| Friday, 18 December 2009
Following a week of more housing bubble speculation, CIBC released a report <http://research.cibcwm.com/economic_public/download/sdec09.pdf> stating Canada is not at risk of a "U.S.-style housing and mortgage blow-up", adding the Bank of Canada should not move prematurely to raise interest rates.
"Historically, it's clear that mortgage arrears rates are highly correlated with the unemployment rates, with little or no correlation with changes in interest rates," wrote CIBC chief economist Benjamin Tal.
Tal listed a number of other "buffers" protecting Canada from a U.S.-style housing and mortgage crisis, including the fact that many households with a debt-to-service (DSR) ratio greater than the standard 40 per cent have already accumulated a significant amount of equity in their homes. The report said out of the five million Canadian households with mortgages, only an estimated 350,000 have a mortgage with a LTV greater than 80 per cent and a DSR greater than 40 per cent.
The report also noted that most at-risk and lower-income borrowers have already locked into fixed-rate mortgages. This differs from the U.S., where a large number of low-income households opted for variable-rate mortgages.
"There is nothing in Canada akin to the huge excesses in lending that led up to the housing and mortgage crisis experienced in the U.S. in the past few years," Tal wrote. "Existing debt burdens appear to be manageable for the vast majority of Canadians ... the magnitude of the problem is not big enough to justify a premature tightening move by the Bank of Canada."
Friday, December 18, 2009
Wednesday, December 16, 2009
Canada Housing Resales Record November (update2)
By Alexandre Deslongchamps
Dec. 15 (Bloomberg) -- Canadian home resales rose to a record 46,450 units in November, as the housing market helped to pull the economy out of recession, a realtor group said.
Seasonally adjusted sales in November climbed 67 percent from a year earlier, the Canadian Real Estate Association said in a statement. <http://www.crea.ca/public/news_stats/pdfs/Nov09_e.pdf>
“The Canadian housing market remains on fire as the combination of low mortgage rates and still favorable buying conditions continues to spur buying activity,” Millan Mulraine <http://search.bloomberg.com/search?q=Millan+Mulraine&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1> , an economist with TD Securities in Toronto, said in a note to clients.
The Bank of Canada has predicted growth in housing investment will stay “brisk until early 2010,” and then slow as pent-up demand is satisfied and affordability declines. The bank lowered its benchmark lending rate <http://www.bloomberg.com/apps/quote?ticker=CABROVER%3AIND> to a record 0.25 percent in April to spur domestic demand and pledged to leave it there through June unless the inflation outlook changes.
Canada’s five-year mortgage rate <http://www.bloomberg.com/apps/quote?ticker=CANMORT5%3AIND> was 5.84 percent for most of November and fell to 5.59 percent by the end of the month, near the 58-year low of 5.25 percent set in April, according to Bank of Canada data.
The rebound has prompted some analysts, including Gluskin Sheff & Associates Inc.’s David A. Rosenberg <http://search.bloomberg.com/search?q=David+A.+Rosenberg&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1> , to question whether a bubble is forming in the housing market.
‘Next Closest Thing’
“Housing values are anywhere between 15 percent and 35 percent above levels we would label as being consistent with the fundamentals,” Rosenberg said in a report before today’s report. “If being 15 percent to 35 percent overvalued isn’t a bubble, then it’s the next closest thing.”
The average nationwide price rose 19 percent from last year to C$337,231 ($317,700), the association said in the statement. Seasonally adjusted listings fell 4.8 percent to 79,953 in November from a year ago.
Without adjusting for seasonality, home sales rose to 36,383 units in November, up 73 percent from a year earlier, CREA said.
“The rebound in resale housing activity led the overall Canadian economy out of recession,” CREA President Dale Ripplinger said in the statement.
To contact the reporter on this story: Alexandre Deslongchamps <http://search.bloomberg.com/search?q=Alexandre+Deslongchamps&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1> in Ottawa at adeslongcham@bloomberg.net <mailto:adeslongcham@bloomberg.net> .
Last Updated: December 15, 2009 11:33 EST
Tuesday, December 15, 2009
Interest Rates May Rise Despite BOC Deadline
Scotia economist warns of bond, mortgage hikes
Jonathan Chevreau, Financial Post Published: Thursday, December 10, 2009
Read more: http://www.nationalpost.com/news/story.html?id=2323217#ixzz0ZhT6MHQc
The National Post is now on Facebook. Join our fan community today. <http://tcr40.tynt.com/ads/13/0ZhT6MHQc>
Bond yields and mortgage rates could head higher before the Bank of Canada's pledge to hold interest rates steady expires in July, the chief economist at Bank of Nova Scotia said this week.
"There's a very good chance long-term rates will head up before then," Warren Jestin said in Toronto at a briefing sponsored by the Investment Funds Institute of Canada.
He warned new homeowners with variable-rate mortgages not to be influenced by the central bank's neutral statements on rates on Tuesday. The bank has pledged to hold rates at a historic low of 0.25% until the end of the second quarter of next year, inflation conditions permitting.
Read the "fine print" and he believes it's likely three-year and five-year mortgage rates will be higher before July 2010.
Mr. Jestin does not foresee a double-dip recession. "Those who expect renewed recession next spring will be proved wrong." For North America, "2010 is a year we fill in the hole we dug for ourselves in one of the most vicious recessions in our lives." But the global economy will grow at a "slower rate than we'd consider normal a few years ago. We believe expansion won't be that strong in 2011 so we don't see rates continuing up in 2011."
Christopher Probyn, managing director and chief economist for State Street Global Advisors, expects the U.S. Federal Reserve will raise interest rates by 0.75% to 1.5% in the second half of 2010. However, he said inflation may run surprisingly low so the Fed could "be on hold much longer than people anticipate."
The 2008-2009 period was by far the worst economy since the International Monetary Fund started collecting data in 1970. "For the first time, there was a contraction in the global economy." Growth in world gross domestic product fell from over 5% in 2007 to 3% in 2008 but went to -2.5% in 2009.
The low was the first quarter of 2009, when the economy contracted at a rate of 6% annualized. But it was flat in the second quarter and returned to positive growth in the third, "so throughout 2009 there has been progressive improvement."
Mr. Probyn foresees a sustained but "rather gradual" recovery, with GDP expanding 2.5% in 2010. Last week's favorable employment report suggests the next stage in recovery may already have arrived. "Maybe we're very close to achieving stability in the labor market," Mr. Probyn said.
Like Mr. Jestin, he doesn't foresee a double-dip recession in 2010. He said the recovery is more likely to be U-shaped, with some bouncing along the bottom, than the instant rebound of a Vshaped comeback.
Jonathan Chevreau, Financial Post Published: Thursday, December 10, 2009
Read more: http://www.nationalpost.com/news/story.html?id=2323217#ixzz0ZhT6MHQc
The National Post is now on Facebook. Join our fan community today. <http://tcr40.tynt.com/ads/13/0ZhT6MHQc>
Bond yields and mortgage rates could head higher before the Bank of Canada's pledge to hold interest rates steady expires in July, the chief economist at Bank of Nova Scotia said this week.
"There's a very good chance long-term rates will head up before then," Warren Jestin said in Toronto at a briefing sponsored by the Investment Funds Institute of Canada.
He warned new homeowners with variable-rate mortgages not to be influenced by the central bank's neutral statements on rates on Tuesday. The bank has pledged to hold rates at a historic low of 0.25% until the end of the second quarter of next year, inflation conditions permitting.
Read the "fine print" and he believes it's likely three-year and five-year mortgage rates will be higher before July 2010.
