Canada First Mortgage

The following was taken directly from the Department of Finance Canada and speaks of the next phase of Canada’s economic plan…

Ottawa, March 2, 2011
2011-019

The Honourable Jim Flaherty, Minister of Finance, announced today that the next phase of Canada’s Economic Action Plan, to be introduced in Parliament on March 22, will focus on keeping Canada’s economy growing and creating better jobs for Canadians.

“As we transition to the next phase of Canada’s Economic Action Plan, measures in this budget will focus on the Harper Government’s key priority of the economy,” said Minister Flaherty. “We will continue to encourage growth and carefully manage government spending in order to balance the budget in the medium term.”

All of the economic output and jobs lost during the recession have been recouped. In fact, over 465,000 jobs have been created since July 2009, more than offsetting all of the jobs lost during the recession. With the global economic recovery still fragile, the Government remains focused on creating jobs and economic growth for Canadians.

“With a recovery now taking hold across the country, the next phase of the Economic Action Plan will focus on strengthening the economy and creating good jobs for Canadians,” said Minister Flaherty.

http://www.fin.gc.ca/n11/11-019-eng.asp

February 28, 2011 By Peggy Mackenzie Moms on Money Toronto Star

When mortgage rates are falling, banks will vie for your business. But in times like these when rates are rising, you have to shop around and negotiate to get the best rate.

This was the situation I faced in 1994 when we bought our first home. This strategy saved us tens of thousands of dollars over the last 17 years. By shopping around and going back to my bank with better deals offered by their competitors we managed to keep getting better deals. The lesson is to do your homework, a bit of research and don’t be afraid to ask.

Rates were at a 30-year low when Jeff and I first started house hunting in 1994. We were long-time Royal Bank of Canada customers, but we went to a different bank for a quote in the hopes that we’d get some bargaining power. Canada Trust quoted us half a percent below the posted rate of 7.25 per cent, provided we moved our business to them. We went back to RBC and they matched the rate and kept our business.

Three years later, rates fell, and I wanted to renegotiate the mortgage.  I shopped around and was offered 1.5 per cent below our RBC rate.  RBC ’s penalty was  three months’ interest (roughly $1500) but they offered a compromise of 1.25 per cent below our current rate and extended the five-year term. They  kept our business.

We successfully used this same strategy twice more  and were down to 4.64 per cent in 2003 but we still paid our mortgage as though our rate were 2 percentage points higher.

Our mistake happened in the fall of 2008 at renewal. Rates were rising and RBC said their best rate was 5.55 per cent for “preferred” customers. I shopped around firmly believing that others would want our business. Scotiabank and TD Canada Trust didn’t. President’s Choice Financial offered the lowest rate at 5.2 per cent and RBC would not match it. We took our mortgage to PCF.

The mistake is that we should have gone with a variable rate, according to Moshe Milevsky’s
column.  He says that homeowners - like us - who have substantial equity in their home and have a diversified portfolio of financial assets, should go variable. But I knew that would keep me awake at night, worrying about how much of our payments was going to interest and how much to the principal. We locked our rate for five years and watched rates plummet six months later.

Recently I tried my mortgage-breaking tactics with PCF and asked how much the penalty would be. They used interest rate differential which is far higher than three months’ of interest payments. See Ellen Roseman’s excellent article on “How mortgage penalties can hurt you.”

PCF wasn’t concerned that I would pay the penalty and leave. Instead they wondered if I’d be interested in a line of credit? As readers know from my line of credit woes, that’s the last thing I wanted! I’m still paying the same rate, but the banks should be worried when I renew. I may well be able to self-fund through my RRSPs and leave them asking why they lost a “preferred” customer. http://www.moneyville.ca/blog/post/944882–how-i-saved-thousands-on-my-mortgage?bn=1

Malcolm Morrison, The Canadian Press

Volatile oil prices, the latest word from the Bank of Canada on interest rates and a report on economic growth at the end of last year will give investors plenty to chew over this week. The central bank is widely expected to keep its key interest rate unchanged at one per cent.

Economists have said that the central bank probably will not raise rates until the middle of the year, but governor Mark Carney’s decision of exactly when has been made more difficult by the wild swings in oil prices.

