates too quickly after any recession.
Based on the severity of this economic downturn, you would have to conclude the Fed is unlikely to risk a double-dip recession, and will keep the Fed funds rate very low (now 0% to 0.25%) for a long time.
This may, of course, cause inflation, but for the time being, that is still better than a giant de-leveraging economic death-spiral.
peter@sprott.com--- - Peter Hodson is a senior portfolio manager at Sprott Asset Management.
Wednesday, June 10, 2009
Can bonds come back?
While the article below is about the US 10 year bond, many of the definitions, observations and statements apply to our Canadian benchmark 5 year bond. Hopefully this will give you some insight as to what is happening with our unusual yields in the bond markets….
Can bonds come back?
David Pett, Financial Post
By definition, the concept of a 10-year treasury note could not be simpler: "A debt owed by the United States government for a period of 10 years." In reality, there may not be a more complicated investment anywhere in the world, considering both its sway on financial markets and its role as a key benchmark for the health of the global economy.
These days, the 10-year government note is back under the microscope. At issue is the rapid rise in yields so far this year, despite drastic measures from the U. S. Federal Reserve to keep interest rates low. Investors are wondering if the 2½-year bond bubble has finally burst and whether they should take their money and run before inflation rises up to consume it.
"The sell-off in the treasury market has gathered substantial momentum in recent weeks, causing problems for stocks and threatening to choke off a still-weak economy," said Chen Zhou, managing editor of global investment strategy at BCA Research in Montreal, in a recent note to clients. "The next up-leg will only develop when the riot in the bond market dies down."
Since late December, yields on 10-year treasury notes have nearly doubled, rising from 2.05% to 3.89% yesterday. That has taken them back to levels established just before the collapse of Lehman Brothers in September, but they still remain more than 130 basis points below the high of 5.3% set in December, 2007. The Canadian 10-year government yield has also risen, to 3.75%.
The "riot," as Mr. Zhou called it, is more the result of yield trajectory. Why have yields increased so much, so fast?
On the one hand, the sell-off can be attributed to so-called "bond vigilantes," who have expressed growing concern that the United States will eventually drown in its ballooning federal budget deficit. This year alone, the U. S. Treasury will sell a record US$2-trillion in new debt to fund its projected US$1.8-trillion deficit. By some estimates, the country's debt, equivalent to 41% of GDP at the end of 2008, could hit 100% of GDP over the next five years.
The fears surrounding the deficit intensified on May 21, when Standard & Poor's downgraded its outlook for Britain's triple-A rating from stable to negative. According to the International Monetary Fund, the U. K. will see its debt reach 72.7% of GDP by 2010.
Paul Ashworth, senior U. S. economist with Capital Economics, believes the answer is far more positive: The rise in treasury yields reflects welcome signs of economic recovery and the diminishing need for safe-haven government bonds.
"It's not so much that everyone thinks the U. S. government is going to go broke -- it's that they are not quite so worried that the other people are going to go broke," he said. "So, they are willing to buy corporate bonds, they are willing to buy commercial paper and they are willing to buy equities. Things are starting to return to normal."
The U. S. Federal Reserve, for its part, must determine whether the bond sell-off is a sign of a impending fiscal collapse or a reflection of growing optimism about an economic recovery.
"If it is the former, there will be another round of financial market mayhem with falling stocks, rising bond yields and a plunging dollar, warned Mr. Zhou. "If the latter is the case, then the recent sell-off could soon set the stage for a bond rally, which could occur in tandem with a resumed advance in stocks."
One of the only ways left for the Fed to fight the rise in treasury yields is by raising the speed and scale of its long-term asset purchases. With interest rates already at near-zero levels, the Fed announced in March a controversial plan of quantitative easing, saying it would buy up to US$300-billion in longer-term treasury bonds. In addition, it has stated it will buy up to US$1.25-trillion of mortgage-backed securities and US$200-billion of debt issued by agencies like Fannie Mae and Freddie Mac.
The goal in making these pledges is to reduce interest yields on government bonds and home mortgage rates, thereby encouraging banks to lend money with less fear that borrowers will default on their loans.
Pump too much money into the system too quickly, however, and the Fed runs the risk of creating runaway inflation when the economy recovers. Conversely, in Japan, during the 1990s central bank officials grew impatient and unwound their stimulus before its true effect could take hold. The economy has been sliding in and out of deflation ever since.
As of last week, the Fed had purchased little more than a third of the total amount of long-term assets it agreed to buy.
If the rise in yields reflects a return to economic and financial normality, then additional quantitative easing would do little to bring down inflation expectations and may even be counter-productive, Mr. Ashworth said.
He also pointed out that the rise in the actual borrowing costs facing households and firms has been more modest than the jump in the 10-year treasury yield. "Mortgage interest rates have remained broadly unchanged over the past few months and corporate bond yields have been falling. While the Fed might be a little concerned that mortgage rates are rising at all, it would take a much bigger increase to prompt a reaction, particularly an unscheduled reaction that might be interpreted as panic."
Still, Mr. Zhou says the Fed will have to step in and purchase treasury bonds more aggressively to keep borrowing costs low. "The right course of action for monetary authorities to take is to focus on fighting deflation and not worry about inflation, Mr. Zhou said. "If the central bank wants to keep mortgage yields at low levels, or move them even lower, it must find ways to supress treasury yields."
Such a move by the Fed, Mr. Zhou added, would help set the stage for a significant bond rally in the near term. He predicts the U. S. bond market will remain weak until bond yields reach 4%, at which point a rebound will develop.
Ultimately, says David Rosenberg, a bearish economist at Gluskin Sheff & Associates in Toronto, bond yields will drop when the economic recovery stumbles. "We just crammed into less than six months what took more than 48 months to do during the last bear market," he said.
"But the history of credit collapses and asset deflations is that you don't rebuild Humpty Dumpty in a matter of days or months, but years. The shift to riskier assets, from safe havens, has created a tremendous buying opportunity for [bond investors] with a six-to 12-month outlook. We will finish the year with yields measurably lower than they are today."
Can bonds come back?
David Pett, Financial Post
By definition, the concept of a 10-year treasury note could not be simpler: "A debt owed by the United States government for a period of 10 years." In reality, there may not be a more complicated investment anywhere in the world, considering both its sway on financial markets and its role as a key benchmark for the health of the global economy.
