Canadian Mortgage News and Views

GOVERNMENT INTRODUCES NEW RULES FOR MORTGAGE LENDERS

2012-03-06T11:00:00.000-08:00

Code of Conduct for Federally Regulated Financial InstitutionsMortgage Prepayment InformationPurposeThe purpose of the Code is to ensure that federally regulated financial institutions ("lenders") provide enhanced information in respect of credit agreements secured by mortgages where a prepayment charge could apply ("mortgages") to assist borrowers in making decisions about prepayment of their mortgage.Lenders currently provide substantial amounts of information relevant to mortgage prepayments to consumers in accordance with the requirements in the applicable federal regulations, including but not limited to federal cost of borrowing disclosure regulations and credit business practices regulations. The information that will be provided under this Code is in addition to existing information provided by lenders to borrowers.Application and ImplementationLenders will implement the policy elements of the Code with respect to new mortgages no later than six (6) months from date of adoption of the Code for Element 3 and Element 4; and no later than twelve (12) months from adoption of the Code for Element 1, Element 2 and Element 5. Lenders will apply the Code to existing mortgages where it is feasible to do so. The Code does not apply to mortgages that are entered into for business purposes or to mortgages entered into by borrowers who are not natural persons.Compliance with the CodeThe Financial Consumer Agency of Canada will monitor and report on compliance with the Code.Manner of Presenting InformationLenders will provide the information in language, and present it in a manner, that is clear, simple and not misleading.Policy Elements1. Information Provided AnnuallyLenders will provide the following mortgage prepayment information to borrowers annually: Prepayment privileges that the borrower can use to pay off their mortgage faster without having to pay a prepayment charge. Examples include making lump-sum prepayments, increasing the regular payment amount, and increasing the frequency of the payment to weekly or bi-weekly. The dollar amount of the prepayment that the borrower can make on a yearly basis under the terms of their mortgage without having to pay a prepayment charge. Explanation of how the lender calculates the prepayment charge for the borrower's mortgage (for example, a certain number of months' interest or the Interest Rate Differential (IRD). Description of the factors that could cause prepayment charges to change over time. Customized information about the mortgage, valid as of the date the information is produced, for the purposes of the borrower estimating the prepayment charge. The customized information will include, depending on the type of mortgage product held by the borrower: The amount of the loan that the borrower has not yet repaid The interest rate of the mortgage and other factors (for example, rate discount or posted interest rate) that the lender uses to calculate the prepayment charge The remaining term or maturity date of the borrower's mortgage For mortgages where the prepayment charge may be based on the IRD: How the lender determines the comparison rate to use to calculate the IRD Where the borrower can find the comparison rate (for example, on the lender's website) Where the borrower can find the lender's financial calculators that the borrower can use, along with the information above, to estimate the prepayment charge. Any other amounts the borrower must pay to the lender if the borrower prepays their mortgage and how the amounts are calculated. How the borrower can speak with a staff member of their lender who is knowledgeable about mortgage prepayments. For example, borrowers may contact a staff member through a toll-free number as described in section 5.2. Information Provided When the Borrower Is Paying a Prepayment ChargeIf a prepayment charge applies and the borrower confirms to the lender that the borrower is prepaying the full or a specified partial amount owing on their mortgage, the lender will provide the following information in a written statement to the borrower: The applicable prepayment charge. Description of how the lender calculated the prepayment charge (for example, whether the lender used a certain number of months' interest or the IRD). If the lender used the IRD to calculate the prepayment charge, the lender will inform the borrower of : the outstanding amount on the mortgage the annual interest rate on the mortgage the comparison rate that was used for the calculation the term remaining on the mortgage that was used for the calculation The period of time, if any, for which the prepayment charge is valid. Description of the factors that could cause the prepayment charge to change over time. Any other amounts the borrower must pay to the lender when they prepay their mortgage and how the amounts are calculated.3. Enhancing Borrower AwarenessTo assist borrowers in better understanding the consequences of prepaying a mortgage, lenders will make available to consumers information on the following topics: Differences between: Fixed-rate mortgages and variable-rate mortgages Open mortgages and closed mortgages Long-term mortgages and short-term mortgages Ways in which a borrower can pay off a mortgage faster without having to pay a prepayment charge. Examples include making lump-sum prepayments, increasing the regular payment amount, and increasing the frequency of the payment to weekly or bi-weekly. Ways to avoid prepayment charges (for example, by porting a mortgage). How prepayment charges are calculated, with examples of the prepayment charges that would apply in specific circumstances. Actions by a borrower that may result in the borrower having to pay a prepayment charge, such as the following actions: partially prepaying amounts higher than allowed by the borrower's mortgage refinancing their mortgage transferring their mortgage to another lenderLenders may make this information available on their publicly accessible Canadian website where products or services are offered and upon request by consumers at the lender's places of business in Canada, including when consumers are pre-approved for a mortgage. Â In addition, each lender will provide on its publicly accessible Canadian website links to information on mortgages provided on the website of the Financial Consumer Agency of Canada. 4. Financial CalculatorsEach lender will post calculators on its publicly accessible website for borrowers, and provide guidance to borrowers on how to use the calculators to obtain the mortgage prepayment information they want. Borrowers will be able to enter information about their mortgage into the calculator to get an estimate of the current prepayment charge. Borrowers will also be able to change the information they enter, such as the amount of the mortgage that has not yet been repaid or the remaining term, so that they can see how the payment choices they make affect the prepayment charge.5. Borrower Access to Actual Prepayment ChargeEach lender will make available a toll-free telephone line through which borrowers can access staff members who are knowledgeable about mortgage prepayments. These staff members will be able to orally provide a borrower with the actual prepayment charge that would apply to the borrower's mortgage at that point in time. These staff members will also be able to provide to a borrower, on request, a written statement of their prepayment charge, accurate as at the time the statement is produced. A lender will not proceed to take steps to pay out a mortgage until the borrower has confirmed that the borrower's intention is to pay out the mortgage.

GOOD DEBT vs BAD DEBT

2012-02-27T09:31:00.000-08:00

Not all debt is created equal – and not all debt is bad. In fact, you need some debt to establish a good credit rating. Being a responsible borrower means knowing which types of debt can help you reach your financial goals and which types leave you further behind. Good debt includes any investment or purchase that helps improve your overall financial position. Mortgage loans are considered good debt because they offer low rates on property that appreciates in value over the long term. You also build equity as you pay down your mortgage. Borrowing to invest is also considered good debt. Often, the interest expense on money borrowed for investments is tax deductible. And when borrowing to maximize your RRSP, you're investing in your future and benefiting from tax sheltered investment growth. Bad debt involves purchases where the value becomes lower than the original cost, and which can carry a high rate of interest, making them harder to pay off. Types of bad debt include high-interest credit card debt, car loans, deferred purchases, and cash advances. If you're unsure about your debt situation, set up a meeting with your mortgage broker. He or she can take you through your finances and advise how you can use your home equity to trade bad debt for smart debt, and give you some financial breathing room. The right refinancing package can help put an end to the monthly squeeze of too much credit card debt or too many loans, and help you get back into your financial comfort zone.

