Take this opportunity to contact your licensed mortgage professional and compare your existing mortgage with what is available today. You may be surprised at how much you can save. Check back with us soon to see how today's announcement affects the fixed rate mortgages.
OTTAWA - The Bank of Canada today announced that it is lowering its target for the overnight rate by one-half of a percentage point to 1/2 per cent.
The outlook for the global economy has continued to deteriorate since the Bank's January Monetary Policy Report Update, with weaker-than-expected activity in major economies. The nature of the U.S. recession, with very weak auto and housing sectors, is particularly challenging for Canada.
Stabilization of the global financial system remains a precondition for the global and Canadian economic recoveries. The timely implementation of ambitious plans in some major countries to address toxic assets and recapitalize financial institutions will be critical in this regard.
National accounts data for the fourth quarter of 2008 and other indicators of aggregate demand point to a sharper decline in Canadian economic activity and a larger output gap through the first half of 2009 than projected in January. Potential delays in stabilizing the global financial system, along with larger-than-anticipated confidence and wealth effects on domestic demand, could mean that the output gap will not begin to close until early 2010. These factors imply a slightly lower profile for core inflation than was projected in the January MPRU.
The effects of the recent aggressive monetary and fiscal policy actions in Canada and other major economies will begin to be felt in the second half of this year and will build through 2010. Once the global financial system stabilizes and global growth recovers, the underlying strength of the Canadian economy and financial sector should ensure a more rapid recovery in Canada than in most other industrialized economies.
The Bank's decision to lower its policy rate by 50 basis points today brings the cumulative monetary policy easing to 400 basis points since December 2007. Consistent with returning total CPI inflation to 2 per cent, the target for the overnight rate can be expected to remain at this level or lower at least until there are clear signs that excess supply in the economy is being taken up.
Given the low level of the target for the overnight rate, the Bank is refining the approach it would take to provide additional monetary stimulus, if required, through credit and quantitative easing. In its April Monetary Policy Report, the Bank will outline a framework for the possible use of such measures.
The Bank will continue to monitor carefully economic and financial developments in judging to what extent further monetary stimulus will be required to achieve its 2 per cent inflation target over the medium term.
Showing posts with label mortgage rates. Show all posts
Showing posts with label mortgage rates. Show all posts
Tuesday, March 3, 2009
Monday, March 2, 2009
Is the Bank of Canada running out of bullets ?
People are noticing that interest rates are at 65 year lows ... contact a mortgage professional to compare your existing mortgage with a new deal at today's fantastic rates. It costs nothing for the call and you may find out you'll save in the long run and lock in today's rates for another few years to come. Here's an article which should provide more good news for those in variable rate mortgages.
JULIAN BELTRAME Globe and Mail Report on Business The Canadian Press
OTTAWA - Just about now, Bank of Canada governor Mark Carney should be experiencing that sinking, helpless feeling about the economy.
It's not for want of trying to shock the economy back to life.
On Tuesday, the telegenic former Goldman Sachs executive is widely expected to cut short-term interest rates another half-point to bring the central bank's overnight rate to a barely-noticeable 0.5 per cent. For all practical purposes, zero.
That would make it the seventh time Mr. Carney has eased a notch, sometimes several notches, on interest rates since taking charge of the central bank last February. In that time he has also injected $40-billion in cash into the economy through asset swaps with banks, and last week took the unusual step of agreeing to accept corporate bonds as collateral to try and free up credit.
None of it has worked and the economy continues to decline.
One problem Mr. Carney faces is that in the current global credit crunch, financial market interest rates are volatile so there's no assurance Canadian banks will pass along the full Bank of Canada rate cuts by reducing their prime lending rate by the same amount.
The prime is the base used by banks to set rates on consumer and corporate loans, lines of credit and some mortgages. While the prime has dropped in most cases by the same amount as the Bank of Canada rate in the last year or so, other interest rates in the market have been rising and loans have been harder to get as the banks avoid riskier lending during a recession.