These days, the 10-year government note is back under the microscope. At issue is the rapid rise in yields so far this year, despite drastic measures from the U. S. Federal Reserve to keep interest rates low. Investors are wondering if the 2½-year bond bubble has finally burst and whether they should take their money and run before inflation rises up to consume it.
"The sell-off in the treasury market has gathered substantial momentum in recent weeks, causing problems for stocks and threatening to choke off a still-weak economy," said Chen Zhou, managing editor of global investment strategy at BCA Research in Montreal, in a recent note to clients. "The next up-leg will only develop when the riot in the bond market dies down."
Since late December, yields on 10-year treasury notes have nearly doubled, rising from 2.05% to 3.89% yesterday. That has taken them back to levels established just before the collapse of Lehman Brothers in September, but they still remain more than 130 basis points below the high of 5.3% set in December, 2007. The Canadian 10-year government yield has also risen, to 3.75%.
The "riot," as Mr. Zhou called it, is more the result of yield trajectory. Why have yields increased so much, so fast?
On the one hand, the sell-off can be attributed to so-called "bond vigilantes," who have expressed growing concern that the United States will eventually drown in its ballooning federal budget deficit. This year alone, the U. S. Treasury will sell a record US$2-trillion in new debt to fund its projected US$1.8-trillion deficit. By some estimates, the country's debt, equivalent to 41% of GDP at the end of 2008, could hit 100% of GDP over the next five years.
The fears surrounding the deficit intensified on May 21, when Standard & Poor's downgraded its outlook for Britain's triple-A rating from stable to negative. According to the International Monetary Fund, the U. K. will see its debt reach 72.7% of GDP by 2010.
Paul Ashworth, senior U. S. economist with Capital Economics, believes the answer is far more positive: The rise in treasury yields reflects welcome signs of economic recovery and the diminishing need for safe-haven government bonds.
"It's not so much that everyone thinks the U. S. government is going to go broke -- it's that they are not quite so worried that the other people are going to go broke," he said. "So, they are willing to buy corporate bonds, they are willing to buy commercial paper and they are willing to buy equities. Things are starting to return to normal."
The U. S. Federal Reserve, for its part, must determine whether the bond sell-off is a sign of a impending fiscal collapse or a reflection of growing optimism about an economic recovery.
"If it is the former, there will be another round of financial market mayhem with falling stocks, rising bond yields and a plunging dollar, warned Mr. Zhou. "If the latter is the case, then the recent sell-off could soon set the stage for a bond rally, which could occur in tandem with a resumed advance in stocks."
One of the only ways left for the Fed to fight the rise in treasury yields is by raising the speed and scale of its long-term asset purchases. With interest rates already at near-zero levels, the Fed announced in March a controversial plan of quantitative easing, saying it would buy up to US$300-billion in longer-term treasury bonds. In addition, it has stated it will buy up to US$1.25-trillion of mortgage-backed securities and US$200-billion of debt issued by agencies like Fannie Mae and Freddie Mac.
The goal in making these pledges is to reduce interest yields on government bonds and home mortgage rates, thereby encouraging banks to lend money with less fear that borrowers will default on their loans.
Pump too much money into the system too quickly, however, and the Fed runs the risk of creating runaway inflation when the economy recovers. Conversely, in Japan, during the 1990s central bank officials grew impatient and unwound their stimulus before its true effect could take hold. The economy has been sliding in and out of deflation ever since.
As of last week, the Fed had purchased little more than a third of the total amount of long-term assets it agreed to buy.
If the rise in yields reflects a return to economic and financial normality, then additional quantitative easing would do little to bring down inflation expectations and may even be counter-productive, Mr. Ashworth said.
He also pointed out that the rise in the actual borrowing costs facing households and firms has been more modest than the jump in the 10-year treasury yield. "Mortgage interest rates have remained broadly unchanged over the past few months and corporate bond yields have been falling. While the Fed might be a little concerned that mortgage rates are rising at all, it would take a much bigger increase to prompt a reaction, particularly an unscheduled reaction that might be interpreted as panic."
Still, Mr. Zhou says the Fed will have to step in and purchase treasury bonds more aggressively to keep borrowing costs low. "The right course of action for monetary authorities to take is to focus on fighting deflation and not worry about inflation, Mr. Zhou said. "If the central bank wants to keep mortgage yields at low levels, or move them even lower, it must find ways to supress treasury yields."
Such a move by the Fed, Mr. Zhou added, would help set the stage for a significant bond rally in the near term. He predicts the U. S. bond market will remain weak until bond yields reach 4%, at which point a rebound will develop.
Ultimately, says David Rosenberg, a bearish economist at Gluskin Sheff & Associates in Toronto, bond yields will drop when the economic recovery stumbles. "We just crammed into less than six months what took more than 48 months to do during the last bear market," he said.
"But the history of credit collapses and asset deflations is that you don't rebuild Humpty Dumpty in a matter of days or months, but years. The shift to riskier assets, from safe havens, has created a tremendous buying opportunity for [bond investors] with a six-to 12-month outlook. We will finish the year with yields measurably lower than they are today."
Tuesday, June 2, 2009
We are rising from the bottom-look for rates to increase as well as real estate prices!
Harper: 'The worst is behind us'
Prime minister encouraged by new data that suggests economy is in recovery mode
Julian BeltrameThe Canadian Press OTTAWA
Canadians have reason to breathe a little easier -- the economy fell sharply at the start of the year but talk about another depression appears to have been just talk.
Having been given the best economic news in months, Prime Minister Stephen Harper was quick to take advantage yesterday, saying the Liberals have no reason to push for a federal election.
"I think the worst is behind us, we will have better quarters going forward,'' Harper said in an interview with a Toronto radio station.
"I think that's one of the reasons (Liberal Leader Michael) Ignatieff seems to be pushing so hard with ideas to get the other parties to bring the government down. He would love the opportunity to get in there for a recovery. The country needs an election like a hole in the head,'' Harper added.
The output numbers for the first quarter of 2009 were nothing to boast about. The economy contracted by a massive 5.4 per cent at an annualized rate, the worst in 18 years when there was a 5.9 per cent decline in 1991.
But with the Bank of Canada having projected a 7.3 per cent collapse and some economists saying the decline could be as much as nine per cent, the Statistics Canada data has the feel of a death row reprieve.
And the improving data for the last two months of the quarter -- February and March -- suggests that as Harper noted, the worst is likely over and it happened during the November-January period.
