Bank of Canada holds rate at 1% as expected

Mark Carney announced today the the Bank of Canada is maintaining the key interest rate at 1% (bank prime 3%). Most analysts expecting this form the Bank of Canada Governor, but what was surprising is how little Canada has to do with the global financial crisis.

He continued to reinforce that the key factors continue to be the crisis in the EU, which is now looking like its heading into a recession, and high US consumer debt.

Click here to watch the Globe and Mail video.

Bank of Canada could slash interest rates next year

Sheryl King, an economist at Bank of America Merril Lynch, said in a note that the volatility hitting Europe and the risk of damage to the global economy means the Bank of Canada will move to cut its benchmark interest rate to ward off the risk of recession.

With the Eurozone sovereign debt and banking crisis showing no sign of containment, some economists think the Bank of Canada will cut rates back to the effective lower bound of 25 basis points (0.25%) early next year.

Click here to read the full article in the Financial Post.

Bank of Canada holds rate at 1% as outlook worsens

The Bank of Canada has kept it's target for the overnight rate steady at 1%. This means that the Bank of Canada prime rate remains at 3%.

The BoC sited a worsening global economy and the need to maintain the current level of stimulus. The Bank also hinted that they may have to keep the benchmark interest rate this low for an extended period of time which is a surprise to many, as we had been expecting a rate hike sooner than later.

The Bank of Canada said that the risk to Canada's economy were roughly balanced, therefore no need for a change to the rate was required at this point.

Debt troubles in Europe continue to have an effect as does the slow down in the USA and emerging markets and Canada's export-driven economy is heavily dependent on all these markets for growth.

It was the 9th consecutive time that the Bank of Canada has decided to hold the rate at 1%.

"Our base case remains that the Bank of Canada will keep rates unchanged until the start of 2013", says BMO economist Michael Gregory. "If anything, today's announcement increases our convictions."

To read the full article from CBC click here.

No rate hikes till Summer of 2012: Reuters poll

The forecast for the next Bank of Canada interest rate hike was pushed back to the 3rd quarter of 2012 based on a recent Reuters poll of 40 economists and strategist in August 2011. This was based on slow global growth and the risk that Europe's debt crisis will linger on, according to the Reuters survey released on Tuesday.

Analysts said Canada's central bank need to raise borrowing costs less than they previously thought, because the domestic economy has not recovered as strongly as expected and the European debt crisis still is dampening the global outlook.

The poll showed a 95 percent probability there won't be a change in rates at the next policy announcement on October 25.

Click here to read the complete article from Reuters.

Carney Confident Canada can survive Economic Crisis

Bank of Canada Governor Mark Carney delivered an assuring message to Canadians yesterday. In that message he stated that he expects the strength of Canadian financial structures to carry it through the growing international crisis.

He also stated that even if other country's fell back in to a recession Canada's economy would remain in tact. This is due to the fundamental strength of Canada's banking system, which was named the best banking system in the world for the 4th consecutive year.

That being said, expect the Bank of Canada to hold interest rates until they can see some stability in the work economy.

Click here to read the complete article from CTV.ca

Bank of Canada keeps overnight rate at 1 percent

The Bank of Canada has done a 180 shift and held the bank rate at 1% (3% prime rate). Earlier this year is was a forgone conclusion that the BoC was going to start to raise rates this fall.

Several factors have forced the banks hand, such as the global economic outlook has deteriorated in recent weeks. The European debt crisis has intensified, along with the US downgrade of credit from AAA to AA, plus the US recession was deeper and has been shallower than previously reported. Recent data also concludes that the US growth recovery will be weaker than anticipated.

Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate at 1 per cent. In light of slowing global economic momentum and heightened financial uncertainty

The next BoC update is October 25, 2011.

Click here to read the entire article from the Bank of Canada.

Home buyers worried about being pushed out of the market by higher mortgage rates received a little good news this week.

With all the turmoil in the world financial markets in the last two weeks, the pressure has been taken off banks to raise interest rates. The longer the turmoil, the more likely the mortgage rates are to fall and the Bank of Canada will be pressured to lower the overnight rate. 180% switch from discussion of a pending rate increase in the fall.

