The Bank of Canada left its main interest rate untouched at 1% Tuesday   while
painting a brighter economic outlook and hinting for the first time since last
summer that it’s beginning to look for an opportunity to raise borrowing costs.

The decision to stand pat for a 13th consecutive meeting was expected. But
after weeks of sunnier rhetoric from Governor Mark Carney amid a strengthening
domestic recovery, Bay Street analysts had been debating how far he would go in
trying to reshape expectations that he may be on hold until late next year.

The statement on Tuesday’s decision was vague about timing, saying only that it
may become necessary to increase rates, but that this would depend on “domestic
and global economic developments.” But, just by saying so, Carney is clearly
starting to lay the groundwork for rate hikes if the Canadian economy and the
global backdrop continue to improve. Significantly, he boosted his 2012 growth
forecast for Canada by four tenths of a percentage point, to 2.4%. And though
he cut his 2013 forecast by the same amount, to 2.4%, the slack in the economy
is now projected to be chewed up in the first half of 2013 instead of in the
third quarter of next year, so possibly six months earlier.

Flaherty anounces budget. No changes to mortgage rules

Finance Minister rejected calls to tinker with mortgage insurance rules, offering a budget that leaves the maximum amortization cap at 30 years and the minimum down payment at 5 per cent.

With the budget announcement, Flaherty effectively rejected a chorus of banker calls for a 25-year amortization cap, down from the 30 years the government now allows. Some economists also wanted the government to increase down payment requires to a minimum 7- or 10-per cent.

Both suggestions were billed as a way of cutting record levels of household debt and slow down the consumer rush to buy homes.

What you need to know about buying U.S. real estate

The financial crisis that began in 2007 with the breakdown of the U.S. residential mortgage market still persists for millions of Americans who have lost their houses, their jobs and all hope of a secure retirement.

As a result, residential real estate prices in the hardest-hit areas such as California, Arizona, Nevada and Florida are well below replacement value (i.e., the land is valued at zero), leading many analysts to conclude that prices must be near, if not already at, the bottom.

Taken together, these facts seem to suggest that Canadians have a once-in-a-lifetime opportunity: To buy U.S. real estate in desirable locations at historically low prices using cheap U.S. dollars. Seems like a slam dunk, right? Maybe. But there are a number of factors to consider before pulling out your cheque book and booking a flight.

If you have always wanted a vacation home in the sun and are planning to buy a property that you will use yourself, then this seems like the perfect time to buy. In addition to enjoying your new home for years to come, it is more than likely that it will appreciate in value during that time.

If you are approaching the opportunity strictly as an investor, with the basic plan of buy-rent-sell.

Click here to see the following list of what to expect.

Canada housing prices won’t crash: poll

OTTAWA — Canada’s government will make it tougher for many homebuyers to get mortgages this year as it grapples with an overheated property market, according to analysts in a Reuters poll, who also ruled out the prospect that prices could suddenly crash.

Ten of 14 economists and strategists surveyed last week in Reuters’ first poll on the Canadian housing sector answered “yes” when asked if they thought Ottawa would tighten mortgage rules within the next 12 months.

Any move would likely come before the prime spring real estate season, analysts said. “Sometime between now and the next budget,” said Benoit Durocher, senior economist at Desjardins in Montreal, on the timing of such a move.

Housing Market has 2 good years ahead!

Canada’s housing market has two good years ahead of it yet, CMHC said Monday, with low interest rates and a “moderately” expanding economy keeping price corrections at bay.

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% because of overbuilding in the condo market.

But CMHC said Monday Canadian markets would “remain steady in 2012 and 2013.”

Click here to read the complete article form the Globe and Mail

Carney Holds Rates Steady

Mark Carney held the overnight interest rate at 1% for the 11th consecutive meeting. Bond yields have also dropped to record lows in the past few weeks which have pushed CDN lending institutions to cut the 5 year rate to as low as 2.99% and the 10 year fixed rate to a record low of 3.89%.

Carney noted he is worried about the level of Canadian household debt with these low interest rates, but said the economy is too weak to justify higher rates anytime soon.

Bank of Canada seen on hold until 2013

A deteriorating European with slower growth and the longer we go without economy and weak global growth will keep the Bank of Canada from raising rates for at least another year, though an interest rate cut looks highly unlikely, according to a Reuters survey

The Reuters poll of 41 economists and strategists released on Tuesday showed the median forecast for the next interest rate hike was pushed back by three months to the first quarter of 2013 from the fourth quarter of 2012 projected in a November poll. The Bank of Canada's target for the overnight rate - its main policy rate - has been at 1 percent for more than a year.

Click here to read the complete article from Reuters Canada