"It is the worst recession since the Great Depression globally, but this is where some of Canada's positives have come back to save us a bit from something nastier,'' said Douglas Porter, deputy chief economist with BMO Capital Markets.
"Make no mistake, it's a very severe downturn. But we've been through these kinds of severe downturns before in the early '80s and early '90s.''
Combined with the revised 3.7 per cent drop in the fourth quarter of 2008, Liberal finance critic John McCallum said the slump still qualifies as among the worst since quarterly data began being kept in 1961.
But he too expressed relief that "there is less panic than there was a while ago . . . and more sense that, 'Yeah, we are going to get out of this."'
McCallum said his party will still press for improvements to unemployment insurance to ensure that more laid-off Canadians qualify for benefits, saying the economy will likely continue to shed jobs for months to come.
Prime minister encouraged by new data that suggests economy is in recovery mode
Julian BeltrameThe Canadian Press OTTAWA
Canadians have reason to breathe a little easier -- the economy fell sharply at the start of the year but talk about another depression appears to have been just talk.
Having been given the best economic news in months, Prime Minister Stephen Harper was quick to take advantage yesterday, saying the Liberals have no reason to push for a federal election.
"I think the worst is behind us, we will have better quarters going forward,'' Harper said in an interview with a Toronto radio station.
"I think that's one of the reasons (Liberal Leader Michael) Ignatieff seems to be pushing so hard with ideas to get the other parties to bring the government down. He would love the opportunity to get in there for a recovery. The country needs an election like a hole in the head,'' Harper added.
The output numbers for the first quarter of 2009 were nothing to boast about. The economy contracted by a massive 5.4 per cent at an annualized rate, the worst in 18 years when there was a 5.9 per cent decline in 1991.
But with the Bank of Canada having projected a 7.3 per cent collapse and some economists saying the decline could be as much as nine per cent, the Statistics Canada data has the feel of a death row reprieve.
And the improving data for the last two months of the quarter -- February and March -- suggests that as Harper noted, the worst is likely over and it happened during the November-January period.
"It is the worst recession since the Great Depression globally, but this is where some of Canada's positives have come back to save us a bit from something nastier,'' said Douglas Porter, deputy chief economist with BMO Capital Markets.
"Make no mistake, it's a very severe downturn. But we've been through these kinds of severe downturns before in the early '80s and early '90s.''
Combined with the revised 3.7 per cent drop in the fourth quarter of 2008, Liberal finance critic John McCallum said the slump still qualifies as among the worst since quarterly data began being kept in 1961.
But he too expressed relief that "there is less panic than there was a while ago . . . and more sense that, 'Yeah, we are going to get out of this."'
McCallum said his party will still press for improvements to unemployment insurance to ensure that more laid-off Canadians qualify for benefits, saying the economy will likely continue to shed jobs for months to come.
Wednesday, May 27, 2009
The Bottom is NOW-if you wait, you will pay more
U.S. confidence data drives sharp loonie rally -TSX rallies as BMO tops estimates-Oil hits six-month high on consumer confidence
§ TSX+216.40 to 10,285.90 climbed to their highest closing level since October on a big jump in U.S. consumer confidence this month and a favourable start to second quarter bank earnings releases.
§ DOW +196.17 U.S. data showed that consumer confidence rose in May to its highest level in eight months.
§ Dollar +.45c to 89.46USD touched its loftiest level in more than 7 months, spurred by a rise in oil prices and by upbeat U.S. economic data that whetted investor appetite for risk.
§ Oil +$.78 to $62.45US per barrel hit a fresh 6-month high, bolstered by U.S. consumer confidence data and comments from OPEC kingpin Saudi Arabia that prices may continue to rise.
§ Gold -$5.60 to $953.30USD per ounce
§ Canadian 5 yr bond yields +.09bps to 2.37- Four weeks ago it was 1.93. The spread, based on 5 yr rate of 3.89%, so is now lower again at 1.52%.
§ http://www.financialpost.com/markets/market-data/money-yields-can_us.html?tmp=yields-can_us
Historically spreads have been closer to 2% or 2.25%. In January the spread was 3.30, however cost of funds had risen drastically with the “credit crunch” With today’s spread of 1.52%, half of January’s, rates are artificially low. Watch for fixed rate increases-two lenders increased yesterday already.
The yield, rate of return on your bond, can be read through a yield curve, which is the pattern of yields on bonds. This increase in bond yield is something to watch. If the bond yield continues to go up, the spread will continue to shrink and this could be a trigger for interest rates to rise
Transmitted by CNW Group on : May 26, 2009 06:00
Affordability and job security most important factors for first-time homebuyers New government incentives help but market fundamentals more important,Canadians say TORONTO, May 26 /CNW/ - Canadians who are considering purchasing theirfirst home are primarily motivated by lower home prices and very low interestrates, but some require confidence in the economy and their employmentprospects before they will enter the market, according to a report releasedtoday by Royal LePage Real Estate Services. Eighty-six per cent of potentialfirst-time buyers say low interest rates make them more likely to purchase ahome; 81 per cent cite lower housing prices as a motivating factor; while 76per cent cite job security and 64 per cent say a stable economy is animportant factor in their decision to buy. Potential buyers were asked to rank their top incentives for purchasing afirst property. While home prices and interest rates took the number one andtwo rankings, respectively, the third most popular incentive was theFirst-Time Home Buyers' Tax Credit. The recently introduced Home RenovationTax Credit for 2009 was cited by 42 per cent of potential first-time buyers aseither 'very likely' or 'somewhat likely' to impact their purchasing decision.
"When first time buyers stepped out of the market in the fourth quarterof 2008, at the height of the global recession, their absence was profoundlyfelt. Without significant volumes of entry-level homes trading hands, theentire market limped through the winter months. First time buyers are back inforce this spring, and with them the beginnings of a market recovery. Whilethese consumers appreciate government incentives such as tax credits, greaterRSP deduction limits and rebates on home renovations, it is markedly improvedaffordability that is proving to be the powerful drawing card," said PhilSoper, president and chief executive of Royal LePage Real Estate Services."Our survey demonstrates how important affordability factors such as interestrates and house prices are in stimulating demand."