The Bank of Canada has not raised it's overnight rate in 2011, making interest rates among the lowest in Canadian history.

This is a benefit to first-time buyers and anyone who is looking to renew their mortgage because lower rates reduce the cost of borrowing.

Read more at:

http://www.vancouversun.com/business/Interest+rates+calm+turbulent+times/5239589/story.html#ixzz1UkFKHx1v

Bank of Canada Maintains Rate Target at 1%

The Bank of Canada this week announced that it is maintaining its target for the overnight rate at 1%. The bank prime lending rate remains at 3%.

The U.S. economy has grown at a slower pace than expected and continues to be restrained by the consolidation of household spending and a slow growth in employment. While growth in Europe has been stronger than expected, fiscal cuts in many countries reflect a weaker growth than originally anticipated. Widespread concerns over sovereign debt have increased risk aversion and volatility in financial markets.

In Canada, the economic expansion is proceeding as projected, although the expected rotation of demand is somewhat slower than had been anticipated. Household spending remains solid and business investment vigorous. Net exports remain weak, due to modest U.S. demand and ongoing competitiveness challenges, particularly the persistent strength of the Canadian dollar. Despite increased global risk aversion, financial conditions in Canada remain very active and private credit growth is strong.

The bank expects growth in Canada to re-accelerate in the second half of 2011. Over the projection horizon, business investment is expected to remain strong, household spending to grow more in line with disposable income, and net exports to become more supportive of growth. Relative to the April projection, growth in household spending is now projected to be slightly firmer, reflecting higher household income, and net exports to be slightly weaker, reflecting more subdued U.S. activity. This was the 10th consecutive month that there was no change to prime rate. The Bank of Canada did hint that there may be rate increases on the horizon as the Canadian economy grows closer to full capacity.

Rates hikes may be on hold until 2012

Over the past few months, major economists have backpeddled on their rate hike predictions. Initially the rates were expected to start to rise as early as July, however most economists are now saying it could be as late as the new year. Major factors include:

• A parade of weak economic data from the U.S.—our key trading partner
• Core inflation that remains manageable
• Global economic risks
• Debt-laden consumers that are only cautiously spending
• A U.S. housing market that's double-dipping
• U.S. unemployment that may be structurally and permanently elevated
• A Canadian dollar that is still acting as a brake on our economy.

To read the full article from Rob McLister form Canadian Mortgage Trends Click here

Bank of Canada maintains overnight rate at 1 per cent

As expected the Bank of Canada maintained its overnight rate at 1% (bank prime rate is 3%). In Canada the economic recovery is proceeding broadly as expected, and the US economy continues to grow at a modest pace. The disasters that struck Japan as well as the continued crisis and economic instability in in Europe, coupled with the high CDN dollar has been key factors in the hold on rates. Expect the rates to hold through the summer.

Click here to read the complete article from news wire

BoC rate hike on hold until September: RBC

Due to the uncertainty of the speed of the economic recovery in Europe and its potential spillover effect in to Canada, The Bank of Canada plans to delay any rate hikes until September 2011. Initially the BoC had planned to start to raise interest rates as early as this July.

Dawn Desjardins, assistant chief economist with RBC states “combined with already-present downside risks to domestic growth in the second quarter, the Bank of Canada is likely to remain on the sidelines longer than we previously thought. Complicating the outlook are global developments with the European sovereign debt crisis bringing fiscal and debt rating concerns to the forefront for investors. In the United States, economic surprises have been to the downside.”

So far, the Canadian economy looks to be holding steady with data suggesting 0.3% growth in March after a dip in February. Monthly growth figures put the economy on pace for 3.7% growth with risks on the upside.

Persistent strength in housing and growth in household credit, however, means the BoC cannot wait too long before taking action to avoid inflationary pressure.

Click here to read the complete article from Eric Lam of the Financial Post.