Mr. Jestin does not foresee a double-dip recession. "Those who expect renewed recession next spring will be proved wrong." For North America, "2010 is a year we fill in the hole we dug for ourselves in one of the most vicious recessions in our lives." But the global economy will grow at a "slower rate than we'd consider normal a few years ago. We believe expansion won't be that strong in 2011 so we don't see rates continuing up in 2011."
Christopher Probyn, managing director and chief economist for State Street Global Advisors, expects the U.S. Federal Reserve will raise interest rates by 0.75% to 1.5% in the second half of 2010. However, he said inflation may run surprisingly low so the Fed could "be on hold much longer than people anticipate."
The 2008-2009 period was by far the worst economy since the International Monetary Fund started collecting data in 1970. "For the first time, there was a contraction in the global economy." Growth in world gross domestic product fell from over 5% in 2007 to 3% in 2008 but went to -2.5% in 2009.
The low was the first quarter of 2009, when the economy contracted at a rate of 6% annualized. But it was flat in the second quarter and returned to positive growth in the third, "so throughout 2009 there has been progressive improvement."
Mr. Probyn foresees a sustained but "rather gradual" recovery, with GDP expanding 2.5% in 2010. Last week's favorable employment report suggests the next stage in recovery may already have arrived. "Maybe we're very close to achieving stability in the labor market," Mr. Probyn said.
Like Mr. Jestin, he doesn't foresee a double-dip recession in 2010. He said the recovery is more likely to be U-shaped, with some bouncing along the bottom, than the instant rebound of a Vshaped comeback.
Friday, December 11, 2009
Household Debt
From Friday's Globe and Mail Published on Thursday, Dec. 10, 2009 9:45PM EST Last updated on Friday, Dec. 11, 2009 7:21AM EST
Mark Carney is urging prudence among Canadians who are borrowing at super-cheap rates today but may not be able to afford higher payments tomorrow.
Household debt is now the biggest risk to the financial system, even if it is not expected to climb to levels that could cripple bank balance sheets, the central bank said Thursday in its review of the financial system. It used a “stress test'' to show that rising interest rates
<http://www.theglobeandmail.com/report-on-business/carney-urges-prudence-on-debt/article1396431/> between mid-2010 and mid-2012 would saddle a growing number of Canadians with unmanageable debt loads.
Mr. Carney, the Bank of Canada
<http://www.theglobeandmail.com/report-on-business/carney-urges-prudence-on-debt/article1396431/> governor, who has guided monetary policy throughout the crisis, is relying on consumers to help drive a recovery juiced by his historically low interest rates. Yet he is also warning borrowers and lenders not to go overboard and to think about the consequences of hefty debt in an inevitable environment of rising rates.
The semi-annual report marked the first time the bank has analyzed the risks based on interest rates reaching specific levels.
“Households need to assess their ability to service these debt obligations over their entire maturity, taking into account likely changes in both income and interest rates,'' the bank said. “Financial institutions need to carefully consider the aggregate risk to their entire portfolio of household exposures when evaluating even an insured mortgage, since a household defaulting on an insured mortgage would likely be unable to meet its other debt obligations.''
The warning, Mr. Carney's most detailed to date, highlights the delicate position of the 44-year-old central bank chief. With overall inflation forecast to remain low, and the economy still struggling to regain its feet, Mr. Carney has pledged to keep his benchmark rate at just 0.25 per cent until mid-2010. So there's little he can do to temper demand in sectors such as housing, where low mortgage rates have spurred buying.
Central bankers around the world will be trying to find the right moment, and the right pace, to unwind the historic monetary stimulus they undertook to fight the global downturn.
Benjamin Tal, a senior economist at CIBC World Markets and author of a recent report showing that Canadians added $44-billion to their total debt in the first half of the year, said the growth in household debt is a sign of how “efficiently” the central bank's monetary policy has worked.
The Bank of Canada's concern, Mr. Tal said in an interview, “is not up to now, their concern is the next 12 months,'' should low borrowing costs attract another wave of buyers who are overstretched.
“That's why it's really important to basically remind the market that those interest rates will not remain at this rate forever.”
Mr. Carney's report also warned that the increase in global stock prices over the past few months, which economists say helped raise consumer confidence as much as incentives to reinvigorate the housing market, may be overdone should corporate earnings not match expectations. Should investments shrink, it would be even harder for some homeowners to pay down debt.
Cheap mortgage rates, and fiscal incentives such as allowing first-time home buyers to use more of their registered retirement savings as a down payment, have fuelled a buying spree.
Existing home sales in October were 74 per cent higher than a bottom reached in January, while home prices were up 21 per cent from a year earlier. And BMO Nesbitt Burns said yesterday that November sales in Canada's seven biggest cities indicate a gain of 90 per cent from last year, led by Vancouver and Toronto.
Mr. Carney and his deputies have not raised the spectre of a bubble in the housing market. In fact, in late October he told lawmakers in Ottawa that he attributes much of the jump in home purchases to Canadians who had delayed plans to buy during the darkest days of the recession.
For the time being, reminding Canadians to be “prudent” may be all Mr. Carney can do. Raising interest rates sooner than the middle of next year might cool the housing sector, but could carry the cost of sending the strong Canadian dollar even higher, causing more problems for the country's exporters.
Eric Lascelles, a top strategist at TD Securities, said the central bank's warning is more likely to be addressed through regulations, such as increasing the minimum down payment or shortening the maximum acceptable term, steps taken just last year by the Harper government.
Finance Minister Jim Flaherty told reporters Thursday that the government is “watching and monitoring'' and would consider tightening rules if necessary, but currently has no plans to do so.
“People have to make sure that the mortgages they take out today either have a fixed rate or that they'll be able to handle increases in that mortgage rate later on,'' he said. “That's just prudent household management.''
The central bank said in its report that household debt will be “a key vulnerability over time,'' and in the stress test model assumed that the ratio of debt to income would rise from 1.42, or 142 per cent, in the second quarter of this year to 1.60, or 160 per cent, by mid-2012.
“Although Canadian household debt as a share of personal disposable income is lower than in the United States and the United Kingdom, its upward trend implies that households have a growing vulnerability to additional adverse shocks,'' the bank said.
At the same time, low interest rates
<http://www.theglobeandmail.com/report-on-business/carney-urges-prudence-on-debt/article1396431/> have helped Canadians cut the amount of income that they need to devote to servicing debt, the bank said.
The proportion of households with debt-service ratios above 40 per cent of income, would rise to 8.5 per cent by the second quarter of 2012 assuming the central bank's key rate is 3.2 per cent, the Bank of Canada said. The share would increase to 9.6 per cent with a benchmark rate of 4.5 per cent. That compares to 6.1 per cent over the past decade and a peak of 7.4 per cent in 2000.
That said, the central bank said Canadian banks currently have more than enough capital on hand to absorb potential losses, suggesting that even the worst-case scenario in the stress test would fall short of risking a collapse of the financial system
<http://www.theglobeandmail.com/report-on-business/carney-urges-prudence-on-debt/article1396431/> .
In its last review published in June, policy makers used a model based on a more severe recession and a resulting increase in unemployment.
With files from Bill Curry and Kevin Carmichael in Ottawa
Mark Carney is urging prudence among Canadians who are borrowing at super-cheap rates today but may not be able to afford higher payments tomorrow.
Household debt is now the biggest risk to the financial system, even if it is not expected to climb to levels that could cripple bank balance sheets, the central bank said Thursday in its review of the financial system. It used a “stress test'' to show that rising interest rates
Mr. Carney, the Bank of Canada
The semi-annual report marked the first time the bank has analyzed the risks based on interest rates reaching specific levels.