Across the country, potential first-time homebuyers agreed thataffordability was their top consideration, however the survey also revealeddifferences amongst buyers in various regions of Canada. In provinces such asBritish Columbia where high housing prices have kept some buyers out of themarket in recent years, 92 per cent of potential first-time buyers are nowmotivated by low interest rates and 96 per cent say lower home prices arelikely to prompt them to buy. In Atlantic Canada, where local economies have been resilient in the faceof a worldwide recession and housing markets remain stable, 43 per cent offirst-time buyers say they that job security is a factor in their decision tobuy, while 84 per cent of buyers in British Columbia and Alberta said jobsecurity will influence them.
Atlantic Canadians were less motivated than other Canadians by declininginterest rates, with only 72 per cent saying it will likely prompt a buyingdecision, compared to 86 per cent of Canadians overall. Buyers in Ontario andQuebec rated the Home Renovation Tax Credit as a bigger factor in their buyingdecision, compared to the Canadian average. Mr Soper continued, "The significant response differences from region toregion show how closely the residential real estate market is tied to broadereconomic trends and consumer confidence. Buying your first home is a majorlife decision, and people are more likely to purchase a home if they feelcomfortable about the state of the economy and confident that they will have ajob to support their new mortgage obligation."
Top Incentives for First-Time Buyers Across Canada
Potential first-time buyers were asked to choose their number one incentive for purchasing a first property. The table shows the percentage of respondents who selected each factor as their top incentive. ------------------------------------------------------------------------- BC & Overall Territories Alberta Prairies Ontario Quebec Atlantic ------------------------------------------------------------------------- Lower Housing Prices 33% 49% 48% 55% 32% 13% 26% ------------------------------------------------------------------------- Low Interest Rates 27% 32% 29% 4% 23% 41% 17% ------------------------------------------------------------------------- First-Time Home Buyers' Tax Credit 12% 3% 10% 22% 15% 11% 10% ------------------------------------------------------------------------- Job Security 10% 6% 5% 2% 10% 16% 15% ------------------------------------------------------------------------- Additional Government Actions to Stabilize Housing less less Markets 3% 3% than 1% 10% 3% 4% than 1% ------------------------------------------------------------------------- Home Renovation less Tax Credit 2% 1% than 1% 1% 1% 3% 11% ------------------------------------------------------------------------- Stable less less less Economy 2% 2% than 1% than 1% 3% 2% than 1% ------------------------------------------------------------------------- Greater RSP Deduction less less less Limits 1% than 1% 1% than 1% 1% 1% than 1% ------------------------------------------------------------------------- Stable Financial less less less less less less Markets than 1% than 1% than 1% than 1% 1% than 1% than 1% ------------------------------------------------------------------------- REGIONAL SUMMARIES
Atlantic
Overall activity in the housing market has remained steady in theAtlantic region with first-time homebuyers continuing to enter the market. Lowinterest rates and recent government incentives, such as the Home RenovationTax Credit, greater RSP deduction limits and the First-Time Homebuyer's TaxCredit speak to affordability. Buyers in this area are entering the marketthat would not have a few years ago, due to these influencing factors.Entry-level buyers in Newfoundland, Prince Edward Island, New Brunswick andNova Scotia continue to search for detached bungalows, with the average priceranging from $157,000 in Charlottetown to $215,667 in Halifax during the firstquarter of 2009.
Quebec
First-time buyers continue to pursue the dream of home ownership inMontreal, as the number of entrants to the housing market has remainedrelatively stable. Low interest rates are contributing to increased marketentry with 41 per cent of first-time buyers suggesting this is the keyincentive driving the purchase of their first property, followed by 13 percent who suggest lower housing prices might influence their buying decision.With 47 per cent of new buyers in Quebec planning to settle in urban areas,buyers are planning to invest and live in their first home for ten or moreyears. Fifty-six per cent of first-time buyers hope to purchase a property inthe $150,000 to $300,000 price range.
Ontario
Encouraged by recent government initiatives, home ownership in Ontario isbecoming a reality for an increasing number of younger purchasers. AcrossOntario, 36 per cent of potential first-time buyers are most likely topurchase property in an urban setting. Condominiums continue to attractfirst-time buyers in the Greater Toronto Area with urban communities ataccessible price points appealing most to market newcomers. In addition toaffordability, location is a leading factor dictating condominium appeal.Neighbourhoods in Toronto's east and west downtown core are popular withfirst-time buyers. In Ottawa, affordability continues to drive activity andmost first-time buyers are opting to purchase in suburban areas whereproperties typically cost $50,000 to $75,000 less than in the city centre.Active first-time buyer markets include Orleans, Barrhaven and Kanata.
Manitoba & Saskatchewan
Thirty per cent of Prairie buyers planning on purchasing their first homein the next three years will choose a detached bungalow. The second-mostpopular choice for first-time buyers is condominiums at 21 per cent, followedby detached two-story homes at 15 per cent. In Winnipeg, up-and-comingneighbourhoods for first-time buyers include River Heights - which hastraditionally been attractive for people entering the market - Fraser's Groveand East / North Caldonin. With a good selection of older bungalows and twostory homes, Broders Annex is the hottest neighbourhood for first-time buyersin Regina.
Alberta
Alberta's urban centres continue to be popular with first-time buyers,who make up nearly a third of home sales in both Calgary and Edmonton.Condominiums and detached bungalows are the most popular choices forfirst-time buyers in Edmonton, where lower housing prices and low interestrates are the biggest incentives for buyers entering the market for the firsttime. Popular areas for new buyers include the suburbs, where a newcondominium may be within budget, the university area, where many parents arebuying for their kids, Allendale and McKernan. In Calgary, new buyers are mostinterested in inner city condominiums and detached houses in the suburbs, withmany seeking new or renovated homes.
British Columbia
With home prices either flat or declining in many communities in BritishColumbia and with interest rates at record lows, first-time buyers are takingadvantage of greater affordability, with female buyers leading the trend.Sixty per cent of the buyers getting into BC's housing market for the firsttime are women. In British Columbia, 40 per cent of prospective first-timebuyers intend to purchase a 'fixer-upper' while 80 per cent would takeadvantage of the Federal Government's Home Renovation Tax Credit in makingupgrades to a home. First-time buyers in Vancouver are favouring condominiumsand townhomes, however an increasing number of entry-level buyers are findingaffordable detached homes outside the city in the Fraser Valley suburbs.