BANK of CANADA WARNING

2012-02-24T10:55:00.000-08:00

The Bank of Canada is warning of an impending housing price correction, putting Canadian mortgage holders at risk.In a four-part series of papers, economists at the bank said a drop in home prices could also impact overall consumption and the Canadian economy.In one of the reports, authored by Brian Peterson and Yi Zheng, the bank cautioned that the risk for fluctuations in house prices has “increased markedly.”The authors noted that house prices have risen sharply in most parts of the country over the past decade, with house prices reaching a historically high level in relation to income. The percentage of household debt to income has risen from 110% in 1999 to 153% currently.“These facts (rising debt and house prices) are interrelated, since rising house prices can facilitate the accumulation of debt,” said guest editor Graydon Paulin, introducing the four papers. “Households could therefore experience a significant shock if house prices were to reverse.”The bank also suggested at 10% drop in home prices in the near future could result in a 1% drop in consumption, negatively impacting the overall economy.A “significant” share of borrowed funds from home-equity extraction in the past decade was used to finance consumption and home renovation, notes the report.“Such indebtedness constitutes an important source of risk to household spending, since it makes households more vulnerable to a potential decline in housing prices,” one paper states.While rising population and income gains over the past 30 years have mostly related to the rising house prices, other factors were taking more prominence in the past decade, such as lowered interest rates, higher expectations for house prices and the liquidity of the housing market.

2012-02-16T08:34:00.000-08:00

Good article from the Globe and Mail:Canada’s housing market has two good years ahead of it yet, Canada Mortgage and Housing Corp. said Monday, with low interest rates and a “moderately” expanding economy keeping price corrections at bay.The Crown corporation – which insures Canadian mortgages – has had a consistently rosier view of the market than many private sector forecasters.Canadian banks have recently issued reports probing the consequences of cheap money, and trying to predict whether there is a bubble in prices that will eventually pop and cause prices to crash. They are particularly concerned about Vancouver and Toronto, where some have predicted price corrections of up to 10 per cent because of overbuilding in the condo market.But CMHC said Monday Canadian markets would “remain steady in 2012 and 2013.“With the Canadian economy set to expand at a moderate pace and mortgage rates expected to remain low, activity levels in 2012 in both new home construction and sales of existing homes will stay close to levels seen in 2011,” said Mathieu Laberge, deputy chief economist.Also in the forecast: “Housing starts will be in the range of 164,000 to 212,700 units in 2012, with a point forecast of 190,000 units. In 2013, housing starts will be in the range of 168,900 to 219,300 units, with a point forecast of 193,800 units.Existing home sales will be in the range of 406,000 to 504,500 units in 2012, with a point forecast of 457,300 units. In 2013, MLS sales are expected to move up in the range of 417,600 to 517,400 units, with a point forecast of 468,200 units.The average MLS price is forecast to be between $330,000 and $410,000 in 2012 and between $335,000 and $430,000 in 2013. CMHC’s point forecast for the average MLS price is $368,900 for 2012 and $379,000 for 2013. The moderate increases in the average MLS price are consistent with the balanced market conditions that occurred in 2011, and that are expected to continue in 2012 and 2013.”

CAAMP'S VIEW ON TODAY's MORTGAGE ISSUES

2012-02-10T06:55:00.000-08:00

BASED ON OUR RESEARCH AND KNOWLEDGE OF THE SECTOR, WE SEE NO REASON TO TIGHTEN OR RESTRICT ACCESS TO RESIDENTIAL MORTGAGES AT THIS TIME1. CURRENT ENVIRONMENT Canada has a well-earned reputation for exercising economic prudence. As a result, we have managed to avoid a mortgage or housing market meltdown. Our banks are stable and our economy, while impacted by the general global economic slowdown, remains healthier than most. CAAMP’s extensive industry research indicates that the Canadian mortgage industry is healthy. We must continue to “stress test” our own financial sector to determine how it would withstand potential weakening of the economy. The more educated we are about the debt we incur (mortgages, credit cards, lines of credit), the better off we will be2. FEDERAL GOVERNMENT ACTIONS TAKEN The federal government responded promptly when it was determined changes were needed in the mortgage market. There have been three significant sets of changes in the past 36 months: - Amortization periods shortened to 30 years from 35 and 40 years - Minimum down payment increased to 5 per cent of purchase price. No 100% LTV mortgages - Homeowners refinancing their mortgage may borrow up to 85 per cent of the equity in their home; down from 90% and 95% - These changes have impacted the mortgage market; re-financings have decreased dramatically and mortgage credit growth has slowed Based on our extensive research and knowledge of the sector, we see no reason to further tighten or restrict access to mortgages at this time3. REASONS FOR CURRENT CONCERN1) Housing Market Prolonged low interest rates are making it more attractive to purchase a home Research shows that the vast majority of homeowners can accommodate rate increases (84 per cent surveyed in CAAMP’s fall 2011 research said they could handle a $200/month increase) CAAMP’s fall 2011 survey indicates mortgage borrowers are prudent, increasing their lump sum payments and paying down their mortgage faster than required Supply and demand drive housing prices – provinces and municipalities should be more aware of their land-use policies and how they impact housing supply2) Media Focus on Insurance Ceiling - Changes in Some Banks’ Lending Practices It is a fact that CMHC is approaching its $600 billion government-imposed limit on mortgage default insurance. Private insurers have a $300 billion limit. This has nothing to do with mortgage insurers being responsible for an increasing number of higher risk mortgages Lenders are buying portfolio insurance against defaults on low risk mortgages - cases where homeowners have more than 20 per cent equity in their homes. These are not high risk mortgages. CMHC is approaching its limit because the number of mortgage holders has grown, the population and housing units have increased and lenders have been insuring low risk mortgages, leveraging the government’s triple A credit rating for other bank business Residential mortgage credit in Canada continues to expand. During the past five years, outstanding residential mortgage credit has expanded by 53%, or an average rate of 8.9% per year. The growth rate is slowing The volume of outstanding residential mortgage credit passed the $1 trillion threshold in July 2010, and as of August 2011, it reached $1.079 trillion Increased homeownership results in an increase in mortgage default insurance However, mortgage defaults are rare. CMHC reported it paid out $454 million in the first nine months of 2011 which represents a 0.42 per cent default rate Overall mortgage arrears rates in Canada are declining and never approached the level of the early 1990s. The housing market in Canada is growing organically and safely There is no parallel in Canada to the subprime default problems that plagued the US market3. FURTHER RESTRICTIONS ON ACCESS TO MORTGAGESWho will be affected? Self-employed borrowers who represent a growing portion of our labour force (currently 2.67 million people, or 15% of employment in Canada) New Canadians who can afford a down payment but have yet to build credit and employment history First time homebuyers who want to enter the homeownership market and build equity These are not the people who fall in to a sub-prime loan category like we saw in the US; yet these changes will impact them The housing industry is an engine of growth in Canada. If we impede its growth, we will add to unemployment and depress the economy If fewer mortgage lenders are able to insure their loans simply because the insurance program has not kept pace with the growth in the mortgage market, then consumers will have less choice when it comes to negotiating a mortgage. Less choice, or less competition, will inevitably lead to higher borrowing costs for the Canadian consumer Likewise, if mortgage brokers are restricted in the mortgage products they can offer, consumer choice will be diminished and costs will increase This reduced access to capital will make it more difficult for people who can legitimately afford to buy a home4)What are the Risks of Further Restricting Access to Mortgages?CAAMP has one of the most comprehensive collections of research on the mortgage industry. It includes original data on borrowers and the characteristics of mortgage loans. This research has revealed repeatedly that borrowers and lenders in Canada have been prudent, and only a very small share of borrowers would have trouble affording future rises in mortgage rates.There are risks, but most are related to the broader economy through two channels:UnemploymentThe broader economic data suggests that the Canadian economy is slowing. If that results in job losses, the housing market would be negatively affected, and there would be impacts on mortgages held by people who lose jobs and then struggle to make payments.Declining Housing PricesHousing prices could decline in a weaker market. In a recession, there is the threat of a downward spiral: a weak economy harming the housing market which negatively affects the broader economy. We believe and trust that the federal government will act to mitigate such a negative scenario.These risks have nothing to do with mortgage products themselves.Risks to the Canadian mortgage market are dependent on the performance of the broader economy. In that light, the best means to control mortgage market risk is through strong economic management. In particular, care must be taken not to take any measures in the mortgage market that unnecessarily reduce housing activity that would be damaging to the economy.