“Households need to assess their ability to service these debt obligations over their entire maturity, taking into account likely changes in both income and interest rates,'' the bank said. “Financial institutions need to carefully consider the aggregate risk to their entire portfolio of household exposures when evaluating even an insured mortgage, since a household defaulting on an insured mortgage would likely be unable to meet its other debt obligations.''
The warning, Mr. Carney's most detailed to date, highlights the delicate position of the 44-year-old central bank chief. With overall inflation forecast to remain low, and the economy still struggling to regain its feet, Mr. Carney has pledged to keep his benchmark rate at just 0.25 per cent until mid-2010. So there's little he can do to temper demand in sectors such as housing, where low mortgage rates have spurred buying.
Central bankers around the world will be trying to find the right moment, and the right pace, to unwind the historic monetary stimulus they undertook to fight the global downturn.
Benjamin Tal, a senior economist at CIBC World Markets and author of a recent report showing that Canadians added $44-billion to their total debt in the first half of the year, said the growth in household debt is a sign of how “efficiently” the central bank's monetary policy has worked.
The Bank of Canada's concern, Mr. Tal said in an interview, “is not up to now, their concern is the next 12 months,'' should low borrowing costs attract another wave of buyers who are overstretched.
“That's why it's really important to basically remind the market that those interest rates will not remain at this rate forever.”
Mr. Carney's report also warned that the increase in global stock prices over the past few months, which economists say helped raise consumer confidence as much as incentives to reinvigorate the housing market, may be overdone should corporate earnings not match expectations. Should investments shrink, it would be even harder for some homeowners to pay down debt.
Cheap mortgage rates, and fiscal incentives such as allowing first-time home buyers to use more of their registered retirement savings as a down payment, have fuelled a buying spree.
Existing home sales in October were 74 per cent higher than a bottom reached in January, while home prices were up 21 per cent from a year earlier. And BMO Nesbitt Burns said yesterday that November sales in Canada's seven biggest cities indicate a gain of 90 per cent from last year, led by Vancouver and Toronto.
Mr. Carney and his deputies have not raised the spectre of a bubble in the housing market. In fact, in late October he told lawmakers in Ottawa that he attributes much of the jump in home purchases to Canadians who had delayed plans to buy during the darkest days of the recession.
For the time being, reminding Canadians to be “prudent” may be all Mr. Carney can do. Raising interest rates sooner than the middle of next year might cool the housing sector, but could carry the cost of sending the strong Canadian dollar even higher, causing more problems for the country's exporters.
Eric Lascelles, a top strategist at TD Securities, said the central bank's warning is more likely to be addressed through regulations, such as increasing the minimum down payment or shortening the maximum acceptable term, steps taken just last year by the Harper government.
Finance Minister Jim Flaherty told reporters Thursday that the government is “watching and monitoring'' and would consider tightening rules if necessary, but currently has no plans to do so.
“People have to make sure that the mortgages they take out today either have a fixed rate or that they'll be able to handle increases in that mortgage rate later on,'' he said. “That's just prudent household management.''
The central bank said in its report that household debt will be “a key vulnerability over time,'' and in the stress test model assumed that the ratio of debt to income would rise from 1.42, or 142 per cent, in the second quarter of this year to 1.60, or 160 per cent, by mid-2012.
“Although Canadian household debt as a share of personal disposable income is lower than in the United States and the United Kingdom, its upward trend implies that households have a growing vulnerability to additional adverse shocks,'' the bank said.
At the same time, low interest rates
The proportion of households with debt-service ratios above 40 per cent of income, would rise to 8.5 per cent by the second quarter of 2012 assuming the central bank's key rate is 3.2 per cent, the Bank of Canada said. The share would increase to 9.6 per cent with a benchmark rate of 4.5 per cent. That compares to 6.1 per cent over the past decade and a peak of 7.4 per cent in 2000.
That said, the central bank said Canadian banks currently have more than enough capital on hand to absorb potential losses, suggesting that even the worst-case scenario in the stress test would fall short of risking a collapse of the financial system
In its last review published in June, policy makers used a model based on a more severe recession and a resulting increase in unemployment.
With files from Bill Curry and Kevin Carmichael in Ottawa
Tuesday, December 8, 2009
Monday, December 7, 2009
Interest Rates
Ottawa — Reuters Published on Sunday, Dec. 06, 2009 10:57AM EST Last updated on Sunday, Dec. 06, 2009 4:56PM EST
The Bank of Canada
<http://www.theglobeandmail.com/report-on-business/carney-may-try-to-stifle-rate-speculation/article1390435/> is widely expected to keep its hands off interest rates Tuesday, holding them at near zero and committing to do so until at least July, despite growing evidence the economy is kicking back to life.
Fears of prolonged economic stagnation eased Friday with a report showing employers hired five times as many workers as expected. The data supported the Bank of Canada's view that economic growth
<http://www.theglobeandmail.com/report-on-business/carney-may-try-to-stifle-rate-speculation/article1390435/> will speed up in the fourth quarter after a disappointing third-quarter, when it barely crept out of recession with tepid 0.4 per cent annualized growth.
All 12 of Canada's primary securities dealers
<http://www.theglobeandmail.com/report-on-business/carney-may-try-to-stifle-rate-speculation/article1390435/> , surveyed by Reuters after the jobs report Friday, forecast the central bank would hold its overnight target rate unchanged at 0.25 per cent at its final policy-setting meeting of the year.
The bank releases its rate decision and accompanying statement at 9 a.m. ET Tuesday.
Two-thirds of the traders think the bank will follow through on its pledge to hold rates at that level through mid-2010, conditional on inflation staying on track.
“They will lean over backward to make their conditional forecast come true,” said David Laidler, an economist with the C.D. Howe Institute.
“What they might start doing between now and June or July, is they might start making more and more public noises about the need to raise interest rates
<http://www.theglobeandmail.com/report-on-business/carney-may-try-to-stifle-rate-speculation/article1390435/> immediately afterward. That's the kind of thing you'll see but not in this announcement,” he said.
Others think the bank's job will be to dampen any speculation that it will abandon its zero-rate policy at the earliest opportunity.
“We expect the bank to attempt to temper early rate hike expectations at next Tuesday's policy announcement,” said Sheryl King, head of Canadian economics and strategy at Bank of America Merrill Lynch.
The Bank of Canada will be pleased with the November job gains, not just because its prophecy of a robust 3.3 per cent fourth quarter may be fulfilled but because it lessens the bank's concerns about the strong Canadian dollar hindering a robust recovery.
The Bank of Canada
Fears of prolonged economic stagnation eased Friday with a report showing employers hired five times as many workers as expected. The data supported the Bank of Canada's view that economic growth
All 12 of Canada's primary securities dealers
The bank releases its rate decision and accompanying statement at 9 a.m. ET Tuesday.
Two-thirds of the traders think the bank will follow through on its pledge to hold rates at that level through mid-2010, conditional on inflation staying on track.
“They will lean over backward to make their conditional forecast come true,” said David Laidler, an economist with the C.D. Howe Institute.
“What they might start doing between now and June or July, is they might start making more and more public noises about the need to raise interest rates
Others think the bank's job will be to dampen any speculation that it will abandon its zero-rate policy at the earliest opportunity.
“We expect the bank to attempt to temper early rate hike expectations at next Tuesday's policy announcement,” said Sheryl King, head of Canadian economics and strategy at Bank of America Merrill Lynch.