The survey portion of the Royal LePage First-Time Homebuyers' Report wasconducted by Pollara from April 29, 2009 to May 8, 2009 among 474 first-timehomebuyers in Canada. The online survey was conducted among arandomly-selected sample of 474 adult Canadians who are likely to purchasetheir first home in the next 3 years. A probability sample of this size with a100% response rate would have an estimated margin of error of +/- 4.5 %, 19times out of 20. The data was statistically weighted to ensure the sample'sregional and age/gender composition reflects the actual Canadian populationaccording to the most recent Census data. About Royal LePage
Royal LePage is Canada's leading provider of franchise services toresidential real estate brokerages, with a network of over 13,000 brokers andsales representatives in 600 locations across Canada. Royal LePage is managedby Brookfield Real Estate Services, and is part of a brand family thatincludes Royal LePage, Johnston and Daniel, and La Capitale Real EstateNetwork. An affiliated company, Brookfield Real Estate Services Fund, is a TSXlisted income trust, trading under the symbol "BRE.UN." For more information visit www.royallepage.ca or www.brookfieldres.com. /For further information: or a copy of the Royal LePage First-Time Homebuyers' Report 2009, please contact: Tammy Gilmer, Director, PublicRelations and National Communications, Royal LePage Real Estate Services Ltd., (416) 510-5783; Melissa Cassar, Vice President, Fleishman-Hillard Canada,(416) 645-3647/
Tuesday, May 12, 2009
5 Tips for Navigating Todays Housing and Interest Rate Market
5 tips for navigating todays housing and interest rate market
Easily the most consistent question I get is “should I buy a home now”. I understand that in uncertain times like we have had it can be unsettling to consider buying a home right now. If you are going to, what do you need to know before you get started.
1. Carefully interview your mortgage professional.
This one is really important but often overlooked. Understand that today all mortgage originators including the banks branches ultimately have the same rates available to them. Certainly one challenge is that they don’t all offer you their best rate. This does unfortunately shift the focus often to you thinking the most important thing is to negotiate the rate. Honestly it is not. The most important thing is to interview the mortgage originator that you will plan to work with. With something as important as your largest debt and monthly financial commitment you should buy the mortgage from a PERSON not an institution. Sadly, if you buy a mortgage from a bank you will not have a relationship with that person. Your subsequent inquiries and requests for information and/or advice will be handled by a call centre or the person who did your mortgage will have been moved to another branch. If you buy from a trusted and PROVEN mortgage broker, then you will have someone who will know you and advise you through various market turns for the life of your mortgage. This is incredibly valuable.
2. Allow your Mortgage Broker to advise you on who the other players of your Real Estate team should be.
I have seen that when buying real estate the transaction goes much smoother when all players involved have experience working together. It makes sense when problems arise and they often do, the players can work together to resolve it, most often without stressing you along the way.
3. Allow your mortgage broker to advise you on your strategy.
You may buy/sell a home four or five times in your lifetime. Today’s top Mortgage Brokers will do it over 500 times per year, and some, like me, have been at it for over 10 years or more. Mortgage brokers have a vested interest in making sure their advice is more then; “you should take a five year, because at our morning meeting my branch manager told me that we were having a rate sale on five year”. Many Mortgage originators don’t have a strategy and could not explain to you articulately why you should take a certain mortgage product or term. If they can’t, why would you gamble a $400,000 plus debt in their hands?
4. Get pre-approved.
This is a no brainer I know, but be careful. Many pre-approvals today are nothing more then a rate hold. If your mortgage originator does not ask you for paperwork to support your claims on your application at the pre-approval stage you should really be careful, unless you are absolutely certain you will qualify. If you are any of these; (self-employed, recently changed jobs, have a relatively high debt load, missed or had any late payments in the last year, in a sector that has some risk of job losses or has already had many job losses, your down payment is not coming from you) then you need to have a full analysis of all your supporting paperwork BEFORE you buy. The mortgage market is incredibly tight right now and we have wound the clock back 7 years or more in terms of the paperwork required and the due dilegence performed on loans. Don’t assume anything.
5. Understand we are in EMERGENCY interest rate times.
The interest rates we see today are as a result of monetary response from our central bank to battle the nasty recession we have been in since mid 2008. These rates will go away, and maybe forever. Take advantage now. Recently I did a real world analysis on an average priced home in Vancouver that was bought and sold within one year, from March 2008 to March 2009. The price dropped 15% but when you combine how much the interest rates had dropped, mortgage payments had decreased 48% in one year. Everyone is focused on how much prices have dropped and are waiting for more drops (in Vancouver, Median prices have been stable since January) but are missing the real opportunity to capture these unbelievably low interest rates.
Tune into The Mortgage Show Saturdays at 1pm on 1410am to hear more.
Angela Calla, AMP
Mortgage Expert
Host of "The Mortgage Show" on 1410am The Buzz every Saturday at 1pm
DLCBC Mortgage Group Ltd.
Tel: 604-802-3983
Fax: 604-939-8795
Toll Free: 1-888-806-8080
Email: acalla@dominionlending.ca
Web: www.angelacalla.ca
Easily the most consistent question I get is “should I buy a home now”. I understand that in uncertain times like we have had it can be unsettling to consider buying a home right now. If you are going to, what do you need to know before you get started.
1. Carefully interview your mortgage professional.
This one is really important but often overlooked. Understand that today all mortgage originators including the banks branches ultimately have the same rates available to them. Certainly one challenge is that they don’t all offer you their best rate. This does unfortunately shift the focus often to you thinking the most important thing is to negotiate the rate. Honestly it is not. The most important thing is to interview the mortgage originator that you will plan to work with. With something as important as your largest debt and monthly financial commitment you should buy the mortgage from a PERSON not an institution. Sadly, if you buy a mortgage from a bank you will not have a relationship with that person. Your subsequent inquiries and requests for information and/or advice will be handled by a call centre or the person who did your mortgage will have been moved to another branch. If you buy from a trusted and PROVEN mortgage broker, then you will have someone who will know you and advise you through various market turns for the life of your mortgage. This is incredibly valuable.
2. Allow your Mortgage Broker to advise you on who the other players of your Real Estate team should be.
I have seen that when buying real estate the transaction goes much smoother when all players involved have experience working together. It makes sense when problems arise and they often do, the players can work together to resolve it, most often without stressing you along the way.
3. Allow your mortgage broker to advise you on your strategy.
You may buy/sell a home four or five times in your lifetime. Today’s top Mortgage Brokers will do it over 500 times per year, and some, like me, have been at it for over 10 years or more. Mortgage brokers have a vested interest in making sure their advice is more then; “you should take a five year, because at our morning meeting my branch manager told me that we were having a rate sale on five year”. Many Mortgage originators don’t have a strategy and could not explain to you articulately why you should take a certain mortgage product or term. If they can’t, why would you gamble a $400,000 plus debt in their hands?