“This turmoil that we have seen in North Africa and the spike in energy prices does introduce another element of risk to the global economy and specifically to the U.S. economy,” said Doug Porter, deputy chief economist at BMO Capital Markets.

He said the task was much more straightforward for the central bank before the unrest in the Mideast because recent economic data has been so strong, including the trade balance moving into a strong surplus and a better than expected employment report for January.

“So the attention is going to turn to whether they drop any hints or start to sound a bit more upbeat and I think they will allow that the economic environment has improved a bit in the last couple of months. But I think overall they will sound quite cautious.”

Meanwhile, investors are looking for some good news from Statistics Canada Monday when the agency reports on economic growth for December.

TD Economics forecast that gross domestic product is expected to show a solid (annualized) advance of three to 3.5 per cent in the final quarter of 2010, significantly stronger than the 2.3 per cent pace the bank expected in December. http://ca.finance.yahoo.com/news/Surging-oil-prices-Bank-capress-582423359.html?x=0

CALGARY - A year ago, the new condo market in Calgary was “mired in a slump” but today it’s “starting to show more life,” says a residential real estate report by the Altus Group.

The economic consulting firm said the success of the planned University City project at the Brentwood Village shopping centre shows that LRT stations offer potential opportunities for condominium apartment developers.

Last fall, the first two phases of the project - two 18-storey towers of 216 units each - sold out within a matter of days.

“The experience at University City demonstrates that transit-oriented development can attract buyers if the product is well designed and priced for the location,” said the Altus Group. “There should be opportunities for transit-oriented development in cities with existing and/or planned LRT lines.”

The report said condominium apartment sales in Calgary began to recover in 2010 reaching almost 1,500 units, up from about 600 in 2009.

“However, the pattern throughout the year was somewhat erratic - the year started out with strong sales in the first quarter, then waned for the next six months before picking up again in the fourth quarter, largely due to the opening of the first phases of University City,” said the report.

It said 15 buildings were launched in 2010, up from six in 2009.

“An impressive 62 per cent of the approximately 1,000 units released for sale in 2010 were sold by the end of the year, boosted by over 400 sales in University City. Only two other buildings launched earlier recorded more than 50 sales in Calgary in 2010.”

The Altus Group said about 1,800 of the total of about 6,300 units in active condominium projects remained unsold at the end of 2010 and those projects are split about equally between highrise and low-rise buildings.

“In Calgary, the market should continue to recover, but the strength of the recovery will depend in part on the ability of developers to offer attractively priced product in superior locations,” added the report.

In the resale market, the Calgary Real Estate Board said there were 5,181 MLS condo transactions in 2010, down 18.13 per cent from the 6,328 in 2009. The average sale price, though, rose by 2.1 per cent on an annual basis from $283,734 in 2009 to $289,697 in 2010.

The resale condo market continued its slow pace in January, according to CREB, with only 302 sales, off 19.68 per cent from the 376 sales in January 2010. The average price year-over-year jumped by 2.0 per cent to $288,291 from $282,639.

According to the website of realtor Mike Fotiou, of First Place Realty, there have been 281 condo MLS sales so far this month from Feb. 1-17 for an average sale price of $287,397. In February 2010, for the entire month, the average sale price was $282,880 on 536 transactions.

mtoneguzzi@calgaryherald.com

© Copyright (c) The Calgary Herald

Read more: http://www.calgaryherald.com/business/Calgary+condo+market+showing+signs+life/4307825/story.html#ixzz1EndlIb66

OTTAWA (Reuters) - Canada’s annual inflation rate slipped to a relatively tame 2.3 percent in January, bucking a trend which has seen several major nations struggle to keep rising prices under control.

The increase, which matched market expectations, compares with the 2.4 percent recorded in December. It also means the Bank of Canada will be under no immediate pressure to raise interest rates on March 1.

Statistics Canada said on Friday that energy prices had risen 9.0 percent in the 12 months to January following a 10.5 percent year-on-year rise in December. Gasoline prices advanced by 13.0 percent on the year, the same rate seen in December.

Overall, prices were up by 0.3 percent from December. The year-on-year core rate, which is closely watched by the Bank of Canada, slipped to 1.4 percent from 1.5 percent.