Fixed vs. variable mortgages: How to choose

There seems to be a common thread among economists when it comes to deciding which rate is better, a variable or a fixed rate mortgage. YOu may be surprised to hear that the difference over the the long run is likely to be minimal.

Moshe Milevsky, associate professor of finance at York University, studied mortgage rate data from 1950 to 2007 and found that choosing a variable rate mortgage would have saved Canadians $20,000 in interest payments over 15 years, based on a $100,000 mortgage.

He also found that Canadians would have been better off with a variable rate mortgage compared to a five-year fixed rate 89 per cent of the time.

The question is whether this other 11 per cent of the time when it is advantageous, is right now, said Benjamin Tal, senior economist with the CIBC World Markets.

“This is one of the few examples of times when it really doesn’t make much of a difference. If you take variable and I take fixed now and we meet five years from now, you would probably be able to buy me lunch, but it would be a cheap lunch.”

That’s largely because interest rates are so low right now. Economists are expecting rates to increase by about half a percentage point or more beginning in June, with further rate hikes to come in 2011.

Click here to read the full article from Moneyville.

Average price of BC home up 15% from last year

(Vancouver Sun April 18th) The average price of a home in British Columbia rose 15 per cent from March of last year to March 2011, the B.C. Real Estate Association reported in a news release today.

The BCREA release said Multiple Listing Service residential sales in the province were up 11.5 per cent compared to March of 2010.

Sales in March amounted to 8,600 units. The average price in March was $594,157.

"We continue to observe a two-speed market in BC, with surging consumer demand in Metro Vancouver overshadowing more moderate demand in other regions," Cameron Muir, BCREA chief ecconomist, said in the release.

"Vigorous consumer demand drove Greater Vancouver to its most active March since 2004, while the Fraser Valley had its strongest March in four years.

"Conversely, sales activity in other B.C. markets is expanding at a pace more inline with overall economic growth."

Surprise, surprise: Central Bank holds overnight rate at 1 per cent

Bank of Canada announced yesterday, it will maintain the overnight interest rate at 1%, which is a 3% bank prime rate. The key indicators for the rate hold, were strong Canadian economic recovery, the soaring loonie, global economic challenges and the disaster in Japan.

There is also indication that the bank will not raise rates at the next meeting on May 31st, instead it will be more likely to occur in July or September when the bank meets. This is great news for all you variable mortgage holders.

Click here to view the entire article form Mortgage Broker News

Top 25 grants and rebates for property buyers and owners

Great article outlining available Grants and Rebates that are available to homeowners so you can be sure you are getting all the grants that are available.

Click here to read the complete article in the Vancouver Sun

Bank of Canada keeps short-term rates low

The Bank of Canada is sticking to its low interest rate policy to continue to help the recovery, even though there is a lot of evidence that the economy is performing better than originally expected.

Most of the five-paragraph statement was devoted to highlighting that not much had changed and that the risks to the global recovery remain elevated. The bank also warned that the strong Canadian dollar and the poor productivity of Canadian firms will slow export growth.

On future intentions, the bank recycled a line used before that any tightening to monetary policy will need to be carefully considered.

The Bank of Canada has kept the overnight rate at 1% (bank prime 3%) since September 2010.

Click here to read the complete article from Julina Beltrame from the Canadian Press.

BoC may have to hold interest rates due to January inflation numbers

With gasoline prices up in January, and year over year price increases in seven of the eight major categories, it was a surprise to see inflation numbers drop in January. Overall consumer prices rose by .03% in January while inflation actually dropped .10 of a point to 2.3%

There is expectation, with the Bank of Canada’s next rate announcement coming on March 1st, that inflation will not be a cause for reactionary concern, making it harder for the BoC to raise the overnight rate.

Click here to read the full article from Property Wire

Interest rate hikes are coming.

Most of Canada's economist and securities dealers expect interest rates to start to rise as early as May. While we have been preparing for an rise in the Bank of Canada rate in July, recent data has suggested that it will happen as soon as May, and possibly in April.