More Down Payment May Cost You More Money

2012-02-08T10:31:00.000-08:00

The search for conventional mortgage financing just got tougher -- and may get tougher still -- with several Canadian lenders moving to cut their rental programs because of tighter access to bulk insurance.
FirstLine, the CIBC-owned broker channel lender, kicked off the latest round of downsizing, last week announcing it would impose a $750,000 cap on rental property loans up to an 80 per cent loan-to-value. That’s $250K less than what owner-occupieds can qualify for.

Street Capital announced a similar decision last week, axing its rental program altogether. And while it will consider exceptions on a case-by-case basis, that’s only where clients are willing to pay default insurance they technically do not need.

Under Canadian mortgage rules, borrowers opting to go conventional by putting down a minimum 20 per cent are exempt from that requirement.

But increasingly lenders have opted to insure those loans themselves through bulk insurance offered by the CMHC. The practice allows them to then securitize those mortgages for sale on equities markets. It also clears up space on their balance sheets to write more loans.

Last week, CMHC warned that lender access to its $600 billion insurance fund would likely be rationed as the Crown corp. approaches the limit of that funding. Government hasn’t yet agreed to raise that ceiling.

Lenders are now taking a look at their books and deciding where to cut their conventional lending business rather than keep some loans uninsured and, therefore, on their books.

Rental programs – along with business-for-self lending – is most vulnerable to that downsizing, say analysts, suggesting property investors will find it increasingly difficult to win financing for acquisitions.

That has already begun to happen, with another high-profile lender -- Merix Financial -- deciding to pass on mortgage insurance costs to conventional mortgage borrowers asking for LTVs between 65% and 80%.

“It was important to Merix to continue to offer those products – BFS and Rental -- so originators can continue to offer them to their clients,” said Jason Kay, VP of sales. “While some clients are having to pay more, from a cash flow perspective, it is relatively neutral compared to costs before the changes.”:

(from Canadian Real Estate Wealth)

CMHC CUTTING BACK ON INSURED MORTGAGES

2012-01-31T08:28:00.000-08:00

(From the Financial Post)

Canada Mortgage and Housing Corp. is cutting back on mortgages it insures as the Crown corporation edges closer to a $600-billion cap imposed on it by the federal government, the Financial Post has learned.

A CMHC spokesman confirmed that it had approached a number of lenders at the end of 2011 about reducing its “bulk or portfolio insurance” after third-quarter results showed the agency had committed to back $541-billion in mortgages. CMHC, which guarantees mortgages held by financial institutions, is ultimately backed by the federal government and needs approval to go over the $600-billion limit — something that would create greater risk for taxpayers should the housing market collapse.

“CMHC has recently received an unexpected level of requests for large amounts of CMHC portfolio insurance.” said Charles Sauriol, a spokesman for the Crown corporation, in an email.

“To ensure equitable access to portfolio insurance within CMHC’s annual limits, an allocation process is being established which has caused some delays. Portfolio insurance provides lenders with the ability to purchase insurance on pools of previously uninsured low ratio mortgages and does not impact CMHC’s transactional business.”

Financial institutions are required to have mortgage-default insurance when a consumer has less than 20% equity. However, the banks have been seeking insurance on loans with even high downpayments — something not required by law — so they can securitize those bulk lending loans, thereby getting them off their balance sheets and reducing their capital requirements. In those cases in which the loans to value is less than 80%, the bank pays the insurance charge instead of the consumer.

“One of the things that has got them [to the limit] faster than expected is they are doing a lot of conventional insurance for lenders,” said one source. Just three years ago, CMHC had $450-billion in loans it was backstopping and had to go to the government to get that increased to $600-billion.

“I think as a taxpayer you should care. The policy question is why should the Canadian taxpayer take that type of meltdown risk within CMHC,” the source said.

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The risk to the taxpayer would be a collapse in the market leading to a defaults like the U.S. saw. If CMHC couldn’t cover those defaults, Ottawa is on the hook for 100% of any shortfall.

On the surface, insuring conventional loans may not appear as risky as traditional mortgage default insurance because it comes with more equity. The banks have been demanding ultra low fees on the conventional mortgages, arguing the equity position makes them a lower risk. However, lenders are skimming their portfolio to load up mortgages that are 70% to 80% debt to equity and may also have other problems, said a source.

With mortgage defaults well below 1%, some might argue the risk to CMHC is negligible. “If you look at what is backing [CMHC’s] guarantee, it should be more than enough to cover any downturn in the market,” said one banking source, who asked not to be identified, about CMHC’s cash reserves. “Besides, what will the government do, not increase their limit? This could kill the entire housing market.”

CMHC gave no indication it would seek an increase in its limit.