The Bank of Canada will be pleased with the November job gains, not just because its prophecy of a robust 3.3 per cent fourth quarter may be fulfilled but because it lessens the bank's concerns about the strong Canadian dollar hindering a robust recovery.
Thursday, November 19, 2009
Royal Bank, TD and BMO cut rates for fixed-rate residential mortgages
November 18, 2009
THE CANADIAN PRESS
TORONTO - Several of Canada's big banks said Wednesday they would cut their posted rates for fixed-rate mortgages by up to 0.25 percentage points.
The Royal Bank (TSX:RY) cut its rates for one, two and three-year closed mortgages by 0.20 percentage points, effective Thursday.
Canada's largest bank cut is posted five-year closed rate by 0.15 percentage points to 5.59 per cent, while its special five-year closed rate was cut by the same amounted to 4.29 per cent.
Bank of Montreal (TSX:BMO) cut nearly all of its posted fixed rates including its one and 10-year fixed rates by 0.25 percentage points. The bank's five-year rate was dropped by 0.19 percentage points to 5.59 per cent.
BMO offered a special five-year fixed rate of 4.29 per cent, down 0.19 percentage points.
TD Bank (TSX:TD) cut its five-year closed rate, lowering it by 0.15 percentage points to 5.63 per cent, effective Thursday.
The changes reflect lower interest rates in the bond market, where banks raise money to finance their mortgage lending.
Both banks said their variable closed mortgage rate at prime will remain unchanged.
Wednesday, November 4, 2009
Tuesday, November 3, 2009
Luxury housing sales edge higher as purchasers take advantage of buying opportunities in Ontario-Atlantic Canada, says RE/MAX
Mississauga, Ontario (November 3, 2009) - Luxury homes sales continue to accelerate as economic recovery takes hold in major markets in Ontario and Atlantic Canada, according to a report released today by RE/MAX.
The RE/MAX Upper End Report found that momentum is building in St. John's, Saint John, Halifax-Dartmouth, Ottawa, Kingston, Greater Toronto, Hamilton-Burlington, and London as purchasers realize that the best buying period in recent history is about to come to a close. Sales are already on par or ahead of last year's levels in 50 per cent of cities surveyed, while the remaining markets are set to reach 2008 figures by year-end.
"Twelve months of healthy home buying activity have clearly been crammed into five short months," says Michael Polzler, Executive Vice President, RE/MAX Ontario-Atlantic Canada. "It's hard to believe that the transition in the market began in May. We've seen steady upward momentum since that time, with solid year-over-year gains posted each and every month."
Monday, October 12, 2009
Saturday, October 10, 2009
Interest Rate Increase
Good Morning
Please be advised that the Government of Canada 5 year yields have increased by over 30 bpts over the last couple of days and currently sit at 2.86%. Should this trend hold, you will most likely see the interest rates in the market on the 5 year fixed rise 25-30 bpts in the coming week by all lenders. Royal Bank of Canada has increased their 5 year special and posted rates by 35 basis points effective today.
On the variable rate mortgage side, spreads are stable based on the 30/90 day paper and there is no short term expectation that ARM/VRM rates will rise.
5 Year Government Of Canada Bond Yields:
2 Oct 2009: 2.50
5 Oct 2009: 2.48
6 Oct 2009: 2.55
7 Oct 2009: 2.54
8 Oct 2009: 2.63
9 Oct 2009 2.86
Please be advised that the Government of Canada 5 year yields have increased by over 30 bpts over the last couple of days and currently sit at 2.86%. Should this trend hold, you will most likely see the interest rates in the market on the 5 year fixed rise 25-30 bpts in the coming week by all lenders. Royal Bank of Canada has increased their 5 year special and posted rates by 35 basis points effective today.
On the variable rate mortgage side, spreads are stable based on the 30/90 day paper and there is no short term expectation that ARM/VRM rates will rise.
5 Year Government Of Canada Bond Yields:
2 Oct 2009: 2.50
5 Oct 2009: 2.48
6 Oct 2009: 2.55
7 Oct 2009: 2.54
8 Oct 2009: 2.63
9 Oct 2009 2.86
Friday, October 9, 2009
Wednesday, September 30, 2009
There's more to a mortage ...
Than a low Interest Rate
Homeowners and buyers are in a rather enviable position these days. Interest rates are at historic lows and the cost of borrowing for a home is about as low as it can get.
That's great news. But it's not the only thing homeowners and purchasers need to think about their mortgage.
There are a number of other features to consider before signing up for a mortgage and what is probably the largest debt that most Canadians will ever take on in their lives.
"When it comes to choosing a mortgage, getting a good rate is just the tip of the iceberg," says Mary Gronkowski, regional sales director with Mortgage Intelligence Inc., a national mortgage brokerage company. "You have to be aware of all the other features that may lie below the surface. All features of a mortgage should fit a homebuyer's personal goals, both now and down the road."
One type of mortgage to consider is an assumable mortgage.
An assumable mortgage means it can be transferred to another borrower. It allows a purchaser to take on your mortgage's terms and payments as part of the sale of your home. With extremely low interest rates today, that could be a big selling feature to a potential buyer in the future.
Given the low rates today, many homeowners are thinking about refinancing their mortgage.
Whether you should refinance your mortgage in a period of low interest rates depends on how much it will cost you to break your existing mortgage compared to how much you will save in interest payments.
If you break an existing mortgage you will have to pay the greater of three month's interest or the interest rate differential (IRD).
An IRD is a penalty for early prepayment of all or part of a mortgage outside of its normal prepayment terms. Usually this is calculated as the difference between the existing rate and the rate for the term remaining, multiplied by the principal outstanding and the balance of the term.
For example, if you had a $100,000 mortgage at nine per cent interest rate with 24 months remaining and wanted to renegotiate your mortgage at 6.5 per cent for 24 months, your IRD would be $5,000 ($100,000 x 2.5% $2,500 x 2 years $5,000).
It may only make sense to refinance your mortgage if the interest rate savings over the remaining life of your mortgage exceed the value of the IRD.
Another strategy is to take a variable rate mortgage. If interest rates go down and you keep your mortgage payments the same, you will be paying off more of your principal with each payment and will pay down your mortgage faster.
Many borrowers are taking advantage of low interest rates by accelerating payments on their mortgages. Many lenders will allow you to double up payments periodically or make lump sum payments of up to 20 per cent of the principal once a year.
You should make sure you understand the size and frequency of payments your lender will allow before you sign up.
Some mortgage lenders will have an option to skip a payment without penalty, which may come in handy in today's economy.
Another option that many mortgages have is portability.
This allows you to transfer your existing mortgage over to a new property, another big advantage if you have a mortgage at current low rates.
Not all portability features are the same, however. Some lenders allow up to 120 days to transfer the mortgage while others allow for only a few days or a week.
That's great news. But it's not the only thing homeowners and purchasers need to think about their mortgage.
There are a number of other features to consider before signing up for a mortgage and what is probably the largest debt that most Canadians will ever take on in their lives.
"When it comes to choosing a mortgage, getting a good rate is just the tip of the iceberg," says Mary Gronkowski, regional sales director with Mortgage Intelligence Inc., a national mortgage brokerage company. "You have to be aware of all the other features that may lie below the surface. All features of a mortgage should fit a homebuyer's personal goals, both now and down the road."
One type of mortgage to consider is an assumable mortgage.
An assumable mortgage means it can be transferred to another borrower. It allows a purchaser to take on your mortgage's terms and payments as part of the sale of your home. With extremely low interest rates today, that could be a big selling feature to a potential buyer in the future.