A recent survey shows a majority of manufacturers say access to credit is still the major obstacle they face.
"There is clear evidence that very low interest rates are not working to expand economic activity," former Conservative cabinet minister Doug Peters, once also a TD Bank chief economist, wrote in a paper for the Canadian Centre for Policy Alternatives.
"In the current recessionary environment, banks are obviously worried about lending to each other, and of course, are worried about lending to consumers and firms. Interest rates that count, such as inter-bank lending rates, mortgage lending rates, bank commercial lending rates, are all unusually high, especially considering that inflation is also very close to zero."
Even before Mr. Carney's Tuesday move, a new report Monday from Statistics Canada is expected to reveal that the Canadian economy, in Finance Minister Jim Flaherty's blunt words, "fell off the table" in the fourth quarter of 2008.
Private sector economists are predicting a sharp three-to-four per cent contraction in economic activity - severe recessionary territory - but remarkably it could be worse. In fact, Mr. Carney is predicting worse for the first three months of this year with a 4.8-per-cent economic contraction.
In his last public speech in January, Mr. Carney insisted that monetary action taken so far "will work," noting the lengthy lag time between action and impact, often cited as 12 to 18 months.
Since the bank started cutting 15 months ago, Canada should be just beginning to feel the effects.
Of course, Mr. Carney has invested a lot of credibility in the assertion it will work. He has stuck out his neck by predicting the economy will bounce back like an Indian rubber ball to 3.8 per cent growth next year, a forecast that has a few supporters and many detractors.
Although he doesn't believe the rebound will be as dramatic, Bank of Montreal economist Douglas Porter says there are good reasons to buy into Mr. Carney's rosy assessment, which would make the current slump milder than the recessions of the early 1980s and 1990s.
First, interest rates are much lower now than during the previous downturns. Second, aggressive stimulus policy is kicking in. And lastly, corporate balance sheets were in better shape heading into the current recession as compared to the previous two.
These act as shock absorbers for the economy's hard landing. However, they will be of little use if the world financial system is not fixed.
That's because until global banks have the confidence and wherewithal to start lending again, the U.S. and global economies will continue to struggle. And that will keep prices for commodities that Canada exports low, sap demand for Canadian manufactured goods, and in turn stifle Canadian job creation and incomes.
And that's where Mr. Carney's frustration comes in. He is largely a spectator in a game played outside his borders, able to influence the outcome only at the margins.
Mr. Carney has received some heat for some of his decisions, most notably keeping interest rates unchanged for a full five months from May to October last year in the mistaken belief that financial markets were stabilizing. But given that he's made up for lost time since then, most economists conceded the period of inaction wasn't critical.
"There are some quibbles I might have over what the Bank of Canada or Ottawa have done, but those are just specks of sand on the beach compared to what's hit us from outside this country," says Mr. Porter.
"There are things policy makers here can do to cushion the blow, but the tools at their disposal are only so big and they can only do so much to offset this deep global downturn."
In his January speech, Mr. Carney talked about other measures at his disposal besides rate cuts, no doubt foreshadowing last week's action on corporate bonds. The bank could also follow the Fed example by implementing so-called "quantitative easing" facilities to pump funds into the private sector, or follow Japan's lead by directly buying corporate bonds, or still more exotic intrusions in the money markets.
But Mr. Holt cautions non-traditional initiatives, even if Mr. Carney judged taking on the added risk necessary, would likely not be game-changing in isolation.
The next big round of central bank action should be left to the Fed and perhaps the Bank of England, he said. This could involve printing mounds of money to buy up government treasury bills in order to free up more cash for the private sector economy.
"You can cut rates to near zero, you can stimulate the domestic economy through fiscal policy, but you still need a rebound in the U.S. and European economies," he explains.
"The smart position (for Carney) is to cut rates Tuesday and wait and see what global central banks do elsewhere."
JULIAN BELTRAME Globe and Mail Report on Business The Canadian Press
OTTAWA - Just about now, Bank of Canada governor Mark Carney should be experiencing that sinking, helpless feeling about the economy.