“CMHC’s mortgage loan insurance limit in force is $600-billion. CMHC manages its mortgage loan insurance business in accordance with this limit,” said Mr. Sauriol.

The Crown corporation would be going to the government looking for an increase in its limit at a time when both Bank of Canada Governor Mark Carney and Finance Minister Jim Flaherty have been casting a wary eye at the housing market.

“We watch the housing market carefully and we are prepared to intervene if necessary. Having said that, we’re not about to intervene in the housing market now,” said Mr. Flaherty this month. For his part, Mr. Carney said “we see that in a number of real estate markets in Canada, valuations are at a minimum, firm; in others, they’re probably overvalued. So there are risks there.”

Sources have indicated the government is already considering tough new measures for calculating how the self-employed qualify for loans and tightening regulations for condominium buyers, so there is probably little appetite for backstopping even more debt from CMHC. In addition to CMHC, the government has a $300-billion limit for private mortgage default insurers.

MORTGAGES FOR NEW IMMIGRANTS

2012-01-26T11:59:00.000-08:00

A Home of Their Own – New Immigrants Face Hurdles

New Canadians are making their numbers felt in the housing market, as they get settled and make the transition from renter to owner, purchasing their first homes in this country.

Over 280,000 new immigrants arrived in Canada in 2010, the highest amount in
50 years according to the Department of Citizenship and Immigration. Immigrants
are expected to play a large role in the housing market in the coming decades.
Between now and 2031, the foreign-born population of Canada could increase approximately four times faster than the rest of the population. For these new Canadians, first-time home ownership may prove harder than anticipated, as they face some unforeseen obstacles, but there are definite opportunities.

Lack of Credit History The biggest challenge for new immigrants is establishing credit because they do not have a financial history in Canada.
Without a credit history, it can be a struggle to get mortgage financing. It is important to start establishing credit soon after arrival in Canada. New
immigrants are encouraged to bring credit and bank references (preferably in
English) with them from their home country to help with developing a Canadian
credit profile.

Large Down Payments Another home ownership hurdle
immigrants have faced is that many financial institutions traditionally have
insisted that new immigrants provide a down payment of at least 25 to 35 per
cent. A large down payment may be difficult for some because they are self-employed and working to establish their own business or unable to access funds from their home country.The good news is that things are changing. More and more lenders in Canada are offering mortgages tailored to the needs of new immigrants, including those with non-landed status. In many cases,immigrants can get a mortgage with a down payment of as little as five per cent of the value of the property, as long as it comes from their own resources.

To start preparing to apply for a mortgage, the following materials should be
assembled: • Copies of your work permit/landed status papers or passport
• Social insurance number
• Employment letter(s)
• Credit reference(s)
• Documentation of the down payment money source
• Bank statements showing 90 days of account activity

The great news is that mortgage brokers can streamline the mortgage process
for new immigrants, from counseling on credit in Canada, to obtaining credit
references from foreign banks, to confirming foreign income; a broker can work
with new immigrant clients to present their financial history to the satisfaction of the lender.

LOOKING BEHIND THE 5 YEAR RATE SPECIAL

2012-01-23T14:43:00.001-08:00

A peek behind deeply discounted 5-year rates.

A major bank has offered a record low 5 year interest rate. However it is a 2 week special only.

Is it as good as it appears to be on first glance. Let’s look a little deeper.

When considering a deeply discounted 5-year rate, keep in mind that cheapest isn’t always best.
Strangely, we know that’s true when we’re shopping for anything else - but we still tend to believe that lowest rate is the one and only factor in choosing a mortgage. But, that low-rate mortgage could actually cost you more in the long run.

An amazing cut-rate mortgage could have you locked in to a very rigid contract filled with financial “trip lines” that could work against you down the road. That’s why it’s important to
check the fine print. For instance, is the mortgage fully closed? That means you’re not leaving the lender unless you sell your house, so your options are limited and you have no negotiating power if your needs change in the next 5 years. Low or no prepayments: means you have no or limited ability to chip away at your principal to reduce your overall cost. Maximum 25-year amortization can take away flexibility you may need later. Many prudent homeowners take a 30-year amortization but set their payments higher using a 25-year or lower amortization. This gives them the option to reduce their payments should an emergency arise or a special need like maternity leave. For first-time buyers too, a 25-year amortization means higher payments
than a 30-year amortization and could limit their entry into the market.

Spot a deeply discounted 5-year rate? Talk to me first. I’ll always help you find the right combination of low rate with the options you need to achieve your goals for homeownership and the financial future you want.

BMO's 5 year 2.99% Mortgage Offering

2012-01-19T09:02:00.000-08:00

On first glance this looks like a great deal. 2.99% for a 5 year mortgage- the lowest 5 year rate ever.
However a closer analysis offers some of the points to be aware of.

Consider:

This is a two-week promo (at the moment) valid until JANUARY 25TH.

There are conditions to their offer. The main terms of BMO's special are as follows:

Maximum Amortization: 25 years
Rate Hold: Up to 90 days
Pre-Approvals: Allowed
Lump-sum Pre-payments: 10% maximum per year (1/2 of the 20% that BMO normally allows)
Optional Payment increase: 10% maximum per year (again, 1/2 of the 20% that BMO normally allows)
Term: Fully closed unless you sell the property, refinance (with BMO only), or early renew into another BMO mortgage.
BMO Mortgage Cash Account: Not available with the Low-Rate
BMO Skip-a-Payment: Not available with the Low-Rate
BMO ReadiLine: Not available with the Low-Rate
Other Details: Not applicable to non-owner occupied rental properties

Most importantly, the client is tied to BMO for the entire 5 year term of their mortgage, even if they want to break it and pay a penalty, they are forced to stay with BMO at whatever rate BMO offers. Client loses negotiating power.

This rate and mortgage is great if you plan to live in the house for many years and will not need to refinace during the term.

BANK of CANADA RAISES INTEREST RATE

2010-07-21T08:20:00.000-07:00

The Bank of Canada did as expected yesterday and announced it is increasing the target for the overnight rate by 0.25% to 0.75%. There was some debate earlier in the month whether the central bank would actually continue increasing interest rates, but after the strong job report that was released mid-month announcing that a record number of jobs were created in June, it became apparent that Bank Governor Mark Carney, now had strong justification to increase rates again.