When inflation hits the 2% benchmark number the next move is to raise interest rates to slow down consumer spending. January's inflation numbers came in under expectations at 2.3%, but job creation was 4 times what was projected, putting pressure on the BoC to start to raise interest rates.

The one certainty is not if rates will rise but when.

The next bank of Canada rate announcement is March 1st 2011.

Click here to read the complete article from the Vancouver Sun

RBC Reports: Mortgage rates to rise, but housing market to be stable over the next two years

RBC came out and reported that they expect the Bank of Canada to raise rates as much as 1% this year and 1.5% in 2012. A fairly bold statement, but the best news from the article is the positive statements made regarding the economic recovery.

“Going forward, we see nearly perfectly offsetting forces driving Canada’s housing market,” he said. “On the upside, the economic recovery will gather strength in 2011, continuing to boost employment and family incomes.

“Even though mortgage rates are expected to rise later this year, they will still be within short reach of current levels and remain supportive for housing market activity,” CREA chief economist Gregory Klump said. “Strengthening economic fundamentals will keep the housing market in balance, which will keep prices stable.”

Click here to read the complete article from The Globe and Mail.

New mortgage rules come into effect March 18th, or do they?

On January 17th, the BoC announced changes to the amortizations of insured mortgages, decreasing the maximum amortization from 35 to 30 years. This goes into effect on March 18th, so the thought was if you did not have an accepted offer by this date you would be forced into a 30 year amortized mortgage, thus decreasing your maximum purchase price. Well this is partly true.

Most lenders will allow you to take advantage of their rate hold window of up to 120 days to close on a purchase. What this means is you must have a accepted offer of sale by March 17th and if you do you will have up to 120 days to complete on the sale and still take advantage of the 35 year amortization. This will also apply to re finances as long as you have your refinance documents into your mortgage broker or lender by March 17th.

Bank of Canada Maintains Overnight Rate

Once again and as widely expected the Bank of Canada left its overnight rate unchanged at 1% (3% bank prime rate) for a 3rd consecutive meeting. We are seeing the economy recover at a somewhat faster pace that originally anticipated, but the risks are still elevated, due to concerns of the pace of recovery in the EU as well as the continued strength of the Canadian dollar.

Yesterdays decision to decrease the amortization of all insured mortgages to 30 years from 35 also made the decision easy to maintain the overnight rate at 1%.

The BoC projects a 2.4% increase in the economy in 2011 and a 2.8% in 2012, with a full return to capacity a by the end of 2012. The BoC's next fixed rate announcement is only 6 weeks away on March 1st.

Please click here to read the complete article.

Dept. of Finance Tightens CMHC Mortgage Rules

For the second time in twelve months, the Department of Finance tightened rules on residential mortgages to help slow the pace of household debt accumulation. Changes include shortening the amortization period to 30 years (which had already been shortened from 40 to 35 years in 2008), a reduction in the maximum refinance percentage from 90% loan-to-value to 85%, and withdrawing CMHC insurance of home equity lines of credit (HELOC).

Changes to the amortization period and the refinancing ratio will take effect March 18 and the HELOC change will take effect April 18, 2011.

In terms of monetary policy, this helps take some pressure off the Bank of Canada (BoC). With all the talk about the non-sustainable pace of household debt accumulation, there was speculation about whether or not the BoC would consider hiking interest rates for reasons not directly related to its inflation-targeting mandate. Such speculation can be put to rest for the time being.

Loonie looks to stay at par with U.S.

Thanks to a sound Fiscal situation in Canada, Finance minister Jim Flaherty says that the Canadian dollar will hover at parity with the U.S. dollar for some time. It makes no sense that the Canadian dollar will go beck to being devalued next to the US dollar for some time, considering the strength of the Canadian Economy.

House Prices expected to rise in 2011

The average house price in Vancouver has hit 1 million dollars, an increase of 9.8% in 2010, and it is expected to rise 3.7% in 2011. Expect sales activity in the lower mainland to be very strong the first half of 2011 due to home buyers taking advantage of the record low interest rates. Click here to read the entire Vancouver Sun article