Thursday, July 1, 2010
HAPPY CANADA DAY !
The Your Mortgage Matters Blog wishes all our readers a healthy and safe Canada Day enjoying a holiday with friends and family.
Wednesday, December 9, 2009
The problem with "alternate" mortgages
Greg McArthur and Jacquie McNish
Globe and Mail Update Published on Sunday, Dec. 06, 2009 8:06PM EST Last updated on Monday, Dec. 07, 2009 7:29PM EST
For the past three years, Lisa Matthews has never missed a mortgage payment
- handing over $292, like clockwork, every week.
But if nothing changes, a bailiff, acting at the request of her mortgage lender, will ring her doorbell and tell Ms. Matthews, her two daughters and her boyfriend to vacate the two-storey house for good.
"This was a pure slap in the face," said Ms. Matthews, a 36-year-old clerk with the City of Hamilton, who was recently told that, despite her perfect payment record, her mortgage will not be renewed at the end of its three-year term.
Ms. Matthews is one of many Canadians being abandoned by a breed of alternative lenders that have stopped lending to customers, who, because of poor credit scores, lower-paying jobs, or minimal home equity, couldn't obtain financing from a traditional lender, such as a bank.
Everyone from the chief executive officer of Ms. Matthews' lender, Xceed Mortgage Corp., to senior officials in Ottawa, agree that borrowers such as Ms. Matthews, who have dutifully paid their mortgage bills, are being unfairly stranded. What they can't agree on is how many Lisa Matthews are out there.
Records obtained under the Access to Information Act show that a lobby group
representing these lenders has warned the federal government that, unless
taxpayers offer help, they will be forced to foreclose on as many as 30,000
homeowners over the next three years.
These "orphaned mortgages," as the industry is calling them, are held by customers who have impeccable payment histories.
But they can't be renewed because the credit crunch has shut off the funding
pipeline of non-bank lenders, the lobby says.
This wave of forced sales and evictions will hit its crest this coming year when nearly half of these mortgages - most of which were issued during the real estate boom of 2007 - will not be renewed, the mortgage companies say.
Executives with alternative mortgage companies say they cannot renew the stranded mortgages because the once-thriving securitization market that attracted investors to these risky - and lucrative - mortgages collapsed in the wake of the U.S. subprime mortgage crisis. To replace the lost pool of capital, lenders are asking the federal government to back a special billion-dollar fund that would renew the healthy mortgages of borrowers who do not qualify for loans from traditional lenders.
Finance Department officials, however, have responded to the lobby group's
alarm bells with caution and questioned their estimates, according to sources close to the negotiations. These sources say Ottawa is frustrated that some of the companies in this small segment of the Canadian mortgage market have been unwilling to hand over data so the problem can be fully assessed, one source said.
"The government thinks this group is asking for help for itself," said the official close to the talks, which bogged down this summer. "Had they been willing to co-operate with the government and provide that information, some sort of program could have been designed. But you can't design a program on anecdotes."
The roots of the problem can be traced back to the housing and lending heyday of half a decade ago, when an assortment of "non-conforming," or subprime mortgage lenders launched operations. Some, such as Xceed and Mississauga-based N-Brook Mortgage Group Inc. had roots in Canada, and others, such as San Diego-based Accredited Home Lenders, migrated from the saturated subprime market in the United States.
Many of these mortgage companies aren't federally regulated so, unlike a bank, they aren't required to insure mortgages when the down payment is equal to less than 20 per cent of the value of the home. And unlike banks, they could - and often did - give loans to people who couldn't afford a down payment. After extra fees were piled on, some of these mortgages added up to as much as 104 per cent of the value of the house being purchased. Interest rates hovered as high as 11 per cent.
Within a few years, this sort of lending started to explode and the new players quickly took hold of 5 per cent of the Canadian market.
But when the financial crisis struck last year, and "subprime" became a dirty word, the pension funds and investment banks that these companies relied upon to fund their mortgages, spurned them. Investors that previously had a ravenous appetite for securities backed by high-risk mortgages were now demanding their money back from companies like Xceed. These investment windows are closing at a time when thousands of mortgages, like Ms. Matthews' loan, are coming due.
Few of the low-income borrowers who were targeted by alternative lenders gave much thought to where their mortgage money was coming from.
"The way we understood it, as long as our mortgage was paid, they would just
renew it. The joke was on me," said Joyce Marentette, a cook in Chatham,
Ont., who was also told last year by Xceed that she would have to find other
financing, when her three-year term came up.
The problem is more acute in depressed areas such as Southwestern Ontario and parts of Alberta, where there are fewer private financiers and property values have sagged, industry insiders say.
Mortgage brokers in Ontario cities such as Windsor, Chatham and St. Thomas say they regularly receive frantic phone calls from homeowners who are shocked to receive a letter explaining that their mortgage won't be renewed.
"We're not talking about a scoundrel that brought it upon himself. These are people that didn't do anything wrong," said Joel Katz, a Windsor mortgage broker. Mr. Katz said he believes the issue isn't on the government's radar because this type of lending accounted for such a small segment of the market compared with the United States. "The problem wasn't as big here, and there are people who are getting stepped on and overlooked."
But exactly how many people are being "stepped on?" Public records in Canada
are so scarce, it's impossible - even for lawmakers - to know for sure.
Ottawa relies on Canada Mortgage and Housing Corp. for data, but because none of these subprime players insured their mortgages through CMHC, the public agency knows very little about their state of their books. One source close to the Finance Department said officials at the Crown corporation figure that stranded borrowers account for only "a tiny sliver" of the country's homeowners.
Paul McGill, president of mortgage provider N-Brook and spokesman for the
mortgage lenders lobby, argues Ottawa is understating the problem. He said he has supplied federal officials with data showing that $1.7-billion of healthy mortgages could be stranded and that these borrowers lack high enough credit scores to qualify for loans from more conservative lenders.
Mr. McGill said federal officials responded by asking mortgage lenders to supply extensive borrower details such as marital status and garage dimensions. Mr. McGill said the requests would have cost too much time and money to fulfill. Lenders have scaled back their proposal to call for a $1-billion Ottawa-backed fund that could renew stranded mortgages. He said Ottawa has not been supportive.
In response to questions, the Finance Department issued a statement saying: "The government is monitoring housing and mortgage markets in order to ensure they remain stable, strong and competitive."
Far away from the push and pull in Ottawa, Ms. Matthews has put her house up
for sale. A handful of prospective buyers has wandered through, but she has
received no offers. A few weeks ago, she received a letter from Xceed's lawyers, explaining that she owes the company nearly $128,000. This means that, despite paying Xceed about $40,000 over the past three years, she now owes $1,000 more than she originally borrowed.
When she opted to buy her first home, she had to get over the hurdle of her low credit score. An unpaid student loan had caught up with her. She had no down payment, and paid a 9.15-per-cent interest rate with Xceed.
"I just thought they were my foot in the door," she said.
Ivan Wahl, Xceed's CEO, said his company has identified 1,100 borrowers that his company will maroon over the next three years. For those people "it is an absolute disaster," he said. Despite his sympathy, he says he is contractually obligated to pay Xceed's investors, which means demanding full payment at renewal time. "The government certainly should step up to the plate to provide some facilities for people who got caught in the crunch."
Ms. Matthews said she doesn't expect the government to do anything for her, and is reserving her frustration for Xceed. She said the companies involved should be giving their customers more warning about their inability to renew. She received a warning letter 31/2 months before her mortgage matured.
"If I knew it was going to end like this, I never would have done it."