Given the low rates today, many homeowners are thinking about refinancing their mortgage.
Whether you should refinance your mortgage in a period of low interest rates depends on how much it will cost you to break your existing mortgage compared to how much you will save in interest payments.
If you break an existing mortgage you will have to pay the greater of three month's interest or the interest rate differential (IRD).
An IRD is a penalty for early prepayment of all or part of a mortgage outside of its normal prepayment terms. Usually this is calculated as the difference between the existing rate and the rate for the term remaining, multiplied by the principal outstanding and the balance of the term.
For example, if you had a $100,000 mortgage at nine per cent interest rate with 24 months remaining and wanted to renegotiate your mortgage at 6.5 per cent for 24 months, your IRD would be $5,000 ($100,000 x 2.5% $2,500 x 2 years $5,000).
It may only make sense to refinance your mortgage if the interest rate savings over the remaining life of your mortgage exceed the value of the IRD.
Another strategy is to take a variable rate mortgage. If interest rates go down and you keep your mortgage payments the same, you will be paying off more of your principal with each payment and will pay down your mortgage faster.
Many borrowers are taking advantage of low interest rates by accelerating payments on their mortgages. Many lenders will allow you to double up payments periodically or make lump sum payments of up to 20 per cent of the principal once a year.
You should make sure you understand the size and frequency of payments your lender will allow before you sign up.
Some mortgage lenders will have an option to skip a payment without penalty, which may come in handy in today's economy.
Another option that many mortgages have is portability.
This allows you to transfer your existing mortgage over to a new property, another big advantage if you have a mortgage at current low rates.
Not all portability features are the same, however. Some lenders allow up to 120 days to transfer the mortgage while others allow for only a few days or a week.
Monday, September 28, 2009 provided by Talbot Boggs
Tuesday, September 29, 2009
Interest Rates
No guarantee rates will stay low, Carney warns
Paul Vieira, Financial Post
OTTAWA -- Governments will be required to undertake "concerted" and "sharp" efforts to restore fiscal sustainability once a market-led recovery is assured, Bank of Canada governor Mark Carney said Monday.
This will particularly apply to countries with ageing populations and "unsustainable entitlement programs," he said in a speech to the Victoria Chamber of Commerce.
While Mr. Carney was speaking about the need of governments to get their fiscal houses in order in the post-crisis landscape, the central banker also went to some lengths to reiterate that the central bank's pledge to keep interest rates at 0.25% until the end of June 2010 is "conditional" on meeting inflation targets. He told reporters afterward it would be unwise to assume current rates are "normal."
"It is an expectation, not a promise," Mr. Carney said in his remarks.
In recent weeks, analysts have debated whether the bank may move before that June 2010 deadline to raise rates given the strength in the economic rebound; or whether it may extend its pledge to keep a lid on growth in the Canadian currency, which it identifies as a risk to growth.
His speech touched on familiar ground, such as the risk of the rising loonie, but also attempted to set the landscape for the "hand off" from government-led growth to the private-sector-led expansion. His remarks suggested that stimuli - whether through government spending or low interest rates - should be kept in place "until the recovery is assured."
When that recovery is assured, certain countries have much work to do to clean up their public finances, Mr. Carney indicated. He did not cite specific countries in his remarks, but jurisdictions that fall under this category could include the United States and western Europe.
"Once the recovery is assured, concerted efforts will be necessary in most economies to restore fiscal sustainability," he said, adding it would be "particularly sharp" for some countries. "The fiscal cost of arresting the downfall will need to be first contained and then repaid over many years."
In Canada, the federal government has set out a framework under which it would remain in a deficit position until at least the 2014-15 fiscal year. But, the Conservative government said it would be able to reduce the amount of red ink in the coming years through cost controls and better growth.
More difficult decisions await legislators in Washington, which is recording shortfalls in the trillion-dollar range. Analysts warn of the need for U.S. legislators to cut spending and raise taxes, which could further keep U.S. consumers timid and undermine global growth.
Without aggressive efforts to keep the U.S. debt in check, bond investors will demand fatter yields that, in turn, could drive up inflation and weaken the U.S. currency.
But some governments are indicating they are prepared to take the steps Mr. Carney is calling for. Alistair Darling, Britain's finance minister, said Monday the country will make annual budget deficit reduction a legal commitment in order to bind future governments to getting the national debt down.
"Policy makers will have to act deftly to maintain stimulus long enough for private demand to take up the burden of growth, but not too long to undermine confidence in and the sustainability of that growth," Mr. Carney said. "The aftermath of the crisis will make considerable demands on structural policies in all countries, including Canada."
Among the structural changes in Canada would be the need for businesses to rely more on emerging markets as a source of demand as open access to the U.S. market becomes "less valuable," Mr. Carney said.
Afterward, he told reporters the U.S. economy would not be as "dominant" because that economy is going through a multiyear adjustment.
Paul Vieira, Financial Post
OTTAWA -- Governments will be required to undertake "concerted" and "sharp" efforts to restore fiscal sustainability once a market-led recovery is assured, Bank of Canada governor Mark Carney said Monday.
This will particularly apply to countries with ageing populations and "unsustainable entitlement programs," he said in a speech to the Victoria Chamber of Commerce.
While Mr. Carney was speaking about the need of governments to get their fiscal houses in order in the post-crisis landscape, the central banker also went to some lengths to reiterate that the central bank's pledge to keep interest rates at 0.25% until the end of June 2010 is "conditional" on meeting inflation targets. He told reporters afterward it would be unwise to assume current rates are "normal."
"It is an expectation, not a promise," Mr. Carney said in his remarks.
In recent weeks, analysts have debated whether the bank may move before that June 2010 deadline to raise rates given the strength in the economic rebound; or whether it may extend its pledge to keep a lid on growth in the Canadian currency, which it identifies as a risk to growth.
His speech touched on familiar ground, such as the risk of the rising loonie, but also attempted to set the landscape for the "hand off" from government-led growth to the private-sector-led expansion. His remarks suggested that stimuli - whether through government spending or low interest rates - should be kept in place "until the recovery is assured."
When that recovery is assured, certain countries have much work to do to clean up their public finances, Mr. Carney indicated. He did not cite specific countries in his remarks, but jurisdictions that fall under this category could include the United States and western Europe.
"Once the recovery is assured, concerted efforts will be necessary in most economies to restore fiscal sustainability," he said, adding it would be "particularly sharp" for some countries. "The fiscal cost of arresting the downfall will need to be first contained and then repaid over many years."
In Canada, the federal government has set out a framework under which it would remain in a deficit position until at least the 2014-15 fiscal year. But, the Conservative government said it would be able to reduce the amount of red ink in the coming years through cost controls and better growth.
More difficult decisions await legislators in Washington, which is recording shortfalls in the trillion-dollar range. Analysts warn of the need for U.S. legislators to cut spending and raise taxes, which could further keep U.S. consumers timid and undermine global growth.
Without aggressive efforts to keep the U.S. debt in check, bond investors will demand fatter yields that, in turn, could drive up inflation and weaken the U.S. currency.
But some governments are indicating they are prepared to take the steps Mr. Carney is calling for. Alistair Darling, Britain's finance minister, said Monday the country will make annual budget deficit reduction a legal commitment in order to bind future governments to getting the national debt down.
"Policy makers will have to act deftly to maintain stimulus long enough for private demand to take up the burden of growth, but not too long to undermine confidence in and the sustainability of that growth," Mr. Carney said. "The aftermath of the crisis will make considerable demands on structural policies in all countries, including Canada."
