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."

How Record Low Interest Rates Help You Pay Off Your Mortgage Faster

Record low interests rates are helping Canadians pay off their debt faster, but cheap borrowing costs are not enough to overcome the red hot housing sector, according to a new survey.
The Canadian Association of Accredited Mortgage Professionals says 35% of Canadians were able to bump up their payments in the last year, some of them taking advantage of a renewed loan at a lower interest rate. That lower rate allows them to apply more of their monthly payment to principal as opposed to just interest.
“There are people comfortable with what their payments are when they are renewing and [the lower rate] becomes an additional payment,” said Jim Murphy, chief executive of CAAMP.
A $250,000 mortgage at 4%, amortized over 25 years, has a monthly mortgage payment $1,315.06 but if you lower the rate to 3% — the going rate on a five-year rate mortgage — your monthly payment drops to $1,183.12. Keep the payment the same and that extra $131.94 can be applied to principal which will ultimately mean your loan is paid off more quickly.
CAAMP found in its May survey that the average mortgage rate of a Canadian homeowner is 3.24%, that’s down from 3.5% a year ago. It said the renewal rate for what it called “recent” mortgages was down to 3.02% on average.

10 Reasons to Make Repairs Before You Sell Your Home

If you’re planning to list your home this summer, you don’t have a lot of time to tackle all the necessary repairs. Why is it important to check these off your to-do list ahead of time? Money spent on improvements now will be far less than the cost of that first price reduction if your house sits on the market.

Even if your home doesn’t linger for long, you run the risk of a buyer asking for concessions and credits for items you didn’t fix, and the quotes from experts doing the work will almost certainly be higher than your own out-of-pocket cost.

Click here for 10 reasons you’ll want to make repairs before you put your house on the market, courtesy of Forbes.