4. Get pre-approved.
This is a no brainer I know, but be careful. Many pre-approvals today are nothing more then a rate hold. If your mortgage originator does not ask you for paperwork to support your claims on your application at the pre-approval stage you should really be careful, unless you are absolutely certain you will qualify. If you are any of these; (self-employed, recently changed jobs, have a relatively high debt load, missed or had any late payments in the last year, in a sector that has some risk of job losses or has already had many job losses, your down payment is not coming from you) then you need to have a full analysis of all your supporting paperwork BEFORE you buy. The mortgage market is incredibly tight right now and we have wound the clock back 7 years or more in terms of the paperwork required and the due dilegence performed on loans. Don’t assume anything.
5. Understand we are in EMERGENCY interest rate times.
The interest rates we see today are as a result of monetary response from our central bank to battle the nasty recession we have been in since mid 2008. These rates will go away, and maybe forever. Take advantage now. Recently I did a real world analysis on an average priced home in Vancouver that was bought and sold within one year, from March 2008 to March 2009. The price dropped 15% but when you combine how much the interest rates had dropped, mortgage payments had decreased 48% in one year. Everyone is focused on how much prices have dropped and are waiting for more drops (in Vancouver, Median prices have been stable since January) but are missing the real opportunity to capture these unbelievably low interest rates.
Tune into The Mortgage Show Saturdays at 1pm on 1410am to hear more.
Angela Calla, AMP
Mortgage Expert
Host of "The Mortgage Show" on 1410am The Buzz every Saturday at 1pm
DLCBC Mortgage Group Ltd.
Tel: 604-802-3983
Fax: 604-939-8795
Toll Free: 1-888-806-8080
Email: acalla@dominionlending.ca
Web: www.angelacalla.ca
How long will rates remain low?
Canadian 5 yr bond yields - .07bps to 2.07- Four weeks ago it was 1.85. The spread today vs the 5 year rate is now down to 1.71%
· http://www.financialpost.com/markets/market-data/money-yields-can_us.html?tmp=yields-can_us NEW LINK
Spreads have really come down and not sure how long this is going to last. If bond yields get any higher rates could start to move up. The Banks could be keeping the rates artificially low because of the spring season and don’t wish to be perceived as making things harder for consumers. If the stock market is down today we may see an easing on the bond yield side (bond yield will drop). Keep watching them and if they continue to rise, I expect we will see a rate increase
The yield, rate of return on your bond, can be read through a yield curve, which is the pattern of yields on bonds. This increase in bond yield is something to watch. If the bond yield continues to go up, the spread will continue to shrink and this could be a trigger for interest rates to rise
Angela Calla, AMP
Mortgage Expert
Host of "The Mortgage Show" on 1410am The Buzz every Saturday at 1pm
DLCBC Mortgage Group Ltd.
Tel: 604-802-3983
Fax: 604-939-8795
Toll Free: 1-888-806-8080
Email: acalla@dominionlending.ca
Web: www.angelacalla.ca
You have received this e-mail message from a member of the Dominion Lending Centres network. This message is intended only for the use of the individual or entity to which it is addressed, and may contain information that is privileged, confidential and exempt from disclosure under applicable law. Any other distribution, copying or disclosure is strictly prohibited. If you have received this message in error, please notify us immediately by telephone 1-888-806-8080 and reply to the sender via e-mail, confirming deletion of the original e-mail and any attachment(s).
· http://www.financialpost.com/markets/market-data/money-yields-can_us.html?tmp=yields-can_us NEW LINK
Spreads have really come down and not sure how long this is going to last. If bond yields get any higher rates could start to move up. The Banks could be keeping the rates artificially low because of the spring season and don’t wish to be perceived as making things harder for consumers. If the stock market is down today we may see an easing on the bond yield side (bond yield will drop). Keep watching them and if they continue to rise, I expect we will see a rate increase
The yield, rate of return on your bond, can be read through a yield curve, which is the pattern of yields on bonds. This increase in bond yield is something to watch. If the bond yield continues to go up, the spread will continue to shrink and this could be a trigger for interest rates to rise
Angela Calla, AMP
Mortgage Expert
Host of "The Mortgage Show" on 1410am The Buzz every Saturday at 1pm
DLCBC Mortgage Group Ltd.
Tel: 604-802-3983
Fax: 604-939-8795
Toll Free: 1-888-806-8080
Email: acalla@dominionlending.ca
Web: www.angelacalla.ca
You have received this e-mail message from a member of the Dominion Lending Centres network. This message is intended only for the use of the individual or entity to which it is addressed, and may contain information that is privileged, confidential and exempt from disclosure under applicable law. Any other distribution, copying or disclosure is strictly prohibited. If you have received this message in error, please notify us immediately by telephone 1-888-806-8080 and reply to the sender via e-mail, confirming deletion of the original e-mail and any attachment(s).
Thursday, May 7, 2009
Rates will creep up in 2010
For lenders, the TSX gains generally mean a retreat (selloff) from bonds which means yields increase. We’ve seen them increasing for several weeks now and the past couple of days could send them higher. Keep an eye on lenders rates-especially quick close offers
The yield, rate of return on your bond, can be read through a yield curve, which is the pattern of yields on bonds. This increase in bond yield (and the decrease in spread-down 10 today) is something to watch. If the bond yield continues to go up, the spread will continue to shrink and this could be a trigger for interest rates to rise
Stimulus sufficient to turn economy around later this year: Bank of Canada
By The Canadian Press OTTAWA - Bank of Canada governor Mark Carney says he does not envision that the struggling economy will require additional monetary stimulus.
The central bank governor says he believes the economy will begin to grow again late this year, after four quarters of decline that began at the end of last year. Carney says that as things stand today, he believes there is enough stimulus from governments and the bank to provide the boost the economy needs.
He sees the elements of recovery forming, including a gradual improvement in the world economy, the housing markets in the U.S. and Canada, the depreciation of the Canadian dollar and Canada's sound financial system.
But he admits that the economic recovery will be muted, growing only by 2.5 per cent in 2010 after falling back a full three per cent this year.
While he says he is optimistic, he underplayed talk of encouraging green shoots appearing on the economic terrain as premature.