Friday’s figures do little to challenge market expectations that the central bank, which targets 2 percent inflation, will hold rates steady until at least May. It halted its rate hike campaign last year on concern about the strength of the economic recovery.

The Canadian data follow a U.S. report on Thursday which showed core consumer prices there rose at the quickest pace in 15 months in January, suggesting a long spell of slowing inflation was coming to an end http://ca.finance.yahoo.com/news/Inflation-fairly-tame-bucks-reuters-3526381484.html

TARA PERKINS — FINANCIAL SERVICES REPORTER

Globe and Mail Canada Mortgage and Housing Corp. is taking the unusual step of publicly challenging its critics, defending its reputation and its business model amid mounting calls for change.

On Monday, the Crown corporation e-mailed to the news media copies of letters that its vice-president had sent to three think tanks which recently published research reports critical of the extensive role that CMHC plays in the housing market and the risk that creates for taxpayers.

The move comes as the Obama administration signalled last Friday that it thinks the U.S. government should no longer play a major role in that country’s housing market. In doing so, it rejected adopting a Canadian-style system, which CMHC critics argue bolsters the case for re-examining the role of the Canadian agency.

“While starting from different places, there are interesting similarities between Canada and the U.S., where we have governments explicitly on the hook for large amounts of mortgages,” said Finn Poschmann, vice-president of research at the C.D. Howe Institute, which two weeks ago published a report entitled, “What Government should do in Mortgage Markets.”

CMHC is by far the largest provider in Canada of default insurance on mortgages, which home buyers are legally required to have if their down payment is smaller than 20 per cent. Ottawa created CMHC in 1946 to house returning war veterans and its role in the housing market has steadily expanded in the decades since.

Mr. Poschmann is one of the critics who received a letter from CMHC’s vice-president of policy and planning, Douglas Stewart. In it, CMHC argues that the Canadian model is cost-effective, and has provided the Canadian taxpayer with $12-billion over the last decade in profits and income taxes.

“Most importantly, the Canadian model withstood the test of the economic downturn, when housing markets in the U.S., United Kingdom, and Ireland failed,” Mr. Stewart wrote.

He also shot back at suggestions from Mr. Poschmann and others that CMHC should be subject to formal oversight from Canada’s financial regulator, the Office of the Superintendent of Financial Institutions, noting that CMHC already complies with OSFI guidelines.

Letters also went out to David Madani at Capital Economics and Jane Londerville at the University of Guelph, who published papers about CMHC earlier this month and last November, respectively.

Mr. Stewart’s letters and the decision to make them public is a departure for CMHC, which tends to shy from discussions about itself and rarely makes executives available to news media. “Simply put, CMHC felt it was important to have a discussion based on factual information,” spokesman Charles Sauriol said Monday.

Mr. Poschmann said CMHC’s mandate is being debated now because of the U.S. situation, where taxpayers have been left on the hook for trillions of dollars in mortgages and policy makers are grappling with how to prevent that from occurring again.

CMHC’s critics aren’t swayed by the global recognition and kudos that the Canadian system, and the agency’s role within it, has received in the wake of the financial crisis. “Underwriting practices in Canada have been better than the U.S., and there’s no question we’ve been more stable than the U.S. has,” Mr. Poschmann said. “That said, that doesn’t mean there aren’t risks here.”

The greatest risk stems from the fact that Canadian housing prices are high relative to incomes, and consumers are shouldering large debt loads, he said. Any correlated market shocks could have serious consequences.

Although last week’s report from the U.S. Treasury Department on the mortgage system did not refer to the Canadian model, it essentially rules out the creation of something similar.

“The U.S., in terms of looking at the full range of options that they could pursue, very much decided to look at options that do not create the same taxpayer vulnerability as the Canadian system creates,” said Neil Mohindra. A year ago, he published a report for the Fraser Institute recommending that CMHC’s mortgage insurance business be privatized. Mr. Mohindra said he did not receive a letter or other response from CMHC at the time.