Some key items in the release included:

Globally
Global economic recovery is proceeding but is not yet self-sustaining
Greater emphasis on balance sheet repair by households, banks, and governments around the world is expected to reduce global growth then the Bank originally believed back in April
The response to the European debt crisis, or Greece’s debt crisis, has reduced the risk of it blowing out of proportion, but it will slow down global growth
US consumer demand is increasing but is still not driving growth
In Canada
Economic activity in Canada is proceeding largely as expected mainly due to government stimulus and consumer spending
Housing activity is declining markedly from high levels, as the Bank believes that ultra low interest rates brought forward housing demand from this year into late last year and earlier in 2010, so we could see a continued slow down through the rest of the year
Despite the latest jobs report for June 2010 stating that employment growth has resumed, business investment still has resumed to previous levels as there is so much global uncertainty at the moment
The Bank of Canada expects economic recovery in Canada to be slower than originally thought in April, and is now expected as follows:
2010: 3.5%
2011: 2.9%
2010: 2.2%
Inflation seems to be under control, and is expected to remain around the target 2%, however, they will keep an eye on whether HST introductions in BC & Ontario will lead to inflation in the short term
The economy is expected to recover to full capacity towards the end of 2011 rather than Q2 2011 as thought in April
They then closed the announcement with a warning that:

Given the considerable uncertainty surrounding the outlook, any further reduction of monetary stimulus would have to be weighed carefully against domestic and global economic developments.

This means that another rate hike at the next meeting on September 8th, 2010, is not guaranteed. They will have to see how the Canadian economy is fairing along with the rest of the world, and some economists believe they may ‘pause’ rate hikes to see the effects of previous increases thus far.

What this means for variable mortgage holders, is that your variable mortgage rates will increase by 0.25% tomorrow.

Keep in mind that the Bank of Canada’s key interest rate doesn’t directly affect fixed mortgage rates, they’re affected by bond yields, and after the last announcement we actually saw fixed mortgage rates come down as bond yields decreased.

CANADA'S ECONOMY OUTPACING THE US

2010-07-08T08:47:00.000-07:00

IMF says Canada will likely outperform this year, sees slower growth in 2011
Thu Jul 8, 9:57 AM
Joe Mcdonald, The Associated Press
Email StoryIM StoryPrintable View.By Joe Mcdonald, The Associated Press

BEIJING, China - Canada's economy is on track to grow more quickly this year than previously expected, putting it ahead of the United States and most other advanced economies, according to new estimates from International Monetary Fund.

The IMF said Thursday it's raising the 2010 growth forecast for Canada to 3.6 per cent from its previous estimate of 3.1 per cent, issued in April.

The IMF's July report also raised its U.S. growth estimate to 3.3 per cent, up from 3.1 per cent and its world estimate to 4.6 per cent from 4.2 per cent.

Asian countries with rapidly maturing economies will grow more quickly than the United States, Japan and European countries that have historically been more advanced.

China's growth for this year, for instance, is now projected at 10.5 per cent, up five percentage points, while the IMF expects India's economy will advance 9.4 per cent this year (up six percentage points from the April projection.)

Next year isn't looking so rosey for Canada, however.

The IMF has lowered its projection for 2011 growth by four percentage points to 2.8 per cent. Also notable was a reduction in the IMF's 2011 projection for China, which has been reduced by three percentage points from April's.

In contrast, the U.S. growth projection for next year was raised by three percentage points to 2.9 per cent, slightly ahead of Canada, while the world outlook for 2011 was raised by eight percentage points to 4.3 per cent.

The IMF, a Washington-based multnational organization affiliated with the United Nations and the World Bank, said Europe's debt crisis might stall the global rebound and governments need to shore up shaky public confidence.

Its quarterly World Economic Outlook warned that "risks have risen sharply" and Europe has to quickly resolve debt problems and restore confidence in its banks.

Europe's problems "could spill over to other regions and stall the global recovery," said Jose Vinals, director of the fund's monetary and capital markets department, at a news conference in Hong Kong.

"Further credible and decisive policy action is needed to resume progress on financial stability and keep the economic recovery on track," Vinals said.

Risks so far are limited to financial markets and activity in other fields stabilized at a high level in May, the IMF said. It said industrial output and trade grew by double digits and there was a modest but steady recovery in developed economies and strong growth in emerging nations.

"The numbers for economic activity have come in strong — in fact, stronger than we have forecast," said Olivier Blanchard, director of the IMF's research department.

The fund raised this year's U.S. growth forecast from 2.7 per cent to 3.3 per cent. The outlook for Germany and other European nations that use the euro common currency was unchanged at 1 per cent.

A global "double dip," or relapse into recession, is "very unlikely," Blanchard said.

Asian economies recovered strongly this year, driven by buoyant exports and stronger domestic demand, the IMF said.

The fund raised its 2010 growth forecast for Japan to 2.4 per cent from 1.9 per cent and for India to 9.4 per cent from 8.8 per cent. The estimate of the Asia region's growth rose to 7.5 per cent from seven per cent.

However, it warned that weakness in Europe "would affect Asia through both trade and financial channels."

Weak data from major economies in recent weeks have diminished confidence in a strong rebound from last year's recession.

The fund's forecast for 2011 growth was unchanged at 4.3 per cent, a decline from this year's rate.

In a move that might fuel concern the recovery is fading, the fund lowered its 2011 growth forecast for Japan from two per cent to 1.8 per cent and for Britain to 2.1 per centfrom 2.5 per cent.

In Europe, the IMF said governments must resolve uncertainty about banks' exposure to sovereign debt and other risks and make sure lenders have enough capital and markets have adequate liquidity.

It said many advanced economies urgently need to push ahead financial reforms including recapitalizing banks, restructuring and consolidating banking industries and overhauling regulation.

"In the absence of complete banking sector recapitalization and restructuring, the flow of credit to the economy will continue to be impaired," the IMF said.

The Case For A Variable Rate When Rates Are Rising

2010-06-17T09:07:00.000-07:00

It’s been a great ride! Canadian homeowners have been benefiting from ultra-low interest rates over the last two years. Unfortunately the time has come: the rate climate is starting to heat up. As the Prime lending rate starts to gradually increase toward more normal lending rates of 5% to 6%, do variable-rate mortgages still make sense? Of course the answer depends on your own personal
situation, but there are definite compelling reasons to choose variable.

Fixed-rate mortgages play a significant role with many Canadian homeowners, particularly those who may lose sleep wondering what will happen next with rates. Fixed mortgages are also ideal for those on a very tight budget; a fixed rate gives you the security of knowing exactly how much your mortgage will be so you can plan accordingly. Many first-time homebuyers choose a fixed-rate mortgage for this reason

For those who are not on a tight budget, a variable-rate mortgage can be a wise financial move, even in a rising rate environment. Lenders offer variable-rate mortgages at the Prime lending rate minus a certain percentage, which varies
by lender. So as the Prime rate increases, so will your mortgage payments. How fast Prime will increase will be determined by inflation and other key economic factors.
Studies have shown that most Canadians hold their mortgage for 15 years or longer, and that over the long term, less overall interest is paid with a variable-rate
mortgage.If you believe that minimizing the total amount of interest you pay over the life of your mortgage is an important goal, then the case for variable-rate mortgages is very strong.