It is too soon to be totally reassured, he says.
And Carney says he is prudently planning for worse.
Carney says in case of a financial system shock, he has prepared plans to intervene by expanding the money supply or purchasing corporate assets - so-called quantitative and credit easing.
The yield, rate of return on your bond, can be read through a yield curve, which is the pattern of yields on bonds. This increase in bond yield (and the decrease in spread-down 10 today) is something to watch. If the bond yield continues to go up, the spread will continue to shrink and this could be a trigger for interest rates to rise
Stimulus sufficient to turn economy around later this year: Bank of Canada
By The Canadian Press OTTAWA - Bank of Canada governor Mark Carney says he does not envision that the struggling economy will require additional monetary stimulus.
The central bank governor says he believes the economy will begin to grow again late this year, after four quarters of decline that began at the end of last year. Carney says that as things stand today, he believes there is enough stimulus from governments and the bank to provide the boost the economy needs.
He sees the elements of recovery forming, including a gradual improvement in the world economy, the housing markets in the U.S. and Canada, the depreciation of the Canadian dollar and Canada's sound financial system.
But he admits that the economic recovery will be muted, growing only by 2.5 per cent in 2010 after falling back a full three per cent this year.
While he says he is optimistic, he underplayed talk of encouraging green shoots appearing on the economic terrain as premature.
It is too soon to be totally reassured, he says.
And Carney says he is prudently planning for worse.
Carney says in case of a financial system shock, he has prepared plans to intervene by expanding the money supply or purchasing corporate assets - so-called quantitative and credit easing.
Friday, April 3, 2009
Friday, March 27, 2009
Thursday, March 26, 2009
Wednesday, March 25, 2009
Thursday, March 19, 2009
Fixed or variable??
More Canadians will turn to fixed mortgages as rates plummet to rock bottom
Ross Marowits, THE CANADIAN PRESS MONTREAL - Bargain basement borrowing costs are prompting many Canadians to opt for fixed mortgages even though variable products continue to be a money-winning option for the foreseeable future, industry observers say.
Canadian Imperial Bank of Commerce's chief economist says variable rate mortgages should produce the greater benefit for the next two to 2.5 years, but be a wash over five years.
"If you're really risk-averse, jump on those fixed-term rates because they're extremely cheap," Benjamin Tal said in an interview.
"Going variable probably will give you good performance for the next two years or so and beyond that, we might see interest rates rising."
Inflation could ultimately lead to higher interest rates, but likely not before 2011, he said.
Variable rates remain attractive even though banks last fall eliminated discounts and began charging premiums for those who signed up for them after the Bank of Canada lowered its interest rate.
The central bank went even further on Tuesday, cutting its trend-setting overnight rate another a half percentage point to 0.5 per cent. Banks followed by lowering their prime rate to 2.50 per cent.
Bank governor Mark Carney said he now sees recovery coming later than it had projected, possibly in early 2010. And he hinted that instead of further lowering rates, the central bank may consider alternative strategies, including buying back government bonds and other forms of credit from chartered banks.
Homeowners with variable rates, especially those with discounts reaching 90 basis points, should ignore temptations to lock in now, says Vince Gaetano, vice-president of Monstermortgage.ca.
The self-professed fan of variable mortgages said they give customers control, which is important in the current economic climate.
Gaetano said homeowners should use this window of low rates to pay down their mortgages as quickly as possible.
"The key is if you can pay your mortgage in half by the time your variable rate doubles your interest cost is going to be the same on your balance."
He accused banks of scaring mortgage holders last fall to lock in their variable rates by suggesting rates will rise. The deteriorating economy has only caused rates to fall even further.
"There's lots of consumers not happy with their banks right now for bad advice," he said, noting that people who opt for variable mortgages have to be comfortable with fluctuations.
Owners of rental properties, however, should stick to fixed-rate mortgages to balance steady income with stable interest expenses, he added.
Mark Olkowski, Southern Ontario manager of mortgage firm Invis, said fixed rates have dropped so low that new mortgage holders are looking more closely at this option than they did just a few months ago.
"The average consumer is looking at it now and they're probably waiting for something to trigger," he said.
If rates haven't reached a floor, they are probably close to it, added Olkowski, who said he hasn't yet seen a flurry of people opt for fixed rates.
"We pretty much have a good idea what's going to happen in 2009. The trick is trying to figure out what's going to happen in 2010, 2011, 2012 and 2013."
The beauty of variable rates is that consumers can convert to a fixed rate without penalty.
Mortgage expert Moshe Milevsky of York University suspects many Canadians will opt for the security of fixed mortgages considering how low rates have dropped.
But he said the decision about what kind of mortgage to take should never be made in isolation of individual circumstances such the amount of equity, value of the house, debts and risk aversion.
And in markets where real estate prices are falling, seeking a long-term rate may be more important than the type of rate.
"The last thing you want to do is have to renew your mortgage in a year from now and have the bank say: 'Let's assess what that house is really worth,' " he said in an interview.
Studies conducted by Milevsky have determined that variable rates have historically produced greater savings 88 per cent of the time.
"But in today's environment, you'd be hard-pressed to make a case to continue floating," he said, advocating a blend between fixed and floating rates.
Ross Marowits, THE CANADIAN PRESS MONTREAL - Bargain basement borrowing costs are prompting many Canadians to opt for fixed mortgages even though variable products continue to be a money-winning option for the foreseeable future, industry observers say.
Canadian Imperial Bank of Commerce's chief economist says variable rate mortgages should produce the greater benefit for the next two to 2.5 years, but be a wash over five years.
"If you're really risk-averse, jump on those fixed-term rates because they're extremely cheap," Benjamin Tal said in an interview.
"Going variable probably will give you good performance for the next two years or so and beyond that, we might see interest rates rising."
Inflation could ultimately lead to higher interest rates, but likely not before 2011, he said.
Variable rates remain attractive even though banks last fall eliminated discounts and began charging premiums for those who signed up for them after the Bank of Canada lowered its interest rate.
The central bank went even further on Tuesday, cutting its trend-setting overnight rate another a half percentage point to 0.5 per cent. Banks followed by lowering their prime rate to 2.50 per cent.
Bank governor Mark Carney said he now sees recovery coming later than it had projected, possibly in early 2010. And he hinted that instead of further lowering rates, the central bank may consider alternative strategies, including buying back government bonds and other forms of credit from chartered banks.