It's not for want of trying to shock the economy back to life.
On Tuesday, the telegenic former Goldman Sachs executive is widely expected to cut short-term interest rates another half-point to bring the central bank's overnight rate to a barely-noticeable 0.5 per cent. For all practical purposes, zero.
That would make it the seventh time Mr. Carney has eased a notch, sometimes several notches, on interest rates since taking charge of the central bank last February. In that time he has also injected $40-billion in cash into the economy through asset swaps with banks, and last week took the unusual step of agreeing to accept corporate bonds as collateral to try and free up credit.
None of it has worked and the economy continues to decline.
One problem Mr. Carney faces is that in the current global credit crunch, financial market interest rates are volatile so there's no assurance Canadian banks will pass along the full Bank of Canada rate cuts by reducing their prime lending rate by the same amount.
The prime is the base used by banks to set rates on consumer and corporate loans, lines of credit and some mortgages. While the prime has dropped in most cases by the same amount as the Bank of Canada rate in the last year or so, other interest rates in the market have been rising and loans have been harder to get as the banks avoid riskier lending during a recession.
A recent survey shows a majority of manufacturers say access to credit is still the major obstacle they face.
"There is clear evidence that very low interest rates are not working to expand economic activity," former Conservative cabinet minister Doug Peters, once also a TD Bank chief economist, wrote in a paper for the Canadian Centre for Policy Alternatives.
"In the current recessionary environment, banks are obviously worried about lending to each other, and of course, are worried about lending to consumers and firms. Interest rates that count, such as inter-bank lending rates, mortgage lending rates, bank commercial lending rates, are all unusually high, especially considering that inflation is also very close to zero."
Even before Mr. Carney's Tuesday move, a new report Monday from Statistics Canada is expected to reveal that the Canadian economy, in Finance Minister Jim Flaherty's blunt words, "fell off the table" in the fourth quarter of 2008.
Private sector economists are predicting a sharp three-to-four per cent contraction in economic activity - severe recessionary territory - but remarkably it could be worse. In fact, Mr. Carney is predicting worse for the first three months of this year with a 4.8-per-cent economic contraction.
In his last public speech in January, Mr. Carney insisted that monetary action taken so far "will work," noting the lengthy lag time between action and impact, often cited as 12 to 18 months.
Since the bank started cutting 15 months ago, Canada should be just beginning to feel the effects.
Of course, Mr. Carney has invested a lot of credibility in the assertion it will work. He has stuck out his neck by predicting the economy will bounce back like an Indian rubber ball to 3.8 per cent growth next year, a forecast that has a few supporters and many detractors.
Although he doesn't believe the rebound will be as dramatic, Bank of Montreal economist Douglas Porter says there are good reasons to buy into Mr. Carney's rosy assessment, which would make the current slump milder than the recessions of the early 1980s and 1990s.
First, interest rates are much lower now than during the previous downturns. Second, aggressive stimulus policy is kicking in. And lastly, corporate balance sheets were in better shape heading into the current recession as compared to the previous two.
These act as shock absorbers for the economy's hard landing. However, they will be of little use if the world financial system is not fixed.
That's because until global banks have the confidence and wherewithal to start lending again, the U.S. and global economies will continue to struggle. And that will keep prices for commodities that Canada exports low, sap demand for Canadian manufactured goods, and in turn stifle Canadian job creation and incomes.
And that's where Mr. Carney's frustration comes in. He is largely a spectator in a game played outside his borders, able to influence the outcome only at the margins.
Mr. Carney has received some heat for some of his decisions, most notably keeping interest rates unchanged for a full five months from May to October last year in the mistaken belief that financial markets were stabilizing. But given that he's made up for lost time since then, most economists conceded the period of inaction wasn't critical.
"There are some quibbles I might have over what the Bank of Canada or Ottawa have done, but those are just specks of sand on the beach compared to what's hit us from outside this country," says Mr. Porter.