The question to ask is: what do you want to pay right now

– a lower variable rate, or a higher fixed rate? Prime rate increases tend to be gradual so it can take several Prime increases to reach current fixed rates. In the meantime, you can keep your savings for lifestyle, investments or to pay down your mortgage! Let’s compare using today’s rates for a $250,000 mortgage, assuming Prime increases 0.75% per year: The question to ask is: what do you want to pay right now

– a lower variable rate, or a higher fixed rate? Prime rate increases tend to be gradual so it can take several Prime increases to reach current fixed rates. In the meantime, you can keep your savings for lifestyle, investments or to pay down your mortgage! Let’s compare using today’s rates for a $250,000 mortgage, assuming Prime increases 0.75% per year:

5-year Fixed-Rate Mortgage (4.75%)
Year Monthly Payment Balance
1 $1,419 $244,620
2 $1,419 $238,982
3 $1,419 $233,073
4 $1,419 $226,880
5 $1,419 $220,390
Total Paid: $85,118

5-year Variable-Rate Mortgage (Prime -0.5%)
Year Monthly Payment Balance
1 (2.00%) $1,059 $242,205
2 (2.75%) $1,148 $234,964
3 (3.50%) $1,238 $228,171
4 (4.25%) $1,327 $221,733
5 (5.00%) $1,417 $215,569
Total Paid: $74,268
Difference in total payments = $10,850
Difference in interest paid = $4,821

In this case, choosing a variable-rate mortgage allows you to keep $15,671 over those five years, even though the Prime rate was rising. Of course, the Prime rate could increase faster than what has been used in this example. Since no one can
accurately predict interest rate movements, your best bet is to have a good conversation with an experienced mortgage planner who can help you assess your own situation, and determine if a variable-rate mortgage is right for you.

BANK of CANADA RAISES INTEREST RATE

2010-06-01T10:03:00.000-07:00

Bank of Canada raises interest rate
| Tuesday, 1 June 2010

After more than a year at a record low level, Bank of Canada Governor Mark Carney raised the benchmark interest rate for the first time since 2007 by one-quarter percentage point to 0.5 per cent. This is the first time since 2007 that that rate has increased and the Bank of Canada is the first in the Group of Seven to do so since the financial crisis and recession began in 2008.
In a statement Carney emphasized that the increase should not be interpreted as just the first of more to come.
"This decision still leaves considerable monetary stimulus in place, consistent with achieving the 2 per cent inflation target in light of the significant excess supply in Canada, the strength of domestic spending and the uneven global recovery,'' the central bank said. ``Given the considerable uncertainty surrounding the outlook, any further reduction of monetary stimulus would have to be weighed carefully against domestic and global economic developments.''

CANADA URGED TO TIGHTEN MORTGAGE RULES

2010-02-11T07:53:00.000-08:00

The Canadian Press

Date: Thursday Feb. 11, 2010 6:56 AM ET

OTTAWA — The federal government should avoid major surgery and make only minor adjustments to deal with fears of overheating in Canada's housing market, a number of leading economists said Wednesday.

Federal Finance Minister Jim Flaherty and the Bank of Canada have expressed concern that Canadians may be assuming too much debt in home purchases, debt that could rebound on them when interest rates rise.

But some solutions being floated in advance of Flaherty's upcoming March 4 budget -- doubling the minimum down payment to 10 per cent, or reducing the maximum amortization period from 35 to 30 years -- could do more harm than good, the economists said.

"We want some sort of micro-surgery, not (taking) a pickaxe to the problem," said Avery Shenfeld, chief economist with CIBC World Markets.

Bank of Nova Scotia economist Derek Holt said such radical surgery could cause home prices to crash and shake confidence in the consumer sector, a key driver of the fragile economic recovery.

Interviews with economists at four of Canada's big banks showed some disparity of views as to the size of the problem, but general agreement that there is good reason for concern.

Most see home prices in Canada as being 10 to 15 per cent too high, largely because construction of new homes ground to a halt during the recession, decreasing available supply, and because of record-low interest rates which are luring many new entrants into the market.

The Canadian Real Estate Association said this week it expects home prices to gain another five per cent to a record average of $337,500 this year. Sales will also hit record levels this year before tailing off next year, the association said.

It is unclear whether Flaherty is contemplating measures to cool prices and activity. Last weekend, the minister told reporters he was closely watching prices, but did not believe Canada had a housing bubble as yet.

But if one were to develop it could have wider repercussions on the economic recovery, as occurred in the United States, the economists said.

The best approach now is to take baby steps that would help moderate prices and activity and create a so-called soft landing.

One measure, according to TD Bank deputy chief economist Craig Alexander, would be to tighten the "income test" banks use to assess whether a prospective homeowner can meet monthly mortgage payments.

Already, banks build in a cushion in handing out floating mortgages by judging credit worthiness based on the borrower's ability to make payments on the three-year rate, not the variable rate -- about a two percentage point difference. Alexander said that could be increased to the still higher five-year posted rate.

A variation would be for banks to judge ability to meet payments not just on the mortgage but on all outstanding debts of a prospective homebuyer.

Yet another idea would be to deny government-backed insurance on mortgages for investment properties, thereby dampening speculation.

Economists believe such measures could help deflate any housing bubble without bursting it.

"It's not in the interest of either buyers or lenders to have boom-bust cycles," said the TD's Alexander.

"That's the lesson from the U.S. experience. If you have the wrong incentives and you don't have regulations, you end up in a place you don't want to be."

Bank of Montreal economist Douglas Porter said if Ottawa chooses to raise the down payment requirement, it should do so modestly, perhaps to six or seven per cent.

Porter said, however, that he didn't think reducing the amortization period to 30 years would be dramatic enough to cause a major disruption in the market.

Economists point out that home affordability is expected to tighten this summer even if Flaherty does not change the rules.

The introduction of the harmonized sales tax starting July 1 in Ontario and British Columbia -- two of the hottest home markets -- is expected to add a couple of thousand dollars to home purchases in those provinces.

And Bank of Canada governor Mark Carney is widely expected to start raising interest rates as early as July.

LIMITED TIME 5 YEAR MORTGAGE RATE

2010-02-01T07:47:00.000-08:00

We at Mortgage Architects Quinte (#10287) are offering a Feb special.

For a limited time we are offering for a 5 year fixed term 3.70%.(oac and subject to change). You will be hard pressed to find another bank or mortgage firm that can match this rate. For further information contact me (MO9002332) at dougboswell@bellnet.ca or 613-968-6439 ex 24. Act now!

2010-01-21T12:12:00.000-08:00

Two items of interest.

1) This past Tues. The Bank of Canada quarenteed to keep its trend-setting rate at 0.25% until the end of June. The implication was there to expect rates to rise after that. If you have a mortgage that is coming up for renewal or are looking to purchase soon, now is the time to give us a call to see how we can help.