Mr. Mohindra agreed with Mr. Poschmann and other critics that even if CMHC is complying with OSFI rules, oversight by the regulator would force the agency to provide much more information to taxpayers, as private mortgage insurers do. “They say they comply with OSFI guidelines and … I’m sure they do,” he said. “The point is they don’t publish the data to support that compliance.” http://www.theglobeandmail.com/report-on-business/cmhc-fires-back-at-critics/article1906882/

Tim Shufelt, Financial Post · Monday, Feb. 7, 2011

Amid the noise of volatile-but-improving economic indicators, mortgage rate hikes are likely to repeat like a chorus in the coming months.

Canadian banks are raising interest rates on mortgages, marking the beginning of a trend as they correlate with rising bond yields and expected monetary tightening.

That’s making a strong case for borrowers to lock into fixed rates before it’s too late, said Benjamin Tal, deputy chief economist with CIBC World Markets. “The window is closing.”

TD Canada Trust and CIBC both announced Monday hikes to their residential mortgage rates, the first increases since changes to the rules of borrowing were announced by the federal government last month. The other big banks where expected to follow the moves shortly.

Effective Feb. 8, the interest rate on the banks’ benchmark five-year closed fixed rate mortgage will increase 25 basis points to 5.44%. The country’s other major lenders are expected to soon follow suit.

Toronto mortgage broker Paula Roberts said rising borrowing costs will compel more of her clients to abandon ultra-low variable rates in favour of higher, fixed-rate mortgages.

That can be a tough decision for borrowers to accept higher payments, but not one that should strain a mortgagee’s finances, she said.

“If you can’t afford [your payments] … that’s a problem,” Ms. Roberts said. “That’s why the government has changed the rules.”

In two stages over the past year the federal government announced changes to the conditions of mortgage lending — shortening the maximum amortization from 35 years to 30 years and requiring borrowers to qualify for a fixed-rate plan, even if they are opting for a variable rate.

Many who only qualify under the old rules, however, will try to secure mortgages before the shorter maximum amortization periods come into effect next month, Ms. Roberts said.

“There are going to be a lot of people that will enter into their agreements by March 18.”

Much of the momentum in mortgage rates can be attributed to a bond selloff and rising yields across the board. That effect is partly a reflection of building global inflationary pressures as well as a global economy that is proving more robust than expected.

“In my opinion, the bond market will not be the place to be over the next six months, and if that’s the case, you will see mortgage rates continue to rise,” Mr. Tal said.

In addition, anticipation of increases to the Bank of Canada’s benchmark lending rates is building, also contributing to rising yields, which puts pressure on fixed-income mortgages.

If there was any lingering doubt that the Bank will soon raise rates, last week’s jobs report erased them. The report showed Canada added four times more jobs than expected in January.

“[It] creates a fairly powerful story for the Bank of Canada, which is clearly concerned on the domestic front,” said Camilla Sutton, chief currency strategist at the Bank of Nova Scotia. “I think there’s a material change.”

So do investors. The probability that the central bank will boost its key policy rate by May, as measured by overnight index swaps, jumped to almost 75% after the jobs data. http://www.financialpost.com/news/Window+closing+ultra+mortgage+rates/4239243/story.html#ixzz1DMwQzyWP

TORONTO, Dec. 15 /CNW/ - Alberta’s economy continues to recover from its severe recession with real GDP set to grow 3.4 per cent in 2010 and then galloping to a solid 4.3 per cent in 2011, according to the latest Provincial Outlook report from RBC Economics. In 2011, RBC projects that Alberta’s economic growth will be second only to Saskatchewan, representing the fastest growth in the province since 2006.

Alberta’s strong forecast is owed to improvements in a number of areas, particularly the booming energy sector and increased job creation since spring which helped to bring down the stubbornly high unemployment rate.

“Improvements in the employment market helped reverse the net migration outflow to other provinces that earlier slowed population growth to the lowest rate in 15 years,” said Craig Wright, senior vice-president and chief economist, RBC. “These are the kinds of turnarounds that will spread the recovery more widely throughout Alberta’s economy next year.”

The RBC report notes Alberta’s employment sector is expected to lead the country with a rise of 2.3 per cent in 2011, up significantly from a scant 0.5 per cent in 2010. The anticipated increase represents the creation of 37,000 jobs and will usher in the highest total of new employment opportunities since 2007 which should ultimately contribute to a boost in population growth.

