Almost Half of Canadian Credit Card Holders Have Debt

A poll by the Bank of Montreal found that 46 per cent of Canadians who hold a credit card have debt on the account. Following the holiday season 28 per cent of card holders added on average $1,192 to their card balance. Almost a third (30 per cent) of card holders carry a monthly balance although 51 per cent do. Millennials are most likely to view a credit card as ‘extra spending money’. BMO’s Nick Mastromarc says that while credit cards are a useful payment tool they should not be viewed as additional borrowing and warns that: “unchecked spending habits can result in getting stuck in continuous monthly debt cycles that can hamper near and long term financial goals.” He recommends speaking with a financial planner to ensure the best management of household spending. 

Rate Cut Talk Gathers Pace

More experts are joining the voices calling for a further cut in interest rates when the Bank of Canada announces its decision next month. The bank’s senior deputy governor Carolyn Wilkins said yesterday that “the economy still has room to grow” and that the bank’s monetary policy will “support the needed adjustments.” She said that the economy needs to adjust to the lower oil prices and that the bank doesn’t want to do anything that could stifle that. The labour market is one of the main areas of concern, especially with lay-offs in the energy sector, along with output and Ms. Wilkins believes that the gaps will close over time. She says that low and stable inflation will help boost investment and prompt the creation of more jobs. The Bank of Montreal’s senior economist Benjamin Reitzes says that we should “Look for another rate cut in March, and don’t count out further easing.” The rate decision will be announced on Mar. 4.

Top five takeaways from Bank of Canada's surprise rate cut

The Bank of Canada surprised markets Wednesday with a 25 basis point cut to its benchmark interest rate. It marks the first time since September 2010 that the bank has moved on rates and a surprise to most as the BoC was scheduled to raise rates in 2015.

Most economists are predicting that we will now not see any interest rate hikes this year.

Below are five key takeaway messages from the rate cut, which brings the benchmark rate from 1% to 0.75%. 

Possible Rise in Unemployment
Oil  Price Uncertainty
Lower Inflation
New Financial Risks
Weak Canadian Economy


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

Mortgage rates set to stay low for the next six months

Renewing a home loan shouldn’t be too painful for the next six months according to a new report from The Canadian Association of Accredited Mortgage Professionals. It’s predicting that the low rates should continue well into 2015 and that means those that have been used to paying at a higher rate can look forward to savings and that will be good news for the economy as a whole. CAAMP says that of the 1.35 million homeowners that have renewed or refinanced their loans during this year 1.05 million are now paying at a lower rate. Their figures also show that 16 per cent of those with a mortgage have increased the level of their monthly payments or paid a lump sum to pay down their loan faster. Another 7 per cent have increased the frequency of their loan repayments to fortnightly. Around 11 per cent have taken equity out of their home for other purposes including debt consolidation, home renovation or investments. Among first-time buyers the average down payment is 21 per cent with 11 per cent of respondents being gifted the money from a relative and 6 per cent receiving a loan from a family member.

Housing Demand Ratchets Higher in British Columbia

Vancouver, BC – November 18, 2014. The British Columbia Real Estate Association (BCREA) released its 2014 Fourth Quarter Housing Forecast today.

"Consumer demand has ratcheted up this year and is expected to remain at a more elevated level through 2015,” said Cameron Muir, BCREA Chief Economist. “While historically low mortgage rates support demand, the housing market is also being underpinned by a more robust economy and associated job growth, strong net migration and consumer confidence."

BC Multiple Listing Service® (MLS®) residential sales are forecast to increase 15.1 per cent to 83,900 units this year. Stronger economic conditions are expected to be somewhat offset by higher interest rates later next year, and keep home sales from advancing much further. As a result, MLS® residential sales are forecast to edge up a further 1.2 per cent to 84,900 units in 2015. The 15-year average is 80,400 unit sales and a record 106,300 MLS® residential sales were recorded in 2005. 

The average MLS® residential price for the province is forecast to increase 6 per cent to a record $569,800 this year and a further 1.2 per cent to $574,300 in 2015. “New construction activity is generally keeping pace with population and household growth, keeping supply in line with consumer demand,” added Muir. BC housing starts are forecast to increase 4.6 per cent to 28,300 units this year and a further 1.4 per cent to 28,700 units in 2015.

Interest Rate Hike. The Question is When?

Canada's latest inflation numbers have once again turned attention toward the Bank of Canada's plans for interest rate increases.

Core inflation – which the central bank uses for its policies – jumped by an unexpected 4-tenths to 2.1% in August. However that is still well within the Bank's target range and it remains to be seen if this is a sustained acceleration that could require interest rate intervention.

Of course the American influence remains strong and the U.S. Fed has quieted the debate about its next move. It's latest policy statement continues to use the phrase "considerable time" when referring to its pledge to keep borrowing costs down. The Fed also indicated it would like to see stronger employment numbers before raising rates.

The Bank of Canada is definitely going to raise rates. The question they still don't know is when. All data indicates it will take some time before we see a rise.

No Housing Bubble

The three Canadians who could be said to have the biggest influence over the country's housing market have all expressed their confidence in it.

Finance Minister Joe Oliver, Bank of Canada Governor Stephen Poloz and CMHC CEO Evan Siddall were at a meeting of G20 financial heads in Australia and all said they see no bubble in the Canadian market. But they are watching it closely.

In a speech, Siddall said CMHC research shows "there are no immediate problematic housing market conditions at the national level."

Siddall did caution, though, that action could be required if the market doesn't cool as predicted.

The Bank of Canada's Poloz repeated his concern that housing is a "vulnerability" for Canada but, he said, "we don't see the housing market as particularly hazardous and we certainly don't consider it to be a bubble."