2) Street Capital has rolled out the first nationally available 1-year adjustable rate mortgage.
Paul Grewal, President of Street Capital, says the product is well-suited to those who expect that “discounts on ARM’s will increase.” It gives people “the flexibility to choose a shorter ARM term,” he adds.
Therefore, if you think variable rates will be prime – 0.50% next year, for example, this 1-year variable lets you switch mortgages in 12 months without penalty--instead of waiting 3-5 years.
Street Capital also lets customers convert to a 3-, 4- or 5-year fixed rate at any time, with no fee, and at discounted broker rates.
Here are some of the key guidelines:
LTV: Up to 95% on purchases and 90% on refinances
Rate Hold: 60 days
Amortizations: 16-35 years
Compounded: Semi-annually
Loan Amounts: $50,000 to $1,500,000
Qualifying Rate: 3-year discounted rate or contract rate
Minimum Beacon Score: 600
Early Termination Penalty: 3 months of interest
Lump-sum Pre-payments: 20% annually
Payment Increase Option: 20% annually
Rate premiums apply on conventional mortgages between 75%-80% LTV, rentals, stated income deals, and discharged bankrupts.
In conjunction with today’s announcement, Street Capital also announced a new 3-year variable.

Doug Boswell (MO 9002332) is a mortgage planner with Mortgage Architects Belleville Ont. (# 10287)
Doug deals with first and second mortgages, renewals, refinancing, bank turndowns.
Telephone: Cell 613-242-9830
Office 613-968-6439 ex24
Email: dougboswell@bellnet.ca

For more information on mortgages and latest rates visit http://www.dougboswell.com/.

2010-01-15T10:42:00.000-08:00

Canada Prepared For Rising Rates according to a recent surrvety bay CAAMP.

Claims that Canadians are taking out risky variable-rate mortgages and borrowing more than they can afford “are not based on actual data” and “are misinformed.” That’s according to CAAMP, who issued this study of 40,000 mortgages from 2009: Revisiting The Canadian Mortgage Market…
Despite rising home prices, first-time mortgagors took out “far less” than they could afford last year, says CAAMP.
"The vast majority of Canadian mortgage borrowers are not taking on undue risks. They have factored rising interest rates in to their mortgage decisions," stated Jim Murphy, president and CEO of CAAMP.
CAAMP ran simulations to estimate what would happen if the Bank of Canada hiked rates 3% over two years (and fixed rates rose 1.25%).
It found that income gains should offset much or all of the increases in mortgage payments that most Canadian’s would experience.
"The bottom line from the simulations is that even though mortgage payments will probably rise for most borrowers, the increase in their incomes will more than offset the higher payments," said CAAMP chief economist Will Dunning. “All in all, the degree of risk from rising mortgage rates appears to be small and manageable,” he writes.
A key finding in the report was that 86% of Canadian home buyers took out fixed rates in 2009. Here’s a breakdown of the terms they selected:
5% chose 1- to 2-year terms
20% chose 3-year terms
5% chose 4-year terms
70% chose 5- to 10-year terms
Other notable findings from the study:
5%: Number of Canadian households who purchase a home each year.
50-60%: Number of those who are first-time homebuyers.
0.03%: Percentage of first-time home buyers (compared to all home owners) that are “pushing the envelope” by getting mortgages they may not be able to afford. CAAMP estimates these “at-risk” borrowers amount to 4,000 households out of 13,250,000 in Canada.
10%: Annual growth rate of mortgage debt in the last five years.
”This growth rate was far in excess of growth of incomes and therefore mortgage debt has become a growing burden for Canadian households,” CAAMP said. CAAMP attributed this growth to rising home prices and increased home ownership. 70% of households now own homes, versus 63.6% in 1996.
5.425 million: Number of Canadian mortgage holders.
22.3%: Average GDS ratio of a home buyer in 2009 32% is the traditional GDS maximum. This stat is a pleasant surprise. According to CAAMP’s findings, most Canadians appear to be underbuying, not overbuying--as some critics charge.
32.8%: Average TDS ratio of a home buyer in 2009 Similar to GDS above, this is well below the standard. 40-42% is the typical TDS maximum.
0.44%: Current percentage of mortgage holders in arrears. CAAMP says arrears averaged 0.50% in the 1990s. Mortgage arrears are highly correlated with Canada’s employment rate. Reduced hours/pay and separations/divorce are secondary factors. CAAMP says it “appear(s) most likely that the arrears rate is close to peaking.”
Dunning closed the report by writing: “Virtually every Canadian who is in a position to buy a home and qualify for a mortgage is well-educated and capable of assessing what is in their best interests, of looking forward, and of anticipating threats to their financial well-being.”
Let’s keep it that way by advising homeowners to remain conservativ

More details on the study above:

Data was collected from a CAAMP survey of its corporate members
Sample size was 40,000 mortgages totalling $10 billion
This represents about one-sixth of total mortgage activity for home purchases in Canada.
The mortgages were all funded in 2009
The data included purchases only. No renewals or refinances.
The vast majority of mortgages in the dataset are high-ratio and insured.

2009-12-17T07:50:00.000-08:00

Bank of Canada Governor Mark Carney again warned Canadians Wednesday not to borrow more than they will be able to handle when ultralow interest rates start to rise, urging households and lenders to be responsible while the risks that debt poses to the economy are "still manageable."
"When risks are still manageable is precisely the best time to act," Carney said in the text of a speech he was delivering to a business audience in Toronto. "We must be vigilant, and all parties must fulfill their responsibilities."
While saying lenders should "actively monitor risk" and not take "false comfort" from mortgage insurance and the past health of household credit, Carney implored Canadians to "ensure that in the future, when the recovery takes hold and extraordinary measures are unwound, they can still service their debts."
Carney's remarks expand on the central bank's semi-annual review of the financial system last week, in which he said household debt is now the biggest risk to the country's financial system, even if it's still "relatively low" and unlikely to reach levels that could cripple banks' balance sheets.
That review used a "stress test" to show rising interest rates between mid-2010 and mid-2012 would saddle a growing number of Canadians with debt loads big enough to leave them "financially vulnerable."
At the same time, Carney said in his remarks that although the Canadian economic outlook has improved, tepid demand in the U.S. for Canadian exports will make the economic recovery not only "more protracted" than usual, but also more dependent on spending at home.
And as the Canadian economy – which resumed growth in the third quarter on the strength of domestic spending – picks up steam, Carney warned that Canadians may save too little and borrow too much.
Nonetheless, he hinted that he would not seek to rush a return to higher borrowing costs to rein in spending and that monetary tightening won't come until inflation is closer to the bank's 2-percent target.
"Whatever happens, the bank's monetary policy reaction to consumer behaviour will always be driven by its implications – taken in conjunction with all other relevant factors – for inflation over the medium-term horizon," he said.
The central bank has made a conditional commitment to keep interest rates on hold until at least the middle of next year.
With the Bank of Canada's benchmark policy rate at a record low 0.25 percent since April, 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 buying in the housing market and elsewhere in the economy.
In the speech, Carney pointed to the U.S. subprime mortgage collapse and the subsequent meltdown of that country's financial system to remind Canadians that growing debt burdens, even if confined to a small slice of the population, can cause problems for the whole economy.
"A shock to economic conditions could be transmitted to the broader financial system through deterioration in the credit quality of loans to households," Carney said. "In such an event, increased loan-loss provisions and reduced quality of the remaining loans could lead to tighter credit conditions more broadly."