Globe and Mail Update Published on Sunday, Dec. 06, 2009 8:06PM EST Last updated on Monday, Dec. 07, 2009 7:29PM EST
For the past three years, Lisa Matthews has never missed a mortgage payment
- handing over $292, like clockwork, every week.
But if nothing changes, a bailiff, acting at the request of her mortgage lender, will ring her doorbell and tell Ms. Matthews, her two daughters and her boyfriend to vacate the two-storey house for good.
"This was a pure slap in the face," said Ms. Matthews, a 36-year-old clerk with the City of Hamilton, who was recently told that, despite her perfect payment record, her mortgage will not be renewed at the end of its three-year term.
Ms. Matthews is one of many Canadians being abandoned by a breed of alternative lenders that have stopped lending to customers, who, because of poor credit scores, lower-paying jobs, or minimal home equity, couldn't obtain financing from a traditional lender, such as a bank.
Everyone from the chief executive officer of Ms. Matthews' lender, Xceed Mortgage Corp., to senior officials in Ottawa, agree that borrowers such as Ms. Matthews, who have dutifully paid their mortgage bills, are being unfairly stranded. What they can't agree on is how many Lisa Matthews are out there.
Records obtained under the Access to Information Act show that a lobby group
representing these lenders has warned the federal government that, unless
taxpayers offer help, they will be forced to foreclose on as many as 30,000
homeowners over the next three years.
These "orphaned mortgages," as the industry is calling them, are held by customers who have impeccable payment histories.
But they can't be renewed because the credit crunch has shut off the funding
pipeline of non-bank lenders, the lobby says.
This wave of forced sales and evictions will hit its crest this coming year when nearly half of these mortgages - most of which were issued during the real estate boom of 2007 - will not be renewed, the mortgage companies say.
Executives with alternative mortgage companies say they cannot renew the stranded mortgages because the once-thriving securitization market that attracted investors to these risky - and lucrative - mortgages collapsed in the wake of the U.S. subprime mortgage crisis. To replace the lost pool of capital, lenders are asking the federal government to back a special billion-dollar fund that would renew the healthy mortgages of borrowers who do not qualify for loans from traditional lenders.
Finance Department officials, however, have responded to the lobby group's
alarm bells with caution and questioned their estimates, according to sources close to the negotiations. These sources say Ottawa is frustrated that some of the companies in this small segment of the Canadian mortgage market have been unwilling to hand over data so the problem can be fully assessed, one source said.
"The government thinks this group is asking for help for itself," said the official close to the talks, which bogged down this summer. "Had they been willing to co-operate with the government and provide that information, some sort of program could have been designed. But you can't design a program on anecdotes."
The roots of the problem can be traced back to the housing and lending heyday of half a decade ago, when an assortment of "non-conforming," or subprime mortgage lenders launched operations. Some, such as Xceed and Mississauga-based N-Brook Mortgage Group Inc. had roots in Canada, and others, such as San Diego-based Accredited Home Lenders, migrated from the saturated subprime market in the United States.
Many of these mortgage companies aren't federally regulated so, unlike a bank, they aren't required to insure mortgages when the down payment is equal to less than 20 per cent of the value of the home. And unlike banks, they could - and often did - give loans to people who couldn't afford a down payment. After extra fees were piled on, some of these mortgages added up to as much as 104 per cent of the value of the house being purchased. Interest rates hovered as high as 11 per cent.
Within a few years, this sort of lending started to explode and the new players quickly took hold of 5 per cent of the Canadian market.
But when the financial crisis struck last year, and "subprime" became a dirty word, the pension funds and investment banks that these companies relied upon to fund their mortgages, spurned them. Investors that previously had a ravenous appetite for securities backed by high-risk mortgages were now demanding their money back from companies like Xceed. These investment windows are closing at a time when thousands of mortgages, like Ms. Matthews' loan, are coming due.
Few of the low-income borrowers who were targeted by alternative lenders gave much thought to where their mortgage money was coming from.
"The way we understood it, as long as our mortgage was paid, they would just
renew it. The joke was on me," said Joyce Marentette, a cook in Chatham,
Ont., who was also told last year by Xceed that she would have to find other
financing, when her three-year term came up.
The problem is more acute in depressed areas such as Southwestern Ontario and parts of Alberta, where there are fewer private financiers and property values have sagged, industry insiders say.
Mortgage brokers in Ontario cities such as Windsor, Chatham and St. Thomas say they regularly receive frantic phone calls from homeowners who are shocked to receive a letter explaining that their mortgage won't be renewed.
"We're not talking about a scoundrel that brought it upon himself. These are people that didn't do anything wrong," said Joel Katz, a Windsor mortgage broker. Mr. Katz said he believes the issue isn't on the government's radar because this type of lending accounted for such a small segment of the market compared with the United States. "The problem wasn't as big here, and there are people who are getting stepped on and overlooked."
But exactly how many people are being "stepped on?" Public records in Canada
are so scarce, it's impossible - even for lawmakers - to know for sure.
Ottawa relies on Canada Mortgage and Housing Corp. for data, but because none of these subprime players insured their mortgages through CMHC, the public agency knows very little about their state of their books. One source close to the Finance Department said officials at the Crown corporation figure that stranded borrowers account for only "a tiny sliver" of the country's homeowners.
Paul McGill, president of mortgage provider N-Brook and spokesman for the
mortgage lenders lobby, argues Ottawa is understating the problem. He said he has supplied federal officials with data showing that $1.7-billion of healthy mortgages could be stranded and that these borrowers lack high enough credit scores to qualify for loans from more conservative lenders.
Mr. McGill said federal officials responded by asking mortgage lenders to supply extensive borrower details such as marital status and garage dimensions. Mr. McGill said the requests would have cost too much time and money to fulfill. Lenders have scaled back their proposal to call for a $1-billion Ottawa-backed fund that could renew stranded mortgages. He said Ottawa has not been supportive.
In response to questions, the Finance Department issued a statement saying: "The government is monitoring housing and mortgage markets in order to ensure they remain stable, strong and competitive."
Far away from the push and pull in Ottawa, Ms. Matthews has put her house up
for sale. A handful of prospective buyers has wandered through, but she has
received no offers. A few weeks ago, she received a letter from Xceed's lawyers, explaining that she owes the company nearly $128,000. This means that, despite paying Xceed about $40,000 over the past three years, she now owes $1,000 more than she originally borrowed.
When she opted to buy her first home, she had to get over the hurdle of her low credit score. An unpaid student loan had caught up with her. She had no down payment, and paid a 9.15-per-cent interest rate with Xceed.
"I just thought they were my foot in the door," she said.
Ivan Wahl, Xceed's CEO, said his company has identified 1,100 borrowers that his company will maroon over the next three years. For those people "it is an absolute disaster," he said. Despite his sympathy, he says he is contractually obligated to pay Xceed's investors, which means demanding full payment at renewal time. "The government certainly should step up to the plate to provide some facilities for people who got caught in the crunch."
Ms. Matthews said she doesn't expect the government to do anything for her, and is reserving her frustration for Xceed. She said the companies involved should be giving their customers more warning about their inability to renew. She received a warning letter 31/2 months before her mortgage matured.
"If I knew it was going to end like this, I never would have done it."
Tuesday, December 8, 2009
Economic recovery is "solidly entrenched": Bank of Canada
Paul Vieira, Financial Post
OTTAWA -- After months of uncertainty, the economic recovery now appears to be "solidly entrenched," the Bank of Canada said Tuesday, indicating its forecast for growth should unfold as envisaged.
Still, in its latest interest rate announcement, the central bank reiterated, as expected, its conditional commitment to keep its key policy rate at a record low 0.25% until June 2010 as inflation is still not expected to hit its preferred 2% target until the second half of 2011.