"There are things policy makers here can do to cushion the blow, but the tools at their disposal are only so big and they can only do so much to offset this deep global downturn."
In his January speech, Mr. Carney talked about other measures at his disposal besides rate cuts, no doubt foreshadowing last week's action on corporate bonds. The bank could also follow the Fed example by implementing so-called "quantitative easing" facilities to pump funds into the private sector, or follow Japan's lead by directly buying corporate bonds, or still more exotic intrusions in the money markets.
But Mr. Holt cautions non-traditional initiatives, even if Mr. Carney judged taking on the added risk necessary, would likely not be game-changing in isolation.
The next big round of central bank action should be left to the Fed and perhaps the Bank of England, he said. This could involve printing mounds of money to buy up government treasury bills in order to free up more cash for the private sector economy.
"You can cut rates to near zero, you can stimulate the domestic economy through fiscal policy, but you still need a rebound in the U.S. and European economies," he explains.
"The smart position (for Carney) is to cut rates Tuesday and wait and see what global central banks do elsewhere."
Wednesday, January 21, 2009
Realtors call on federal government to stimulate housing mrket
Published January 15, 2009 CREA
The Canadian Real Estate Association is calling on the federal government to include several housing initiatives in the upcoming budget. The association believes the proposals are even more important in today's recessionary times, based on the impact housing has on the overall economy and the reported results of MLS residential sales in 2008.
"Bay Street needs to take a back seat to Main Street in the next federal budget," says the President of The Canadian Real Estate Association, Calvin Lindberg. "The government has already moved to help credit markets and our chartered banks, now it's time to take direct and immediate action to help ordinary Canadians."
Statistics released today by the CREA show that the residential housing market sales volume withdrew in 2008 to levels not seen since 2002. More importantly, the most recent statistics from December 2008 show that sales activity reached its lowest level for the month of December since 2000. Some 434,477 homes traded hands via the MLS systems of real estate boards in Canada in 2008, down 17.1 per cent from the record 523,855 properties sold in 2007.
"We are pleased the Minister of Finance and the government have recognized the need for action by ranking housing as one of the top six issues in its pre-budget consultations," Mr. Lindberg added.
CREA has met with senior government officials and proposed several measures to help stimulate the housing market, both for residential and commercial investors.
For residential homebuyers, CREA proposes the government increase the limit of the Home Buyers Plan (HBP). Introduced in 1992 by a Conservative government and made permanent by a Liberal government in 1994, the HBP has broad political and consumer support.
The HBP allows first time homebuyers to withdraw up to $20,000 from their RRSP to help purchase a residential property, which must be repaid over a period of 15 years.
Unfortunately, the HBP has not kept pace with inflation or home prices. As a result, the HBP does not have the same impact and relevance it did 16 years ago, when $20,000 represented 13.3 per cent of the average house price, versus about 6.5 per cent today.
"The government should immediately raise the HBP limit from $20,000 to $25,000 and it should keep pace with annual inflation. Additionally, it should be available to all home buyers, not just first time buyers," the CREA President added.
To address issues facing the commercial and investment property markets, CREA is seeking amendments to the Income Tax Act to promote increased reinvestment in real property. The CREA proposal calls for the deferral of capital gains taxes and the capital cost allowance recovery for all real property investments when an investment property is sold and the proceeds are re-invested in another real property within the subsequent year.
"Our proposal has benefits across the board for the economy, for rental housing and for the small investor, as well as some significant environmental benefits as old buildings are renovated and made more energy efficient. The budget is the perfect time for this sort of stimulus," Calvin Lindberg added.
Studies show that more than 29 jobs are created for every $1 million invested in property renovation. A study prepared by Altus Clayton for CREA also shows that each residential MLS transaction generated an additional $32,200 in consumer spending. Commercial and investment property transactions can generate even higher levels of economic spinoffs.
Canada Mortgage and Housing Corporation (CMHC) reported that rental construction is not growing fast enough to offset demand. At the same time, the Ontario Housing Supply Working Group has found that tax changes, such as the proposed rollover, "will not only lower the rent threshold at which a new project will be viable...new supply will help reduce demand pressures and...increase the supply of vacant units in existing stock."