Among the structural changes in Canada would be the need for businesses to rely more on emerging markets as a source of demand as open access to the U.S. market becomes "less valuable," Mr. Carney said.
Afterward, he told reporters the U.S. economy would not be as "dominant" because that economy is going through a multiyear adjustment.
Sunday, September 20, 2009
Wandering Buck... on the Pickering Waterfront Trail
Don't often see this wonderful animal... one good reason to be grateful
Saturday, September 19, 2009
Wednesday, September 16, 2009
Mortgage Rates Dropping, Its Strategy time
It was a little less than a year ago that the global financial crisis began to hit home, which is to say that mortgage rates spiked higher.
Now, the cost of mortgages is coming down. If you're buying a home or renewing a mortgage, it's time to review your options.
Fixed-rate mortgages declined a little last week, but the most dramatic changes can be seen in variable-rate mortgages. For the first time in almost a year, it's possible to get a variable-rate mortgage at the prime rate used by most major financial institutions, which is currently 2.25 per cent.
Pre-crisis, variable-rate mortgages came with discounts that ranged from 0.75 percentage points to as much as 0.9 points off prime. By late last fall, crisis conditions prompted lenders to start charging prime plus a full percentage point or more. Now, some lenders are starting to unwind their crisis-rate premiums.
"Variable-rate mortgages are all over the map right now," said Gary Siegle, regional manager with the mortgage brokerage firm Invis Inc. in Calgary. "We're seeing them right in the area of prime with some lenders."
An example of a variable-rate mortgage at prime: ResMor Trust, a small player that deals through mortgage brokers, is offering four-year variable-rate mortgages at prime in all provinces except Quebec. The catch: You have to have your mortgage approved by Sept. 30 and close the purchase within 45 days.
Can variable-rate mortgages fall back to their pre-crisis lows any time soon?
"Definitely, 100 per cent, no," said Robert McLister, a mortgage broker and author of the Canadian Mortgage Trends blog (canadianmortgagetrends.com). "Could they get a little below prime? Definitely."
Okay, it's strategy time. With prime at 2.25 per cent and fully discounted five-year fixed-rate mortgages going for something in the area of 3.9 to 4.1 per cent, you're got some thinking to do if you're buying a home or renewing a mortgage.
The variable rate looks tempting. Sure, the prime is going to rise in the medium term, but it's expected to stay put until next spring at least. Even when prime does move higher, it will have to increase by roughly 1.75 percentage points to get to where today's five-year mortgages are.
"The risk is obviously that rates go up a lot more," Mr. McLister warned. "Rates went down four percentage points from December, 2007, through April, 2009. They could easily go up four - why not?"
Variable-rate mortgages allow you to lock into a fixed-rate mortgage, so there's no reason why you have to ride interest rates all the way up. Still, you have to recognize that fixed-rate mortgages could be significantly more expensive by the time you decide to lock in.
An academic study of rates between 1950 and 2007 found variable-rate mortgages were the money-saving choice over five-year fixed-rate mortgages 89 per cent of the time. If you're willing to ride rates higher for a while in hopes of longer-term savings on interest costs, then consider a possible approach suggested by Mr. McLister.
Instead of arranging a variable-rate mortgage now, go for a one-year fixed-rate mortgage. Then, when you're renewing in one year's time, you'll move into a variable-rate mortgage that will ideally have a rate that is discounted below prime.
Fully discounted one-year closed mortgages today go for about 2.55 per cent, so you're not paying much of a penalty at all compared with what variable-rate mortgages are pegged at right now.
Another suggestion from Mr. McLister is to consider a three-year mortgage, which offers an attractive blend of low rates and security against interest rate surges. Three-year mortgage typically go for around 3.39 per cent on a fully discounted basis, but he knew of one small lender offering 2.9 per cent through the mortgage broker channel.
The case for going with a five-year fixed rate is that rates are very cheap by historical standards. Rates were a little bit lower last spring, but they're not as high as they were a month or two ago
thanks to a pullback in bond yields that has trickled down to fixed-rate mortgages.
Mr. Siegle said over half of his firm's clients are locking into a fixed-rate mortgage right now. "You can't ever time the bottom of the market, but are these good rates that you can be comfortable with? A lot of people are saying, 'yeah, they are.' "
ROB CARRICK
*****
Source: Bank of Canada, Cannex
Now, the cost of mortgages is coming down. If you're buying a home or renewing a mortgage, it's time to review your options.
Fixed-rate mortgages declined a little last week, but the most dramatic changes can be seen in variable-rate mortgages. For the first time in almost a year, it's possible to get a variable-rate mortgage at the prime rate used by most major financial institutions, which is currently 2.25 per cent.
Pre-crisis, variable-rate mortgages came with discounts that ranged from 0.75 percentage points to as much as 0.9 points off prime. By late last fall, crisis conditions prompted lenders to start charging prime plus a full percentage point or more. Now, some lenders are starting to unwind their crisis-rate premiums.
"Variable-rate mortgages are all over the map right now," said Gary Siegle, regional manager with the mortgage brokerage firm Invis Inc. in Calgary. "We're seeing them right in the area of prime with some lenders."
An example of a variable-rate mortgage at prime: ResMor Trust, a small player that deals through mortgage brokers, is offering four-year variable-rate mortgages at prime in all provinces except Quebec. The catch: You have to have your mortgage approved by Sept. 30 and close the purchase within 45 days.
Can variable-rate mortgages fall back to their pre-crisis lows any time soon?
"Definitely, 100 per cent, no," said Robert McLister, a mortgage broker and author of the Canadian Mortgage Trends blog (canadianmortgagetrends.com). "Could they get a little below prime? Definitely."
Okay, it's strategy time. With prime at 2.25 per cent and fully discounted five-year fixed-rate mortgages going for something in the area of 3.9 to 4.1 per cent, you're got some thinking to do if you're buying a home or renewing a mortgage.
The variable rate looks tempting. Sure, the prime is going to rise in the medium term, but it's expected to stay put until next spring at least. Even when prime does move higher, it will have to increase by roughly 1.75 percentage points to get to where today's five-year mortgages are.
"The risk is obviously that rates go up a lot more," Mr. McLister warned. "Rates went down four percentage points from December, 2007, through April, 2009. They could easily go up four - why not?"
Variable-rate mortgages allow you to lock into a fixed-rate mortgage, so there's no reason why you have to ride interest rates all the way up. Still, you have to recognize that fixed-rate mortgages could be significantly more expensive by the time you decide to lock in.
An academic study of rates between 1950 and 2007 found variable-rate mortgages were the money-saving choice over five-year fixed-rate mortgages 89 per cent of the time. If you're willing to ride rates higher for a while in hopes of longer-term savings on interest costs, then consider a possible approach suggested by Mr. McLister.
Instead of arranging a variable-rate mortgage now, go for a one-year fixed-rate mortgage. Then, when you're renewing in one year's time, you'll move into a variable-rate mortgage that will ideally have a rate that is discounted below prime.
Fully discounted one-year closed mortgages today go for about 2.55 per cent, so you're not paying much of a penalty at all compared with what variable-rate mortgages are pegged at right now.
Another suggestion from Mr. McLister is to consider a three-year mortgage, which offers an attractive blend of low rates and security against interest rate surges. Three-year mortgage typically go for around 3.39 per cent on a fully discounted basis, but he knew of one small lender offering 2.9 per cent through the mortgage broker channel.
The case for going with a five-year fixed rate is that rates are very cheap by historical standards. Rates were a little bit lower last spring, but they're not as high as they were a month or two ago
thanks to a pullback in bond yields that has trickled down to fixed-rate mortgages.