Recent data - from retail sales to a stunningly strong jobs report for November -- have painted a mostly cheer picture of the Canadian economy, analysts say, even though third-quarter GDP growth of 0.4% annualized came in well below the central bank's 2% expectation.
Since the central bank's latest economic forecast in October, "global economic developments have been slightly more positive and the global outlook has improved modestly," the bank's governing council said in its statement, adding though that "significant fragilities" remain.
The central bank said the composition of economic growth is unfolding as expected, highlighted by a shift toward stronger domestic demand and less reliance on exports.
"The main drivers and the profile of the projected recovery in Canada remain consistent with the bank's [outlook]," it added. "The bank continues to expect economic growth to become more solidly entrenched over the projection period and inflation to return to the 2% target in the second half of 2011."
According to the central bank's outlook, Canada is expected to grow 3.3% this quarter, followed by expansion of 3% next year and 3.3% in 2011. Predictions for strong growth gained steam late last week when data indicated the Canadian economy added 79,000 jobs in November.
Further, the central bank on Tuesday played down the impact of the stronger dollar, even though it acknowledged it remained a key risk to its forecast, and "could act as a significant further drag" on growth and inflation. The stronger loonie, which has advanced as much as 25% this year against its U.S. counterpart, led to a surge in imports in the third quarter - resulting in net exports acting as a drag on the economy of roughly 5.3 percentage points.
Since the last rate announcement, however, the dollar has on average traded a couple of cents below the central bank's working assumption of a US96¢ loonie.
Most analysts were looking for any change in nuance in the bank's statement - in particular a hint or two that it might move before its conditional pledge to keep rates at a record low until June 2010 given the surge in domestic consumption as households take advantage of record low borrowing costs.
Instead, the central bank reiterated that its target rate of 0.25% "can be expected" to remain intact until the end of the second quarter of next year. The pledge is conditional on inflation hitting the 2% target in the third quarter of 2011, as the bank expects.
The last time the bank raised its key policy rate, to 4.5%, was in July of 2007 - and shortly afterward the first signs of the credit crisis emerged.
Some economists, such as Ryan Brecht of Action Economics, expect the central bank to begin hiking its policy rate, and aggressively, starting in the second half of next year.
In a note released Tuesday morning, Mr. Brecht, the firm's senior North American economist, said he envisaged the Bank of Canada raising its target rate by 175 basis points before December of 2010, for a policy rate of 2%, or "more normal levels." Still, that would be below the 3% level in September of 2008, when Lehman Bros. collapsed, or the 4.5% peak hit more than two years ago.
OTTAWA -- After months of uncertainty, the economic recovery now appears to be "solidly entrenched," the Bank of Canada said Tuesday, indicating its forecast for growth should unfold as envisaged.
Still, in its latest interest rate announcement, the central bank reiterated, as expected, its conditional commitment to keep its key policy rate at a record low 0.25% until June 2010 as inflation is still not expected to hit its preferred 2% target until the second half of 2011.
Recent data - from retail sales to a stunningly strong jobs report for November -- have painted a mostly cheer picture of the Canadian economy, analysts say, even though third-quarter GDP growth of 0.4% annualized came in well below the central bank's 2% expectation.
Since the central bank's latest economic forecast in October, "global economic developments have been slightly more positive and the global outlook has improved modestly," the bank's governing council said in its statement, adding though that "significant fragilities" remain.
The central bank said the composition of economic growth is unfolding as expected, highlighted by a shift toward stronger domestic demand and less reliance on exports.
"The main drivers and the profile of the projected recovery in Canada remain consistent with the bank's [outlook]," it added. "The bank continues to expect economic growth to become more solidly entrenched over the projection period and inflation to return to the 2% target in the second half of 2011."
According to the central bank's outlook, Canada is expected to grow 3.3% this quarter, followed by expansion of 3% next year and 3.3% in 2011. Predictions for strong growth gained steam late last week when data indicated the Canadian economy added 79,000 jobs in November.
Further, the central bank on Tuesday played down the impact of the stronger dollar, even though it acknowledged it remained a key risk to its forecast, and "could act as a significant further drag" on growth and inflation. The stronger loonie, which has advanced as much as 25% this year against its U.S. counterpart, led to a surge in imports in the third quarter - resulting in net exports acting as a drag on the economy of roughly 5.3 percentage points.
Since the last rate announcement, however, the dollar has on average traded a couple of cents below the central bank's working assumption of a US96¢ loonie.
Most analysts were looking for any change in nuance in the bank's statement - in particular a hint or two that it might move before its conditional pledge to keep rates at a record low until June 2010 given the surge in domestic consumption as households take advantage of record low borrowing costs.
Instead, the central bank reiterated that its target rate of 0.25% "can be expected" to remain intact until the end of the second quarter of next year. The pledge is conditional on inflation hitting the 2% target in the third quarter of 2011, as the bank expects.
The last time the bank raised its key policy rate, to 4.5%, was in July of 2007 - and shortly afterward the first signs of the credit crisis emerged.
Some economists, such as Ryan Brecht of Action Economics, expect the central bank to begin hiking its policy rate, and aggressively, starting in the second half of next year.
In a note released Tuesday morning, Mr. Brecht, the firm's senior North American economist, said he envisaged the Bank of Canada raising its target rate by 175 basis points before December of 2010, for a policy rate of 2%, or "more normal levels." Still, that would be below the 3% level in September of 2008, when Lehman Bros. collapsed, or the 4.5% peak hit more than two years ago.
Housing Starts Rise in November
Tavia Grant Tuesday, Dec. 08, 2009 8:17AM EST
Housing starts hit their highest level this year in November, more proof that Canada's real-estate market has clawed out of recession.
Starts rose slightly to 158,500 units, on a seasonally adjusted basis, up from 157,400 in October as single-home construction outweighed a drop in multiple home activity, Canada Mortgage and Housing Corp. said Tuesday.
"The improvement in housing starts continued in November," said Bob Dugan, CMHC's chief economist.
The results were slightly less than the 165,000 starts economists had expected. Still, they're running at a much stronger level than in April, when they sunk to the 118,500 mark.
Record low interest rates are fuelling a rebound in Canada's real-estate market, spurring rising prices and a flurry of buying activity. The Bank of Canada will provide its current view of lending rates and the economy today at 9 a.m. Eastern time.
More builders have plans in the works, a report showed yesterday. Building permits jumped 18 per cent in October to the highest value in 13 months, Statistics Canada
said yesterday.
Multiple starts eased in November, CMHC said, to 71,300 units from 72,500 units a month earlier. Single starts rose 3.4 per cent to 69,800 units.
The annual rate of urban starts has risen the most in Quebec, at 10 per cent, followed by Atlantic Canada.
Housing starts hit their highest level this year in November, more proof that Canada's real-estate market has clawed out of recession.
Starts rose slightly to 158,500 units, on a seasonally adjusted basis, up from 157,400 in October as single-home construction outweighed a drop in multiple home activity, Canada Mortgage and Housing Corp. said Tuesday.
"The improvement in housing starts continued in November," said Bob Dugan, CMHC's chief economist.
The results were slightly less than the 165,000 starts economists had expected. Still, they're running at a much stronger level than in April, when they sunk to the 118,500 mark.
Record low interest rates are fuelling a rebound in Canada's real-estate market, spurring rising prices and a flurry of buying activity. The Bank of Canada will provide its current view of lending rates and the economy today at 9 a.m. Eastern time.
More builders have plans in the works, a report showed yesterday. Building permits jumped 18 per cent in October to the highest value in 13 months, Statistics Canada
said yesterday.