NET WORTH RISES ALONG WITH HOUSEHOLD DEBT

2009-12-14T10:01:00.000-08:00

Tavia Grant wrote an article in Dec 14th Globe and Mail stating that Canadians' net worth in the third quarter of 2009 rose, but house debt rose also.

Canadians' net worth swelled in the third quarter, riding the crest of rising equity markets. But debt levels rose too, sending the household debt-to-income ratio to a record high. Household net worth climbed 2.3 per cent in the quarter, as Canada's benchmark stock index (TSX-I11,530.88106.950.94%) gained 10 per cent, Statistics Canada said Monday. Net worth hit $5.7-trillion, marking two quarters of gains after three straight drops.

Debt, too, is rising. Household debt, as measured by mortgages and consumer credit swelled 1.6 per cent as low borrowing costs caused Canadians to buy more homes and renovate them. They also bought more cars, sparking a further increase in consumer credit, the agency said. Personal debt has been steadily rising in Canada since 1982.

“Falling mortgage rates, along with increased sales of existing homes and renovations, sustained increases in mortgage demand,” the report said. “Strength in auto purchases led to a further increase in consumer credit.”

Thus the household debt-to-income ratio rose 2 points to 145 per cent, the highest level since quarterly record-keeping began in 1990. That means for every $100 of personal disposable income, Canadians are now carrying $145 in debt.

Back in 1990, by comparison, Canadians were carrying $88.60 in debt for every $100 of income.
Household debt has become the biggest risk to the country's financial system, the Bank of Canada cautioned last week in its review of the financial system. The central bank cut interest rates to a record low this year, and expects to keep them there until mid-2010, a move which is both kick starting the economy and fuelling an increase in borrowing.

Canada's national net worth fell 1.3 per cent to $5.9-billion, the third straight drop and the biggest decline on record, largely due to an increase in net foreign debt.

Household per capita net worth is now $168,800 in the third quarter, still below the peak of $179,000 in the second quarter of last year, Statscan said. The third-quarter increase in household net worth was due to higher values of financial assets, which include fixed income securities, corporate equities, mutual fund investments, and pension assets.

2009-12-11T07:55:00.000-08:00

The 4 major banks have made slight changes in some of their posted rates over the past 2 days.

Scotia has its 4 yr closed at 5.14% and 5 yr closed at 5.49%

BMO has a i yr at 3.00%, 4 yr fixed at 5.14% and 6 yr closed at 5.49%

TD has a 4 yr closed at 5.14 and 5 yr closed at 5.49%

RBC has a 1 yr closed at 3.40%, 4 yr closed at 5.14% and 5 yr closed at 5.49%

My best rate is 4 yr closed at 3.79%, 5 yr closed at 3.85% and 1 yr closed at 2.35%

Bank of Canada holds rate at 0.25%

2009-12-08T11:48:00.000-08:00

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.
While significant fragilities remain, global economic developments have been slightly more positive and the global outlook has improved modestly relative to the Bank's projection in its October Monetary Policy Report (MPR).

In Canada, as expected, the composition of aggregate demand is shifting towards final domestic demand and away from net exports. In the third quarter, the balance of these shifts resulted in weaker-than-projected GDP growth. Core inflation in recent months has been slightly higher than the Bank had projected, although total CPI inflation remains close to projections.
The main drivers and the profile of the projected recovery in Canada remain consistent with the Bank's views in the October MPR. The Bank continues to expect economic growth to become more solidly entrenched over the projection period and inflation to return to the 2 per cent target in the second half of 2011.

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. In its conduct of monetary policy at low interest rates, the Bank retains considerable flexibility, consistent with the framework outlined in the April MPR.

The risks to the outlook for inflation continue to be those outlined in the October MPR. On the upside, the main risks are stronger-than-projected global and domestic demand. On the downside, the main risks are a more protracted global recovery and persistent strength in the Canadian dollar that could act as a significant further drag on growth and put additional downward pressure on inflation. The Bank views all of these risks through the prism of achieving the 2 per cent inflation target.

Housing Market and Ontario Economy Outlook

2009-11-23T11:01:00.001-08:00

A recent CMHC outlook Conference recently reporeted the following:

- economy has rebounded and consumer spending grown
- mortgage rates are expected to stay low until well into 2010
-mortgage payments have put less of a burden on after tax income and affordibilty is very positive in Canada
- house sales will continue to improve in 2010 but will rely on employment growth
- Canadian saving rates have moved up due to uncertaincy about jobs etc. As the recovery continues, saving rates will start to decrease
- this recession has not been as deep as the previous one
- our exporting will be slow to recover as US households are saving more and consumption has decreased
- Canadian consumer spending will remain low for 2010
- Walmart profits have increased significantly, indicating consumer spending awareness
- 68% of Canadian mortgages are fixed term
- debt consolidation is the biggest reason for refinancing at these low rates
- finance, insurance and real estate sectors have seen an increase in jobs.

REPORT on CANADA's RESIDENTIAL MORTGAGE MARKET

2009-11-16T11:48:00.000-08:00

The Canadian Association of Accredited Mortgage Professionals has just released their annual survey results on how Canadians feel about housing and mortgages.

61% of those surveyed feel that now is a good time to purchase a home compared to 38% at this time last year.

77% are either satisfied or completely satisfied with their current mortgage. This has been due to the decline in rates over the past year.

42% in Ontario, 43 % in Alberta and 47% in BC feel that house prices will rise in the next year.

16 % expressed concern over job loss. Over 80% of this group have more than 20% equity in their home.

2/3 of all mortgages are for 4 or more years, with 56% having a 5 year term.

The average amount of equity in a Canadian home is $142000 while those with no mortgage have $322000 equity in their home.

Canadians take equity out for 2 main reasons - debt consolidation and renovations.

68% have a fixed rate mortgage while 27% have variable and adjustable rate mortgage. Fixed rates are most popular among the ages of 18 and 34 while those in the 55+ are more likely to prefer variable rate mortgages.

To read the full report, CLICK HERE