CREA's proposed deferral and reinvestment will help the small investor disproportionately. Research based on the 2006 tax year indicates that 58 per cent of those reporting real property gains had net incomes of $50,000 or lower.
CREA's detailed proposal for the Home Buyers Plan is available on www.crea.ca.
CREA's capital gains proposal is also posted on www.crea.ca.
A podcast with CREA President Calvin Lindberg is also available on
www.crea.ca.
The Canadian Real Estate Association is calling on the federal government to include several housing initiatives in the upcoming budget. The association believes the proposals are even more important in today's recessionary times, based on the impact housing has on the overall economy and the reported results of MLS residential sales in 2008.
"Bay Street needs to take a back seat to Main Street in the next federal budget," says the President of The Canadian Real Estate Association, Calvin Lindberg. "The government has already moved to help credit markets and our chartered banks, now it's time to take direct and immediate action to help ordinary Canadians."
Statistics released today by the CREA show that the residential housing market sales volume withdrew in 2008 to levels not seen since 2002. More importantly, the most recent statistics from December 2008 show that sales activity reached its lowest level for the month of December since 2000. Some 434,477 homes traded hands via the MLS systems of real estate boards in Canada in 2008, down 17.1 per cent from the record 523,855 properties sold in 2007.
"We are pleased the Minister of Finance and the government have recognized the need for action by ranking housing as one of the top six issues in its pre-budget consultations," Mr. Lindberg added.
CREA has met with senior government officials and proposed several measures to help stimulate the housing market, both for residential and commercial investors.
For residential homebuyers, CREA proposes the government increase the limit of the Home Buyers Plan (HBP). Introduced in 1992 by a Conservative government and made permanent by a Liberal government in 1994, the HBP has broad political and consumer support.
The HBP allows first time homebuyers to withdraw up to $20,000 from their RRSP to help purchase a residential property, which must be repaid over a period of 15 years.
Unfortunately, the HBP has not kept pace with inflation or home prices. As a result, the HBP does not have the same impact and relevance it did 16 years ago, when $20,000 represented 13.3 per cent of the average house price, versus about 6.5 per cent today.
"The government should immediately raise the HBP limit from $20,000 to $25,000 and it should keep pace with annual inflation. Additionally, it should be available to all home buyers, not just first time buyers," the CREA President added.
To address issues facing the commercial and investment property markets, CREA is seeking amendments to the Income Tax Act to promote increased reinvestment in real property. The CREA proposal calls for the deferral of capital gains taxes and the capital cost allowance recovery for all real property investments when an investment property is sold and the proceeds are re-invested in another real property within the subsequent year.
"Our proposal has benefits across the board for the economy, for rental housing and for the small investor, as well as some significant environmental benefits as old buildings are renovated and made more energy efficient. The budget is the perfect time for this sort of stimulus," Calvin Lindberg added.
Studies show that more than 29 jobs are created for every $1 million invested in property renovation. A study prepared by Altus Clayton for CREA also shows that each residential MLS transaction generated an additional $32,200 in consumer spending. Commercial and investment property transactions can generate even higher levels of economic spinoffs.
Canada Mortgage and Housing Corporation (CMHC) reported that rental construction is not growing fast enough to offset demand. At the same time, the Ontario Housing Supply Working Group has found that tax changes, such as the proposed rollover, "will not only lower the rent threshold at which a new project will be viable...new supply will help reduce demand pressures and...increase the supply of vacant units in existing stock."
CREA's proposed deferral and reinvestment will help the small investor disproportionately. Research based on the 2006 tax year indicates that 58 per cent of those reporting real property gains had net incomes of $50,000 or lower.
CREA's detailed proposal for the Home Buyers Plan is available on www.crea.ca.
CREA's capital gains proposal is also posted on www.crea.ca.
A podcast with CREA President Calvin Lindberg is also available on
www.crea.ca.
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