Multiple starts eased in November, CMHC said, to 71,300 units from 72,500 units a month earlier. Single starts rose 3.4 per cent to 69,800 units.
The annual rate of urban starts has risen the most in Quebec, at 10 per cent, followed by Atlantic Canada.
Monday, December 7, 2009
Next Bank of Canada Meeting
The Bank of Canada is set to meet tomorrow to have their last meeting of 2009 regarding interest rates.
It is widely held that there will be no movement from the current overnight rate of 0.25% and therefore that the prime rate will also stay at 2.25%.
Stay tuned to The Your Mortgage Matters Blog for all the details tomorrow morning. For a full report on current interest rates, make sure you check with a licensed mortgage broker.
It is widely held that there will be no movement from the current overnight rate of 0.25% and therefore that the prime rate will also stay at 2.25%.
Stay tuned to The Your Mortgage Matters Blog for all the details tomorrow morning. For a full report on current interest rates, make sure you check with a licensed mortgage broker.
Thursday, December 3, 2009
Canadian Homeowners Feeling Bigger Pinch
Garry Marr, Financial Post Published: Wednesday, November 25, 2009
Bidding wars and higher interest costs have lead to the inevitable - a drop in housing affordability for the first time in five quarters, according to a new index produced by the Royal Bank of Canada.
The bank says home ownership costs are up, something that has not happened since the spring of 2008. Despite the increase, costs are still off the peak reached for this housing cycle.
Royal Bank says 45.8% of pre-tax household income was needed to service the cost of owning a standard detached home in the third quarter of this year. That was up 1.2 percentage points from a quarter ago but well off the high of 52.3% hit in the 2008. The all-time high was 57.1%, reached in the second quarter of 1990.
"Home affordability has deteriorated in all provinces and major markets in Canada due to a slight rise in key mortgage rates and appreciation in property values," said Robert Hogue, senior economist with Royal Bank.
Further proof that house prices are on the rise came Wednesday from the Teranet-National Bank National Composite House Price Index which showed September house prices were up 1.3% from the month before, the fifth straight month that prices have risen.
"The vigor is consistent with an improvement in market conditions over 2009 to date - more homes have been selling and fewer have been coming on the market," said Marc Pinsonneault, senior economist with National Bank Financial Group.
Data released this month from the Canadian Real Estate Association, which represents 100 boards across the country, shows the trend of escalating prices is not slowing down. The Ottawa-based group said existing home prices were up 20.7% last month from October, 2008, the largest year over year increase in 20 years.
Those price increases have come as interest rates have also started to rise. Mr. Hogue said the 5.4% posted rate for a five-year closed mortgage, reached in the second quarter, is the lowest since Royal Bank started doing the study in 1985. Rates climbed to 5.73% in the third quarter for a five-year closed mortgage. The posted rate is generally at least one percentage point higher than what consumers can get on a discounted basis.
Prices have also been impacted by a supply shortages across the country. New listings last month in the country's 25 largest markets were off 16% from a year ago. New home construction is on the rise but has not been able to respond fast enough to meet the rising demand.
Phil Soper, chief executive of Royal LePage Real Estate Services, expects the supply side problem to improve in the spring, a traditional time when families consider selling to coincide with the end of the school year.
"It's a much more common time for people to list their homes than this time of year," said Mr. Soper. "I suspect the supply side of this problem will ease considerably."
He's also not that concerned with rising mortgage rates. "That's what I hoped would happen," said the chief executive. "I know policy makers are hoping they can ease their stimulative approach to monetary policy at the same time as consumer confidence and the economy overall start to improve and not cause a sharp negative downturn in housing activity. So far, this is unfolding in not a bad fashion."
gmarr@nationalpost.com
Bidding wars and higher interest costs have lead to the inevitable - a drop in housing affordability for the first time in five quarters, according to a new index produced by the Royal Bank of Canada.
The bank says home ownership costs are up, something that has not happened since the spring of 2008. Despite the increase, costs are still off the peak reached for this housing cycle.
Royal Bank says 45.8% of pre-tax household income was needed to service the cost of owning a standard detached home in the third quarter of this year. That was up 1.2 percentage points from a quarter ago but well off the high of 52.3% hit in the 2008. The all-time high was 57.1%, reached in the second quarter of 1990.
"Home affordability has deteriorated in all provinces and major markets in Canada due to a slight rise in key mortgage rates and appreciation in property values," said Robert Hogue, senior economist with Royal Bank.
Further proof that house prices are on the rise came Wednesday from the Teranet-National Bank National Composite House Price Index which showed September house prices were up 1.3% from the month before, the fifth straight month that prices have risen.
"The vigor is consistent with an improvement in market conditions over 2009 to date - more homes have been selling and fewer have been coming on the market," said Marc Pinsonneault, senior economist with National Bank Financial Group.
Data released this month from the Canadian Real Estate Association, which represents 100 boards across the country, shows the trend of escalating prices is not slowing down. The Ottawa-based group said existing home prices were up 20.7% last month from October, 2008, the largest year over year increase in 20 years.
Those price increases have come as interest rates have also started to rise. Mr. Hogue said the 5.4% posted rate for a five-year closed mortgage, reached in the second quarter, is the lowest since Royal Bank started doing the study in 1985. Rates climbed to 5.73% in the third quarter for a five-year closed mortgage. The posted rate is generally at least one percentage point higher than what consumers can get on a discounted basis.
Prices have also been impacted by a supply shortages across the country. New listings last month in the country's 25 largest markets were off 16% from a year ago. New home construction is on the rise but has not been able to respond fast enough to meet the rising demand.
Phil Soper, chief executive of Royal LePage Real Estate Services, expects the supply side problem to improve in the spring, a traditional time when families consider selling to coincide with the end of the school year.
"It's a much more common time for people to list their homes than this time of year," said Mr. Soper. "I suspect the supply side of this problem will ease considerably."
He's also not that concerned with rising mortgage rates. "That's what I hoped would happen," said the chief executive. "I know policy makers are hoping they can ease their stimulative approach to monetary policy at the same time as consumer confidence and the economy overall start to improve and not cause a sharp negative downturn in housing activity. So far, this is unfolding in not a bad fashion."
gmarr@nationalpost.com
Tuesday, December 1, 2009
Abode Mortgage Holdings Corp Announces Closure
Abode Mortgage Holdings Corp. Announces the Closure of the Company's
Mortgage Origination Business
11/30/2009 10:25:02 AM - Market Wire
VANCOUVER, BRITISH COLUMBIA, Nov 30, 2009 (Marketwire via COMTEX News Network)
Abode Mortgage Holdings Corp (TSX VENTURE:ABD) (the "Company" ) today
announces that the sale of its wholly-owned subsidiary, Abode Mortgage
Corporation (AMC), as described in the Company's November 27, 2009 press
release is no longer proceeding. Further, the interim funding and mortgage
loan purchase arrangements referred to in the release have terminated.
Without an established funding and whole loan purchase arrangement, AMC
cannot properly carry on its business and the Directors of the Company have
decided to cease operations.
In commenting on these developments, the Company's CEO, Mike Linehan, stated: "Management and the staff of AMC are devastated by the decision to cease operations. However, without a committed mortgage funding and whole loan sale partner, the business of AMC is not viable. We wish to thank our loyal industry partners and deeply regret our inability to carry on in business."
About Abode Mortgage Holdings Corp.
Abode Mortgage Holdings Corp. is a public company trading on the TSX Venture
Exchange under the symbol ABD.
SOURCE: Abode Mortgage Holdings Corp.