“With interest in developing Alberta’s oil sands growing ever higher, the gush of capital spending on megaprojects is expected to continue next year and beyond. This will pump tremendous activity into the provincial economy and act as a catalyst for both faster job growth and stronger migration from outside the province,” added Wright.

According to the RBC Economics Provincial Outlook, the impact of Alberta’s strengthening demographics will be especially positive for consumer spending in 2011 as retail sales are expected to soar to a rate of 5.6 per cent, higher than any other province. This, along with the 5.1 per cent increase in consumer spending expected this year, will go along way toward reversing the massive 8.4 per cent decline experienced in 2009.

Looking ahead to 2012, the rising tide of energy-related spending and the expanding of non-conventional oil production will continue to exert powerful lifting forces throughout the Alberta economy. RBC forecasts the province will sustain a solid pace of growth with GDP of 3.8 per cent which will keep the province near the top of Canada’s growth rankings.

The RBC Economics Provincial Outlook assesses the provinces according to economic growth, employment growth, unemployment rates, retail sales, housing stars and consumer price indexes.

Nicolas Van Praet, Financial Post · Thursday, Jan. 27, 2011

MONTREAL — The number of Canadians moving to another province has punched to a high not seen in 20 years as people pack up in search of better jobs and salaries elsewhere.

Roughly 337,000 Canadians were on the move in 2010, says a report on interprovincial migration published Thursday by TD Economics. That’s 45,000 more than the year before and the most since the late 1980s. It also represents the largest share of the overall population since 1998.

“It’s a good sign in the sense that whenever you see that kind of movement, it’s an expression of a labour market that’s healing after a pretty severe recession,” said TD senior economist Pascal Gauthier, who wrote the study. “People are either returning home or moving to areas that didn’t have employment before. For those that are already employed, they’re finding potentially better prospects.”

Interprovincial migration matters because when there is a net movement of people to higher-employment and higher-productivity areas, that generates net economic output gains on a national basis. It’s also crucial for businesses because people often make big-ticket purchases when they move, which can have a significant impact on local housing and retail markets.

Canada’s situation lies in stark contrast with the United States, where census data show long-distance moves across states fell last year to the lowest level since the government began tracking them in 1948. Americans used to be a nation of big movers, with as many as one in five relocating for work every year in the 1950s. Now, experts are debating why they’ve become a nation of “hunkered-down homebodies,” as the New York Times put it.

Richard Florida, director of the Martin Prosperity Institute at the University of Toronto, says the United States is experiencing a new kind of class divide now between “mobile” people who have the resources and flexibility to pursue economic opportunity, and “stuck” citizens who are tied to places with weaker economies.

He argues the U.S. housing crisis is a big factor slowing mobility down. When the housing bubble popped, it left millions of Americans unable to sell their homes. “It’s bitterly ironic that housing, for so many Americans, has gone from being a cornerstone of their American dream to being a burden,” he wrote in a recent opinion piece.

Mr. Gauthier agrees that the housing crash is partly to blame for keeping Americans put. “There’s such a glut of supply that it’s just difficult to sell your house. In Canada, that’s not been an issue.”

In Canada, the biggest impediment to the free flow of labour between provinces and territories remains regulation as occupational requirements fall under provincial jurisdiction.

Workers in regulated professions and skilled trades, such as teachers and engineers, still face major barriers trying to work in provinces other than their own. Solving that problem will be key ahead of the looming labour force crunch, Mr. Gauthier argues.

Alberta, B.C. and Saskatchewan have seen the strongest net inflow of people of all provinces for the past three years and that will not change in the short term, the TD report forecasts. The three jurisdictions are working to implement a newly signed trade and labour mobility agreement between them that could eventually see seamless movement of workers between their borders.

TD says Ontario and Quebec will continue to lose residents to other provinces on a net basis, but the bleeding will be at a slower pace than in previous years. It says Manitoba and Prince Edward Island will be the only provinces still shedding a significant share of residents through the end of 2012.