Mr. Siegle said over half of his firm's clients are locking into a fixed-rate mortgage right now. "You can't ever time the bottom of the market, but are these good rates that you can be comfortable with? A lot of people are saying, 'yeah, they are.' "
ROB CARRICK
*****
Source: Bank of Canada, Cannex
Wednesday, September 9, 2009
CMHC Expects housing Market to rebound strongly this year and next
Canada's housing market will rebound strongly in the second half of this year and into 2010, the federal housing agency said yesterday. Housing starts will reach 141,900 this year and increase to 150,300 for 2010, said Canada
Mortgage and Housing Corp. "Improving activity on the resale market and lower inventory levels in both the new and existing home markets are expected to prompt builders to increase residential construction," CMHC said.
Bob Dugan, CMHC's chief economist, said, "Economic uncertainty and lower levels of employment tempered new housing construction in the first half of this year. In the second half of 2009 and in 2010, we expect housing markets across Canada to strengthen."
Financial Post Published: Friday, September 04, 2009
Bank Of Canada expected to keep rates at record low
OTTAWA -- Analysts appear to be unanimous in believing the Bank of Canada will hold its record-low policy rate steady at its meeting Thursday, and maintain its commitment to keep the rate at 0.25% until June 2010.
The only item to look for in the pending rate statement, they indicate, is any change in nuance or tone, and possibly further concern about the rise of the Canadian dollar.
"The fact that the major economic data has largely evolved in line with the Bank of Canada's forecasts suggests (the central bank) is likely to reiterate its conditional statement to keep the overnight rate at 0.25% until the end of the second quarter of 2010," said Charmaine Buskas, senior economics strategist with TD Securities.
"And with no expected change to the overnight rate, all the focus will be on the nuances in the statement. It is likely to be very similar to the July 21 statement."
For the record, 21 economists in a Bloomberg News survey anticipate no change in the Bank of Canada rate, nor do the 11 members of the C.D. Howe Institute's monetary policy council.
The C.D. Howe said the Bank of Canada should stick to its mid-2010 commitment, adding that growth prospects remain uncertain as council members questioned how sustainable Canadian exports growth abroad will be, with "the dependence of U.S. and Chinese growth on government stimulus being a particular point of concern.
Paul Vieira, Financial Post Published: Tuesday, September 08, 2009
Wednesday, August 26, 2009
Central banks signal low rates here to stay
OTTAWA -- Despite growing confidence that economic growth is in the offing, monetary policy around the world is likely to remain "ultra-accommodative," perhaps until 2011, as doubt remains as to whether or not the growth expected this quarter is sustainable, analysts say.
That is the view emerging following the weekend gathering of the world's leading central bankers in Jackson Hole, Wyo., highlighted by remarks from Ben Bernanke, U.S. Federal Reserve chairman, who warned of the uncertainties ahead, and Jean-Claude Trichet, president of the European Central Bank, who suggested he is in no rush to reverse emergency stimulus measures.
"The key message from Jackson Hole was ... that monetary policy is likely to remain ultra-accommodative for the foreseeable future - at least for the next several years," said Julian Jessop, chief international economist at Capital Economics of London.
"It seems more likely that there will be no increases in interest rates in any of the major economies over the next 12 to 18 months."
Strategists at RBC Capital Markets concurred, adding in a note released Monday: "We continue to believe the economic backdrop will warrant a significant additional period of low rates. Indeed, even at the Jackson Hole conference, there was not even a suggestion that we should be braced for anything other than that outcome."
This outlook applies to Canada as well. Banc of America Securities-Merrill Lynch, as part of global report on monetary policy, said it does not expect the Bank of Canada to begin raising rates until 2011 - well past its pledge to keep the key policy rate, at 0.25%, until June 2010.
Canada has a significant output gap - the difference between potential and real gross domestic product - and the rate at which money is deployed in the economy, or money velocity, has shrunk 15% since late last year even though the central bank has taken its target rate to its lowest possible level, the BofA-Merrill Lynch analysis indicates.
"To compensate, we think the Bank of Canada will probably need to keep rates lower ... to ensure that money creation remains in the double-digit [growth] territory needed to reinflate the economy and close the output gap," the report says.
This outlook is similar to what economists at Laurentian Bank Securities suggested last week. They said a lack of pricing power for firms, a sizeable amount of excess supply and virtually non-existent upward pressure from labour costs means the bulk of policy tightening would not materialize until 2011.
The Bank of Canada signalled in its last economic outlook that it expected economic growth to resume this quarter, marking, technically, the end of a deep but relatively short recession.
It expects growth this quarter of 1.3%, 3% in the final three months of 2009, and the latter again in 2010. Further boosting the recovery story was data from Japan, Germany and France that indicated economic growth in the second quarter.
But there are growing concerns about the sustainability of this emerging recovery.
In a note published last week, Olivier Blanchard, chief economist of the International Monetary Fund, warned of a difficult recovery that would take years to unfold as elements of the financial system remain dysfunctional.
Of particular concern in his outlook was the source of demand once governments phased out fiscal stimuli. The worry is that U.S. business investment and household spending would remain weak, and Asian economies would fail to pick up the slack.
Still, some leading central bankers warn about leaving interest rates too low too long.
Masaaki Shirakawa, governor at Bank of Japan, told his peers at Jackson Hole that policymakers must avoid economic bubbles fostered by expectations that interest rates will remain low.
"Shirakawa's point about the need to prevent future bubbles is weighing more on minds of central bankers, so maybe they do have to be a little more careful," said David Cohen, director of Asian economic forecasting at Action Economics in Singapore.
That is the view emerging following the weekend gathering of the world's leading central bankers in Jackson Hole, Wyo., highlighted by remarks from Ben Bernanke, U.S. Federal Reserve chairman, who warned of the uncertainties ahead, and Jean-Claude Trichet, president of the European Central Bank, who suggested he is in no rush to reverse emergency stimulus measures.
"The key message from Jackson Hole was ... that monetary policy is likely to remain ultra-accommodative for the foreseeable future - at least for the next several years," said Julian Jessop, chief international economist at Capital Economics of London.
"It seems more likely that there will be no increases in interest rates in any of the major economies over the next 12 to 18 months."
Strategists at RBC Capital Markets concurred, adding in a note released Monday: "We continue to believe the economic backdrop will warrant a significant additional period of low rates. Indeed, even at the Jackson Hole conference, there was not even a suggestion that we should be braced for anything other than that outcome."
This outlook applies to Canada as well. Banc of America Securities-Merrill Lynch, as part of global report on monetary policy, said it does not expect the Bank of Canada to begin raising rates until 2011 - well past its pledge to keep the key policy rate, at 0.25%, until June 2010.
Canada has a significant output gap - the difference between potential and real gross domestic product - and the rate at which money is deployed in the economy, or money velocity, has shrunk 15% since late last year even though the central bank has taken its target rate to its lowest possible level, the BofA-Merrill Lynch analysis indicates.
"To compensate, we think the Bank of Canada will probably need to keep rates lower ... to ensure that money creation remains in the double-digit [growth] territory needed to reinflate the economy and close the output gap," the report says.
This outlook is similar to what economists at Laurentian Bank Securities suggested last week. They said a lack of pricing power for firms, a sizeable amount of excess supply and virtually non-existent upward pressure from labour costs means the bulk of policy tightening would not materialize until 2011.
The Bank of Canada signalled in its last economic outlook that it expected economic growth to resume this quarter, marking, technically, the end of a deep but relatively short recession.