Abode Mortgage Holdings Corp. Mike Linehan CEO ir@abodecorp.com www.abodecorp.com
Copyright (C) 2009 Marketwire. All rights reserved.
Mortgage Origination Business
11/30/2009 10:25:02 AM - Market Wire
VANCOUVER, BRITISH COLUMBIA, Nov 30, 2009 (Marketwire via COMTEX News Network)
Abode Mortgage Holdings Corp (TSX VENTURE:ABD) (the "Company" ) today
announces that the sale of its wholly-owned subsidiary, Abode Mortgage
Corporation (AMC), as described in the Company's November 27, 2009 press
release is no longer proceeding. Further, the interim funding and mortgage
loan purchase arrangements referred to in the release have terminated.
Without an established funding and whole loan purchase arrangement, AMC
cannot properly carry on its business and the Directors of the Company have
decided to cease operations.
In commenting on these developments, the Company's CEO, Mike Linehan, stated: "Management and the staff of AMC are devastated by the decision to cease operations. However, without a committed mortgage funding and whole loan sale partner, the business of AMC is not viable. We wish to thank our loyal industry partners and deeply regret our inability to carry on in business."
About Abode Mortgage Holdings Corp.
Abode Mortgage Holdings Corp. is a public company trading on the TSX Venture
Exchange under the symbol ABD.
SOURCE: Abode Mortgage Holdings Corp.
Abode Mortgage Holdings Corp. Mike Linehan CEO ir@abodecorp.com www.abodecorp.com
Copyright (C) 2009 Marketwire. All rights reserved.
Monday, November 30, 2009
Lenders panel plays it safe at CAAMP
Tuesday, 24 November 2009
A panel of lenders at CAAMP's annual conference said they believe mortgage brokers' share of the market will continue to grow, but also emphasized the need for greater efficiency and speculated that volume bonuses could be scaled back over time.
"There is increasing penetration of the mortgage broker channel because it takes all the grief of getting a mortgage off a person's shoulders," said Stephen Smith of First National, adding the under 40 generation has created a culture of using mortgage brokers as opposed to their parents' generation who turn to banks.
Among the positive outlook there was also critique. Ivan Wahl of Xceed Mortgage Corporation talked about his company's goal to do 80 per cent of volume with 20 per cent of brokers and speculated there are only a small number of brokers who "do what they say they're going to do." John Webster of Scotia Mortgage Authority said he didn't think lenders needed to be "all things to all people" in response to one of Smith's comments about catering to all brokers, not just the ones who send in lots of deals.
On the topic of lender exclusivity, Boris Bozic of Merix Financial said it appeared lenders were after "the same 750 brokers across the country even though there are 14,000", stating brokers can have trouble gaining direct access to a lender. He also stated volume bonuses have a "shelf life expiry" and warned the industry to prepare for changes.
The panel agreed on a trend toward more screening of brokers (such as Scotia Mortgage Authority's mortgage scorecard) focusing on efficiency ratios, number of delinquencies and deal quality. And although the panel agreed the economic recovery is underway, their optimism was cautious.
"The last half of 2009 was much better than anyone expected," said Webster. "But there is still a lot of uncertainty."
A panel of lenders at CAAMP's annual conference said they believe mortgage brokers' share of the market will continue to grow, but also emphasized the need for greater efficiency and speculated that volume bonuses could be scaled back over time.
"There is increasing penetration of the mortgage broker channel because it takes all the grief of getting a mortgage off a person's shoulders," said Stephen Smith of First National, adding the under 40 generation has created a culture of using mortgage brokers as opposed to their parents' generation who turn to banks.
Among the positive outlook there was also critique. Ivan Wahl of Xceed Mortgage Corporation talked about his company's goal to do 80 per cent of volume with 20 per cent of brokers and speculated there are only a small number of brokers who "do what they say they're going to do." John Webster of Scotia Mortgage Authority said he didn't think lenders needed to be "all things to all people" in response to one of Smith's comments about catering to all brokers, not just the ones who send in lots of deals.
On the topic of lender exclusivity, Boris Bozic of Merix Financial said it appeared lenders were after "the same 750 brokers across the country even though there are 14,000", stating brokers can have trouble gaining direct access to a lender. He also stated volume bonuses have a "shelf life expiry" and warned the industry to prepare for changes.
The panel agreed on a trend toward more screening of brokers (such as Scotia Mortgage Authority's mortgage scorecard) focusing on efficiency ratios, number of delinquencies and deal quality. And although the panel agreed the economic recovery is underway, their optimism was cautious.
"The last half of 2009 was much better than anyone expected," said Webster. "But there is still a lot of uncertainty."
Friday, November 27, 2009
Experts expect mortgage rate rise to be quick
November 24, 2009 5:40 a.m.
Interest rates aren't going up any time soon, but when they do the rise will be rapid, mortgage industry experts say.
Because of this, mortgage lenders and brokers have a responsibility to help homebuyers assess their capacity to make higher monthly payments, and to constantly evaluate their chances for default.
"There should be some prudence and there should be counselling by mortgage brokers to ensure people do leave a little wiggle room," Ivan Wahl, chairman and CEO of Xceed Mortgage Corp., said at an industry conference yesterday.
Wahl praised Canadian regulators for preventing the housing meltdown that has decimated the American economy, but said mortgage lenders have a responsibility to self-regulate.
The Canadian and American housing markets fared very differently during the recession. While the financial crisis in the U.S. was caused in large part by subprime mortgages, strict regulations helped the Canadian economy avoid a similar meltdown.
However, even mortgage lenders weren't expecting the Canadian housing market to fare as well as it has.
"The last half of '09 is better than anybody expected," said John Webster, president and CEO of Scotia Mortgage Corp.
"We were looking at a nuclear winter ... ( for new mortgages), a 30 to 35 per cent drop, and that hasn't happened," agreed Stephen Smith, chairman and president of First National Financial.
Interest rates aren't going up any time soon, but when they do the rise will be rapid, mortgage industry experts say.
Because of this, mortgage lenders and brokers have a responsibility to help homebuyers assess their capacity to make higher monthly payments, and to constantly evaluate their chances for default.
"There should be some prudence and there should be counselling by mortgage brokers to ensure people do leave a little wiggle room," Ivan Wahl, chairman and CEO of Xceed Mortgage Corp., said at an industry conference yesterday.
Wahl praised Canadian regulators for preventing the housing meltdown that has decimated the American economy, but said mortgage lenders have a responsibility to self-regulate.
The Canadian and American housing markets fared very differently during the recession. While the financial crisis in the U.S. was caused in large part by subprime mortgages, strict regulations helped the Canadian economy avoid a similar meltdown.
However, even mortgage lenders weren't expecting the Canadian housing market to fare as well as it has.
"The last half of '09 is better than anybody expected," said John Webster, president and CEO of Scotia Mortgage Corp.
"We were looking at a nuclear winter ... ( for new mortgages), a 30 to 35 per cent drop, and that hasn't happened," agreed Stephen Smith, chairman and president of First National Financial.
Thursday, November 26, 2009
When to give out your S.I.N.
Follow the link to this great article on when to give our your social insurance number and why.
Tuesday, November 24, 2009
Experts agree mortgage rates to rise in 2010
Here's a link to a great article you might want to consider as we head into 2010.
As always, we recommend you check with a licensed mortgage broker to take the stress and hassle out of mortgage negotiations.
As always, we recommend you check with a licensed mortgage broker to take the stress and hassle out of mortgage negotiations.
Wednesday, November 18, 2009
Rapid rebound Fuels Fears of Housing Bubble
Garry Marr, Financial Post
Canadian existing home prices are now rising at a pace not seen in 20 years, fueling talk that a bubble may be forming in the market.