In Manitoba’s case, it’s not that there aren’t any jobs. The province’s unemployment rate has been consistently lower than that of the rest of Canada since the 1990s. It’s that people are being lured by the prospect of higher-paying jobs in neighbouring provinces.
http://www.financialpost.com/news/Migration+year+high/4180290/story.html#ixzz1CKVWbcer

Tal believes the Bank of Canada interest rate  move will come early, possibly in May

By Julian Beltrame, The Canadian Press

OTTAWA - Canadians may be starting to get the message about the perils of mounting debt, suggests a new report from CIBC.

A new analysis by the CIBC shows that many measures of household debt moderated in the third quarter of 2010, just as the often-quoted indicator of debt-to-disposable income hit a record 148 per cent.

The paper says that alarming number was due to falling incomes in the July-September compared with the April-June quarter — when Canadians were getting juicy tax refund cheques from Ottawa — not because debt levels were rising.

In fact, behind the scenes, credit growth was already falling.

Household debt in the third quarter grew at the slowest pace in nine years, while in the last month for which there is data — October 2010 — it was the softest in 15 years.

As well, lines of credit are now rising at a monthly clip of 0.3 per cent, the slowest pace since 2007.

While the mortgage market expanded by seven per cent year-over-year — still faster than income growth — mortgage debt was a small portion of household assets, a function of improved stock market portfolios and better home values.

“I’m not saying debt is not a problem. What I am saying is the problem is getting smaller,” said economist Benjamin Tal, author of the CIBC report.

“Everybody is assuming debt is rising like crazy, but the reality is that if you look closely you see that the rate at which debt is accumulating is going down notably. We should not get panicky because it seems the system is starting to correct itself.”

The Bank of Canada and the federal government have been warning Canadians about their debt exposure for well over a year.

But the hectoring picked up in recent months after the debt-to-income ratio rose to a record high in the third quarter, even beating out the U.S. indebtedness ratio.

In mid-January, Finance Minister Jim Flaherty announced new measures to rein in borrowing, including reducing the amortization period on mortgages from 35 to 30 years, limiting the size of home-equity loans and removing government insurance on lines of credit secured on homes.

Responding to the report at an event in Oshawa, Ont., Flaherty said he acted because he was seeing some “excesses” in borrowing and was concerned a minority of homeowners would not be able to make their monthly payments once interest rates start rising.

“Moderation is the key,” Flaherty said.

Tal said Canadians got the “message” from the warnings of policy makers, but also that there was a natural exhaustion with borrowing.

Other economists, including Scotiabank’s Derek Holt, have also talked about the Canadian consumer entering a new phase in which pent-up demand, particularly for housing, has been exhausted.

Still, Tal believes Flaherty acted correctly in tightening credit conditions, and also in keeping those measures modest and targeted. He estimates that when the new rules take effect in March, they will curtail new mortgage credit by between two and three per cent over the next 12 months.

“They chose an almost surgical approach where it hits where it hurts without causing too many side effects,” Tal said. “They targeted marginal borrowing … they will not derail the housing market.”

The latest downward trend on credit will take some pressure off Bank of Canada governor Mark Carney to raise interest rates to keep Canadians from loading on too much debt.

Economists are divided as to when Carney will move off the super-low one per cent policy rate.

Some argue that uncertainty over the recovery, risks in the global economy and fear about stoking the dollar — more that debt levels — may be more decisive in convincing Carney to stay on the sidelines until at least the third quarter.

Tal believes the move will come early, possibly in May. He said while the central bank’s 2.4 per cent growth forecast for 2011 is modest, the composition of that expansion is superior to what occurred last year.

Last year’s recovery was bolstered by consumer borrowing and government stimulus, he said, while future growth will be anchored by “a vibrant business sector.”

Tal said he does not believe higher rates, when they come, will cause a major panic among borrowers or disruption in the economy.

He notes that personal bankruptcies are already on the way down, and that all expectations are that Carney will be raising rates in a slow, measured way, rather than in large increments.

“The overall speed and magnitude of future rate hikes will be limited by the growing effectiveness of monetary policy and a modest recovery,” he said.

http://ca.finance.yahoo.com/news/Message-heard-Canadian-capress-3310848876.html?x=0