It expects growth this quarter of 1.3%, 3% in the final three months of 2009, and the latter again in 2010. Further boosting the recovery story was data from Japan, Germany and France that indicated economic growth in the second quarter.
But there are growing concerns about the sustainability of this emerging recovery.
In a note published last week, Olivier Blanchard, chief economist of the International Monetary Fund, warned of a difficult recovery that would take years to unfold as elements of the financial system remain dysfunctional.
Of particular concern in his outlook was the source of demand once governments phased out fiscal stimuli. The worry is that U.S. business investment and household spending would remain weak, and Asian economies would fail to pick up the slack.
Still, some leading central bankers warn about leaving interest rates too low too long.
Masaaki Shirakawa, governor at Bank of Japan, told his peers at Jackson Hole that policymakers must avoid economic bubbles fostered by expectations that interest rates will remain low.
"Shirakawa's point about the need to prevent future bubbles is weighing more on minds of central bankers, so maybe they do have to be a little more careful," said David Cohen, director of Asian economic forecasting at Action Economics in Singapore.
Paul Vieira, Financial Post, with files from Reuters Published: Monday, August 24, 2009
Tuesday, August 25, 2009
Real Estate...Lack of Inventory
We are currently experiencing (homes priced right and well looked after) a lack inventory. Perhaps its the warm weather? may its because traditionally the end of August most people are getting the kids ready for school? Whatever it may be, It likely will not last. There is expectations in the market place that with the current interest rates more homes will be put for sale in the coming months.
So if your thinking of moving up or down, don't SELL yourself short call me today.
Monday, August 24, 2009
Toronto Real Estate Board Economic Commentary
Statistics Canada releases a series of leading indicators that can often point toward economic expansion and contraction a few months in advance.
The composite leading index rose 0.4% in July, after small declines in May and June were revised up to no change. The increase in July was the first advance since August 2008, just before the turmoil in global financial markets deteriorated significantly. Overall, 6 of 10 components expanded in July, the most since May 2008. Just four months earlier, the money supply was the only component that increased, when the overall index fell 1.4%, its fastest rate of decline in the current downturn.
The stock market and housing continued to post the largest gains, although the stock market leapfrogged ahead of housing with a 5.7% increase. The upturn in household spending spread from housing to other durable goods, which posted their first advance in over a year. Not all sectors of household spending were upbeat. Furniture and appliance sales continued to trend down, while personal services pulled down services employment.
The leading indicator for the United States continued to improve, rising 0.4% for the first back-to-back gain in about two years. House sales and starts turned up in the last three months, while industrial output stabilized. The improvement in the US economy was not reflected in Canada's manufacturing sector, where new orders continued to decline, falling nearly 6%. Meanwhile, the ratio of shipments to inventories continued to be restrained by falling exports, notably autos and forestry products.
Available on CANSIM: table 377-0003.
Definitions, data sources and methods: survey number 1601.
This release will be reprinted in the September 2009 issue of Canadian Economic Observer, Vol. 22, no. 9 (11-010-X, free). For more information on the economy, consult the Canadian Economic Observer.
Table 1
Wednesday, August 19, 2009
Market Watch August 2009
In a clear sign that the housing market has shifted into recovery mode, residential housing sales in Canada’s major markets has reported record sales in July. Toronto and Vancouver led the charge with sales among the highest in history for both local. Currently experiencing a lack of supply of updated homes in certain areas of the market place.To view homes available in your area go www.pitino.caSaturday, August 15, 2009
Enjoying a Summers Day
Now that summer has finally arrived, the real estate market seems to be very active for homes that have been well looked after. For more information go www.pitino.ca
Friday, August 14, 2009
Creating Curb Appeal
They say you can’t judge a book by its cover. But when it comes to houses, the exterior can be just as important as the interior if selling or buying. How a house 'shows’ from the street can tell a potential buyer a lot about what it may be like inside. Even if the inside is the sparkling, charming, structurally sound dream home they’ve been searching for, a buyer is not going to forget a cracked driveway, fallen shutters, overgrown grass and flower beds.
For sellers, there are many ways to enhance the exterior of a home to achieve the curb appeal necessary to attract prospective buyers. Start by taking a close, objective look at your home from the curb. Be sure to view it from different angles. Ask friends and neighbors for their unbiased opinions.
Clean up the yard:
Mow the lawn, trim the hedges, weed the flower beds, get rid of dead trees and shrubs; get rid of any broken lawn furniture; shovel the walk and driveway in winter; rake the yard in the fall.
Repair any problems:
If the roof is damaged, repair it. Also repair any doors and windows that have loose hinges or other damage; fix storm doors and window screens; caulk window exteriors; clean and repair sidings and other structural flaws.
Eliminate clutter:
If you have yard and construction debris piled up along the side of the house, or elsewhere, get rid of it. The exterior of your home should be as uncluttered in appearance as the interior. This includes cleaning out the garage - a major breeder of clutter. Be ruthless. If you haven’t used something in a year, give it to charity or recycle it.
Give siding a fresh new look:
Cleaning the exterior surface is all your home may need for a fresh new face. Before rushing to paint siding, try washing it. For painted wood siding and aluminum siding, use a solution of one cup strong detergent and one quart chlorine bleach in three gallons of water. Be sure to wear rubber gloves, goggles and other protective garments. Work from the bottom up and rinse thoroughly.
Use flower power:
Well-placed flowers, trees and shrubs can really make the outside of a home look inviting. Not only does attractive landscaping invite buyers, it can increase the value of a home. Even without major landscaping, flowers can make a yard look colorful and pleasant. Plant them in garden beds, hang them from railings and porch ceilings, add flower boxes to window sills. There is no limit to the power of flowers.
For sellers, there are many ways to enhance the exterior of a home to achieve the curb appeal necessary to attract prospective buyers. Start by taking a close, objective look at your home from the curb. Be sure to view it from different angles. Ask friends and neighbors for their unbiased opinions.
Clean up the yard:Mow the lawn, trim the hedges, weed the flower beds, get rid of dead trees and shrubs; get rid of any broken lawn furniture; shovel the walk and driveway in winter; rake the yard in the fall.
Repair any problems:
If the roof is damaged, repair it. Also repair any doors and windows that have loose hinges or other damage; fix storm doors and window screens; caulk window exteriors; clean and repair sidings and other structural flaws.
Eliminate clutter:
If you have yard and construction debris piled up along the side of the house, or elsewhere, get rid of it. The exterior of your home should be as uncluttered in appearance as the interior. This includes cleaning out the garage - a major breeder of clutter. Be ruthless. If you haven’t used something in a year, give it to charity or recycle it.
Give siding a fresh new look:
Cleaning the exterior surface is all your home may need for a fresh new face. Before rushing to paint siding, try washing it. For painted wood siding and aluminum siding, use a solution of one cup strong detergent and one quart chlorine bleach in three gallons of water. Be sure to wear rubber gloves, goggles and other protective garments. Work from the bottom up and rinse thoroughly.
Use flower power:
Well-placed flowers, trees and shrubs can really make the outside of a home look inviting. Not only does attractive landscaping invite buyers, it can increase the value of a home. Even without major landscaping, flowers can make a yard look colorful and pleasant. Plant them in garden beds, hang them from railings and porch ceilings, add flower boxes to window sills. There is no limit to the power of flowers.
All About Me
Serving the Toronto East Pickering, Ajax, Whitby and Oshawa area REAL ESTATE for 29 years. Earning the right to SERVE you...I treat every client as if your my only client...
Subscribe to:
Posts (Atom)