The average price of a home sold last month was $341,079, a 20.7% increase from a year ago, the Ottawa-based Canadian Real Estate Association said Monday. Sales also continued to climb with 42,288 units trading hands, a 41% jump from October, 2008.
At the same time that demand continues to surge and interest rates remain at historic lows, supply remains critically low. New listings last month in the country's 25 largest market were off 16% from a year ago.
"I don't think it's a bubble yet," said Doug Porter, an economist with Bank of Montreal. "The rapid-fire rebound in Canadian housing is showing no sign of letting up. While that may be causing some sweaty palms among bubble-phobes, the quick turn is a vivid illustration that monetary policy still works in this country."
Mr. Porter says large markets are skewing average prices, creating a national picture that might seem more buoyant than it is in reality. Toronto, the largest market in the country, saw a 20% increase in price last month from year ago. In Vancouver, the most expensive market in the country, sales were up 170.8% from a year ago.
"There is a little bit of magic in the way they put these numbers together," said Mr. Porter.
Derek Holt, senior vice-president of economics at Scotia Capital, called what's happening in the marketplace today a once in a lifetime situation. He says record low interest rates, tight supply, a favourable lending environment and government stimulus program have all helped stir the housing pot.
"It's more the medium term, two three years, where we could get into headaches potentially," said Mr. Holt. questioning whether consumers buying today are ready for interest rates that could be three to four percentage points higher by 2011.
Real estate author Garth Turner said the latest figures prove his thesis that Canada is now in a real estate bubble. "We got this type of growth in sales and prices in the middle of a recession. The latest GDP numbers show the economy actually contracted," says Mr. Turner.
A new study from the Canadian Association of Accredited Mortgage Professionals released yesterday shows Canadians are benefitting from the lower interest rates. The average mortgage rate negotiated in the past year was 4.55%, a decline from 5.41% a year ago.
"Clearly people are thinking the worst is behind us and that comes as we have record low rates," said Jim Murphy, president of CAAMP. "If rates were to spike dramatically, there could be some concern but we just don't see that."
Gregory Klump, chief economist with CREA said while the latest numbers appear dramatic they have to be kept in context. "Activity in the early part of 2009 had fallen to a decade low. With improvement in consumer confidence and interest rates, sales activity was expected to respond.," he said.
Mr. Klump suggested prices will ease up as seller's start to take advantage of higher prices. However, CREA is now predicting prices will rise 4.2% this year after suggesting they would only increase by 1.5%.
Michael Polzler, executive vice president of Re/Max Ontario-Atlantic Canada Inc., said he's been expecting these type of price increases. "Last year at this time, everything just stopped. They were very realistic example of where everything was it," he said. "Now we are just back to kind of normal. You are going to see these type of numbers continues into the spring because we are comparing them to last year."
Canadian existing home prices are now rising at a pace not seen in 20 years, fueling talk that a bubble may be forming in the market.
The average price of a home sold last month was $341,079, a 20.7% increase from a year ago, the Ottawa-based Canadian Real Estate Association said Monday. Sales also continued to climb with 42,288 units trading hands, a 41% jump from October, 2008.
At the same time that demand continues to surge and interest rates remain at historic lows, supply remains critically low. New listings last month in the country's 25 largest market were off 16% from a year ago.
"I don't think it's a bubble yet," said Doug Porter, an economist with Bank of Montreal. "The rapid-fire rebound in Canadian housing is showing no sign of letting up. While that may be causing some sweaty palms among bubble-phobes, the quick turn is a vivid illustration that monetary policy still works in this country."
Mr. Porter says large markets are skewing average prices, creating a national picture that might seem more buoyant than it is in reality. Toronto, the largest market in the country, saw a 20% increase in price last month from year ago. In Vancouver, the most expensive market in the country, sales were up 170.8% from a year ago.
"There is a little bit of magic in the way they put these numbers together," said Mr. Porter.
Derek Holt, senior vice-president of economics at Scotia Capital, called what's happening in the marketplace today a once in a lifetime situation. He says record low interest rates, tight supply, a favourable lending environment and government stimulus program have all helped stir the housing pot.
"It's more the medium term, two three years, where we could get into headaches potentially," said Mr. Holt. questioning whether consumers buying today are ready for interest rates that could be three to four percentage points higher by 2011.
Real estate author Garth Turner said the latest figures prove his thesis that Canada is now in a real estate bubble. "We got this type of growth in sales and prices in the middle of a recession. The latest GDP numbers show the economy actually contracted," says Mr. Turner.
A new study from the Canadian Association of Accredited Mortgage Professionals released yesterday shows Canadians are benefitting from the lower interest rates. The average mortgage rate negotiated in the past year was 4.55%, a decline from 5.41% a year ago.
"Clearly people are thinking the worst is behind us and that comes as we have record low rates," said Jim Murphy, president of CAAMP. "If rates were to spike dramatically, there could be some concern but we just don't see that."
Gregory Klump, chief economist with CREA said while the latest numbers appear dramatic they have to be kept in context. "Activity in the early part of 2009 had fallen to a decade low. With improvement in consumer confidence and interest rates, sales activity was expected to respond.," he said.
Mr. Klump suggested prices will ease up as seller's start to take advantage of higher prices. However, CREA is now predicting prices will rise 4.2% this year after suggesting they would only increase by 1.5%.
Michael Polzler, executive vice president of Re/Max Ontario-Atlantic Canada Inc., said he's been expecting these type of price increases. "Last year at this time, everything just stopped. They were very realistic example of where everything was it," he said. "Now we are just back to kind of normal. You are going to see these type of numbers continues into the spring because we are comparing them to last year."
Sunday, November 1, 2009
Turn Back Time
Welcome to November ... a reminder to set your clocks back one hour today and change the batteries in your smoke detectors and other gas detectors around the house.
Saturday, October 31, 2009
Happy Halowe'en
Just a quick note to say Happy Hallowe'en everyone ... hope you have a safe & happy evening shelling out to the ghosts and goblins.
Wednesday, October 28, 2009
The recession may be officially over, but recovery is fragile and job losses still mounting
Tom Raum, THE ASSOCIATED PRESS
The Canadian Press, 2009
WASHINGTON - It is about to become official: The U.S. recession is over - but not the pain.
The government will release figures this week expected to show that the economy has awakened from its deepest slump since the 1930s and is in the early stages of a recovery. But the following week, the government will issue another set of figures expected to show unemployment continuing to rise toward and possibly above a clearly recessionary 10 per cent.
How can both be possible?
The government releases third-quarter Gross Domestic Product figures on Thursday. Many forecasters say they will show GDP growing at an annual rate of about 3 per cent, validating a widely held belief among economists that the recession ended in June or July.
But try telling that to the more than 15 million still unemployed, the small businesses and individuals who can't get loans and the people whose homes are worth less than their mortgages.
Assertions by government and private economists that the recession is over - issued amid graphic examples of continuing wide distress - are raising fresh questions about economic scorekeeping.
The national recession may be technically over, but the state of the economy remains in the eyes of the beholder.
Or, as Ronald Reagan liked to say, a recession is when your neighbour loses his or her job. Depression is when you lose yours.
A survey of economic forecasters prepared by Blue Chip Economic Indicators, a research organization, predicted GDP growth to remain positive in each quarter through the end of 2010. In a survey by the National Association of Business Economics, 34 of 43 economists polled said the recession is over.
"From a technical perspective, the recession is very likely over," said Federal Reserve Chairman Ben Bernanke.