Homeowners with variable rates, especially those with discounts reaching 90 basis points, should ignore temptations to lock in now, says Vince Gaetano, vice-president of Monstermortgage.ca.
The self-professed fan of variable mortgages said they give customers control, which is important in the current economic climate.
Gaetano said homeowners should use this window of low rates to pay down their mortgages as quickly as possible.
"The key is if you can pay your mortgage in half by the time your variable rate doubles your interest cost is going to be the same on your balance."
He accused banks of scaring mortgage holders last fall to lock in their variable rates by suggesting rates will rise. The deteriorating economy has only caused rates to fall even further.
"There's lots of consumers not happy with their banks right now for bad advice," he said, noting that people who opt for variable mortgages have to be comfortable with fluctuations.
Owners of rental properties, however, should stick to fixed-rate mortgages to balance steady income with stable interest expenses, he added.
Mark Olkowski, Southern Ontario manager of mortgage firm Invis, said fixed rates have dropped so low that new mortgage holders are looking more closely at this option than they did just a few months ago.
"The average consumer is looking at it now and they're probably waiting for something to trigger," he said.
If rates haven't reached a floor, they are probably close to it, added Olkowski, who said he hasn't yet seen a flurry of people opt for fixed rates.
"We pretty much have a good idea what's going to happen in 2009. The trick is trying to figure out what's going to happen in 2010, 2011, 2012 and 2013."
The beauty of variable rates is that consumers can convert to a fixed rate without penalty.
Mortgage expert Moshe Milevsky of York University suspects many Canadians will opt for the security of fixed mortgages considering how low rates have dropped.
But he said the decision about what kind of mortgage to take should never be made in isolation of individual circumstances such the amount of equity, value of the house, debts and risk aversion.
And in markets where real estate prices are falling, seeking a long-term rate may be more important than the type of rate.
"The last thing you want to do is have to renew your mortgage in a year from now and have the bank say: 'Let's assess what that house is really worth,' " he said in an interview.
Studies conducted by Milevsky have determined that variable rates have historically produced greater savings 88 per cent of the time.
"But in today's environment, you'd be hard-pressed to make a case to continue floating," he said, advocating a blend between fixed and floating rates.
Wednesday, January 28, 2009
Mortgage Industry Welcomes Federal Budget
Good Afternoon,
Below are the details on today's budget announcement and how it affects the mortgage industry.
As mortgage rates are at 50 year lows many clients in fixed terms presently are receiving large benefits from re-doing there present mortgages at today's low rates.
This morning a family whom purchased a home in the summer time had a fixed rate of 5.25% called me to get their mortgage reviewed and we were able to save them $335 dollars a month on their 400k mortgage. Now the wife can go back to school and upgrade her education comfortably before returning to work from her maternity leave with the additional savings on hand, and a lower mortgage amount at maturity.
If you or someone that you care about needs to review there mortgage to position themselves to save on a monthly basis and pay their mortgage off faster, please call me directly at 604-802-3983 or introduce us over an email at acalla@dominionlending.ca
We look forward to helping you,
Angela Calla, AMP
Mortgage Expert
Host of "The Mortgage Show" on 1410am The Buzz every Saturday at 1pm
DLCBC Mortgage Group Ltd.
Tel: 604-802-3983
Fax: 604-939-8795
Toll Free: 1-888-806-8080
Email: acalla@dominionlending.ca
Web: www.angelacalla.ca
Canada's Mortgage Industry Welcomes Federal Budget Announcements
Earlier today, federal Finance Minister Jim Flaherty tabled the federal budget. Several measures affect Canada's housing and mortgage industry.
Temporary home renovations tax credit of up to $1,350 for eligible home renovations and alterations
Increase in the home buyers RSP plan, withdrawal limit increased to $25,000 from the current $20,000
A new first time home buyers tax credit that will provide up to $750 in tax relief for closing costs
Broad based personal tax reductions including an increase in the personal exemption and increases to the limits for the two lowest tax brackets
CAAMP President and CEO Jim Murphy, AMP was in Ottawa today as part of the pre-budget lock up. To view a copy of CAAMP's Press Release on the budget announcements - click here
For more information on today's federal budget reading - click here
HOME | EVENTS | AMP | COURSES | ABOUT CAAMP
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You are subscribed as acalla@dominionlending.ca. To unsubscribe please click here.
Below are the details on today's budget announcement and how it affects the mortgage industry.
As mortgage rates are at 50 year lows many clients in fixed terms presently are receiving large benefits from re-doing there present mortgages at today's low rates.
This morning a family whom purchased a home in the summer time had a fixed rate of 5.25% called me to get their mortgage reviewed and we were able to save them $335 dollars a month on their 400k mortgage. Now the wife can go back to school and upgrade her education comfortably before returning to work from her maternity leave with the additional savings on hand, and a lower mortgage amount at maturity.
If you or someone that you care about needs to review there mortgage to position themselves to save on a monthly basis and pay their mortgage off faster, please call me directly at 604-802-3983 or introduce us over an email at acalla@dominionlending.ca
We look forward to helping you,
Angela Calla, AMP
Mortgage Expert
Host of "The Mortgage Show" on 1410am The Buzz every Saturday at 1pm
DLCBC Mortgage Group Ltd.
Tel: 604-802-3983
Fax: 604-939-8795
Toll Free: 1-888-806-8080
Email: acalla@dominionlending.ca
Web: www.angelacalla.ca
Canada's Mortgage Industry Welcomes Federal Budget Announcements
Earlier today, federal Finance Minister Jim Flaherty tabled the federal budget. Several measures affect Canada's housing and mortgage industry.
Temporary home renovations tax credit of up to $1,350 for eligible home renovations and alterations
Increase in the home buyers RSP plan, withdrawal limit increased to $25,000 from the current $20,000
A new first time home buyers tax credit that will provide up to $750 in tax relief for closing costs
Broad based personal tax reductions including an increase in the personal exemption and increases to the limits for the two lowest tax brackets
CAAMP President and CEO Jim Murphy, AMP was in Ottawa today as part of the pre-budget lock up. To view a copy of CAAMP's Press Release on the budget announcements - click here
For more information on today's federal budget reading - click here
HOME | EVENTS | AMP | COURSES | ABOUT CAAMP
--------------------------------------------------------------------------------
Please add the domain "caamp.org" to your email's "Safe Senders" list.
To unsubscribe, click the link below. Please allow two weeks for removal from our system.
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