"A recession that showed no signs of ending last January appears to be firmly entering the recovery phase," said Christina Romer, the chair of the White House Council of Economic Advisers.
But nobody is sugar coating the statistics, especially in the administration, which agrees with private surveys suggesting that unemployment will hover near 10 per cent through most of next year.
"Even when you've turned the corner, you have so much work to do," Romer told Congress' Joint Economics Committee.
And while she credited much of the turnabout to government stimulus measures and moves by the Fed, she said "by mid-2010, fiscal stimulus will be contributing little to further growth."
Even ahead of the report expected to show an increase in economic growth, The Conference Board, a private Chicago-based research group, reported Tuesday that consumers' confidence about the U.S. economy fell unexpectedly in October as job prospects remained bleak.
That fueled speculation that an already gloomy holiday shopping forecast could worsen. Consumer spending accounts for more than two-thirds of the entire economy.
The economy has lost 7.2 million jobs since the recession began in December 2007, 3.4 million of them since President Barack Obama took office in January.
James K. Galbraith, an economist at the University of Texas at Austin, suggests too much attention is given to when recessions technically begin and not enough to other measures of the economy.
"It's just a word. A recession technically lasts during negative quarters. But that doesn't mean you're back to prosperity once you have positive growth. You're back to prosperity when the unemployment rate is back around 4 per cent," Galbraith said. And that, he said, could take years.
A recession is popularly defined as two or more consecutive quarters of negative economic growth, or declining output.
But a more refined determination is made by the National Bureau of Economic Research, a private group of leading economists charged with dating the start and end of economic downturns. It not only looks at GDP but at employment levels, real personal income, industrial production and wholesale
and retail sales.
It put the start date at December 2007 and has not yet called an end.
There have been 11 recessions since World War II. In the two most recent ones, job growth lagged long after the recessions were deemed over. In the most recent two - July 1990-March 1991 and March-November 2001 - the unemployment rate did not fall to prerecession levels for several years.
After the eight-month 2001 recession, the unemployment rate went from a prerecession 4 per cent in 2000 to 4.8 per cent in 2001. Then it kept climbing even higher - to 5.8 per cent in 2002 to 6 per cent in 2003. It didn't return to under 5 per cent until 2006, when it fell to 4.6 per cent.
While there are clear signs of recovery, it is uneven.
Stocks have surged about 50 per cent since their March lows. And a year after Washington rescued the financial industry, some large banks and Wall Street firms have roared back to profitability.
But smaller banks and other businesses are struggling, and many have failed or are failing.
That disconnect sparked anger among the public and led to sweeping government action last week to limit executive compensation at financial firms that accepted federal bailout money.
"While credit may be more available for large businesses, too many small business owners are still struggling to get the credit they need," Obama said in his weekly radio and Internet address. "These are the very taxpayers who stood by America's banks in a crisis - and now it's time for our banks
to stand by creditworthy small businesses, and make the loans they need to open their doors, grow their operations and create new jobs."
There have been modest improvements in manufacturing and other parts of the nonfinancial business sector, yet lingering signs of weakness in commercial real estate and retail spending.
Economists suggest some of the expected increase in economic growth is a bounce off the bottom. They attribute it to government stimulus spending, including the now-expired Cash for Clunkers program; accommodative Fed monetary policies and widespread cost-cutting by companies.
Many companies let inventories run down so much that when they ran out, orders picked up. Home resales ticked up as buyers scrambled to complete their purchases before a tax credit for first-time owners expires. And U.S. exporters have benefited from a relentless decline of the dollar that has
made U.S. goods cheaper and more competitive overseas.
But none of this adds up to a sustainable upswing.
"Absent robust job growth, it is not a true economic recovery," said White House economic adviser Jared Bernstein.
The Canadian Press, 2009
WASHINGTON - It is about to become official: The U.S. recession is over - but not the pain.
The government will release figures this week expected to show that the economy has awakened from its deepest slump since the 1930s and is in the early stages of a recovery. But the following week, the government will issue another set of figures expected to show unemployment continuing to rise toward and possibly above a clearly recessionary 10 per cent.
How can both be possible?
The government releases third-quarter Gross Domestic Product figures on Thursday. Many forecasters say they will show GDP growing at an annual rate of about 3 per cent, validating a widely held belief among economists that the recession ended in June or July.
But try telling that to the more than 15 million still unemployed, the small businesses and individuals who can't get loans and the people whose homes are worth less than their mortgages.
Assertions by government and private economists that the recession is over - issued amid graphic examples of continuing wide distress - are raising fresh questions about economic scorekeeping.
The national recession may be technically over, but the state of the economy remains in the eyes of the beholder.
Or, as Ronald Reagan liked to say, a recession is when your neighbour loses his or her job. Depression is when you lose yours.
A survey of economic forecasters prepared by Blue Chip Economic Indicators, a research organization, predicted GDP growth to remain positive in each quarter through the end of 2010. In a survey by the National Association of Business Economics, 34 of 43 economists polled said the recession is over.
"From a technical perspective, the recession is very likely over," said Federal Reserve Chairman Ben Bernanke.
"A recession that showed no signs of ending last January appears to be firmly entering the recovery phase," said Christina Romer, the chair of the White House Council of Economic Advisers.
But nobody is sugar coating the statistics, especially in the administration, which agrees with private surveys suggesting that unemployment will hover near 10 per cent through most of next year.
"Even when you've turned the corner, you have so much work to do," Romer told Congress' Joint Economics Committee.
And while she credited much of the turnabout to government stimulus measures and moves by the Fed, she said "by mid-2010, fiscal stimulus will be contributing little to further growth."
Even ahead of the report expected to show an increase in economic growth, The Conference Board, a private Chicago-based research group, reported Tuesday that consumers' confidence about the U.S. economy fell unexpectedly in October as job prospects remained bleak.
That fueled speculation that an already gloomy holiday shopping forecast could worsen. Consumer spending accounts for more than two-thirds of the entire economy.
The economy has lost 7.2 million jobs since the recession began in December 2007, 3.4 million of them since President Barack Obama took office in January.
James K. Galbraith, an economist at the University of Texas at Austin, suggests too much attention is given to when recessions technically begin and not enough to other measures of the economy.
"It's just a word. A recession technically lasts during negative quarters. But that doesn't mean you're back to prosperity once you have positive growth. You're back to prosperity when the unemployment rate is back around 4 per cent," Galbraith said. And that, he said, could take years.
A recession is popularly defined as two or more consecutive quarters of negative economic growth, or declining output.
But a more refined determination is made by the National Bureau of Economic Research, a private group of leading economists charged with dating the start and end of economic downturns. It not only looks at GDP but at employment levels, real personal income, industrial production and wholesale
and retail sales.
It put the start date at December 2007 and has not yet called an end.
There have been 11 recessions since World War II. In the two most recent ones, job growth lagged long after the recessions were deemed over. In the most recent two - July 1990-March 1991 and March-November 2001 - the unemployment rate did not fall to prerecession levels for several years.
After the eight-month 2001 recession, the unemployment rate went from a prerecession 4 per cent in 2000 to 4.8 per cent in 2001. Then it kept climbing even higher - to 5.8 per cent in 2002 to 6 per cent in 2003. It didn't return to under 5 per cent until 2006, when it fell to 4.6 per cent.
While there are clear signs of recovery, it is uneven.
Stocks have surged about 50 per cent since their March lows. And a year after Washington rescued the financial industry, some large banks and Wall Street firms have roared back to profitability.
But smaller banks and other businesses are struggling, and many have failed or are failing.
That disconnect sparked anger among the public and led to sweeping government action last week to limit executive compensation at financial firms that accepted federal bailout money.
"While credit may be more available for large businesses, too many small business owners are still struggling to get the credit they need," Obama said in his weekly radio and Internet address. "These are the very taxpayers who stood by America's banks in a crisis - and now it's time for our banks
to stand by creditworthy small businesses, and make the loans they need to open their doors, grow their operations and create new jobs."
There have been modest improvements in manufacturing and other parts of the nonfinancial business sector, yet lingering signs of weakness in commercial real estate and retail spending.
Economists suggest some of the expected increase in economic growth is a bounce off the bottom. They attribute it to government stimulus spending, including the now-expired Cash for Clunkers program; accommodative Fed monetary policies and widespread cost-cutting by companies.
Many companies let inventories run down so much that when they ran out, orders picked up. Home resales ticked up as buyers scrambled to complete their purchases before a tax credit for first-time owners expires. And U.S. exporters have benefited from a relentless decline of the dollar that has
made U.S. goods cheaper and more competitive overseas.
But none of this adds up to a sustainable upswing.
"Absent robust job growth, it is not a true economic recovery," said White House economic adviser Jared Bernstein.
Monday, October 26, 2009
Study Says Variable Rate Mortgages Better Deal for Borrowers Most Times
The Canadian Press
TORONTO - Fixed mortgage rates may help you feel secure in your budgeting, but the Bank of Montreal (TSX:BMO) says the more volatile variable rate mortgages will save you money in the long run.
The bank put out a report Friday showing that, over the past 30 years, variable-rate mortgages have been more cost-effective about 82 per cent of the time.
That may come as a surprise to some after studies have shown many Canadians prefer a fixed-rate mortgage.
A fixed rate locks the borrower into a set interest rate for a certain period of time.
That gives many borrowers peace of mind knowing how much money to set aside each month for their mortgage payment.
Variable rates change along with interest-rate moves.
BMO said the Bank of Canada's overnight lending rate is at its lowest possible point now, which could mean there are fewer benefits to a variable rate in the foreseeable future.
BMO highlighted two historical periods when fixed rates were considered beneficial - in the late 1970s and late 1980s - and both were just before interest rates started rising again.
The bank added that the current interest environment is similar to both of these periods.
"Short-term rates are at extreme lows and pressure is likely to build for higher rates in the year ahead," said deputy chief economist Doug Porter in the report.
"The question of whether to lock in to a longer-term fixed mortgage rate or stay in a variable rate has become an increasingly complex and important issue."
Canada has been in a long-term declining rate environment since the early 1980s, the bank suggested.
As a result, the spread between five-year fixed mortgages and variable mortgages has been pushed wider in recent years, and is now near an all-time high.
Editor's note: For all your mortgage options explained in plain english, we suggest you contact a licensed mortgage broker.
TORONTO - Fixed mortgage rates may help you feel secure in your budgeting, but the Bank of Montreal (TSX:BMO) says the more volatile variable rate mortgages will save you money in the long run.
The bank put out a report Friday showing that, over the past 30 years, variable-rate mortgages have been more cost-effective about 82 per cent of the time.
That may come as a surprise to some after studies have shown many Canadians prefer a fixed-rate mortgage.
A fixed rate locks the borrower into a set interest rate for a certain period of time.
That gives many borrowers peace of mind knowing how much money to set aside each month for their mortgage payment.
Variable rates change along with interest-rate moves.
BMO said the Bank of Canada's overnight lending rate is at its lowest possible point now, which could mean there are fewer benefits to a variable rate in the foreseeable future.
BMO highlighted two historical periods when fixed rates were considered beneficial - in the late 1970s and late 1980s - and both were just before interest rates started rising again.
The bank added that the current interest environment is similar to both of these periods.
"Short-term rates are at extreme lows and pressure is likely to build for higher rates in the year ahead," said deputy chief economist Doug Porter in the report.
"The question of whether to lock in to a longer-term fixed mortgage rate or stay in a variable rate has become an increasingly complex and important issue."
Canada has been in a long-term declining rate environment since the early 1980s, the bank suggested.
As a result, the spread between five-year fixed mortgages and variable mortgages has been pushed wider in recent years, and is now near an all-time high.
Editor's note: For all your mortgage options explained in plain english, we suggest you contact a licensed mortgage broker.
Thursday, October 22, 2009
Is CMHC and the Government's low rate policy a recipe for disaster or just under appreciated?
An interesting opinion piece today in the National Post. Please click the link and have a read.
It seems you could take this news one of two different ways. Either that we are headed down the road to ruin due to poorly thought out policy decisions or that there's no better time to buy a home since it seems you'll be guaranteed an approval by the insurance agency.
You make the call. We look forward to your comments.
Here's the link: http://www.financialpost.com/opinion/story.html?id=734ff73e-1f8c-4bfd-b3de-5e468913e8be
It seems you could take this news one of two different ways. Either that we are headed down the road to ruin due to poorly thought out policy decisions or that there's no better time to buy a home since it seems you'll be guaranteed an approval by the insurance agency.
You make the call. We look forward to your comments.
Here's the link: http://www.financialpost.com/opinion/story.html?id=734ff73e-1f8c-4bfd-b3de-5e468913e8be
Tuesday, October 20, 2009
No Change in Bank of Canada Key Rate
As we anticipated, Bank of Canada Governor Carney announced he is leaving the Bank's overnight lending rate unchanged at 0.25% and therefore no changes are expected in the bank prime rate from the current 2.25%.
With inflationary pressures at bay, the Bank is managing to keep their conditional promise to hold rates where they are until the end of the 2nd quarter of 2010.
The high flying Canadian Dollar is expected to dampen positive economic gains experienced since July of this year and the Bank Of Canada now expects that it will reach its inflation target of 2% in the 3rd quarter of 2011 which is one quarter later than earlier forecast.
Canadian bond rates fell after the announcement as traders began backing off from earlier rate hike anticipation and the Canadian dollar was backing off as well in trading earlier today.
With inflationary pressures at bay, the Bank is managing to keep their conditional promise to hold rates where they are until the end of the 2nd quarter of 2010.
The high flying Canadian Dollar is expected to dampen positive economic gains experienced since July of this year and the Bank Of Canada now expects that it will reach its inflation target of 2% in the 3rd quarter of 2011 which is one quarter later than earlier forecast.
Canadian bond rates fell after the announcement as traders began backing off from earlier rate hike anticipation and the Canadian dollar was backing off as well in trading earlier today.
Tuesday, October 13, 2009
Fixed interest rates on the rise
Mortgage rates are on the rise today at most lenders ... the balance will no doubt follow suit in a day or so.
The discounted rates under 4.00% for all terms are still available (O.A.C.) for a limited period of time so get in touch with a licensed mortgage broker and protect yourself from rising rates for the next 120 days.
120 day rate protection covers you from now until mid February 2010 so anyone with a mortgage maturing between now and then should be getting off the fence and acting now. Any purchase transaction with a closing date between now and then should make sure that the financing has been arranged. There is no model to suggest where rates will go over the next while but if you can get a 3.79% 5 year closed mortgage rate today, why take the chance and wait til tomorrow to make your application through a licensed mortgage broker?
The discounted rates under 4.00% for all terms are still available (O.A.C.) for a limited period of time so get in touch with a licensed mortgage broker and protect yourself from rising rates for the next 120 days.
120 day rate protection covers you from now until mid February 2010 so anyone with a mortgage maturing between now and then should be getting off the fence and acting now. Any purchase transaction with a closing date between now and then should make sure that the financing has been arranged. There is no model to suggest where rates will go over the next while but if you can get a 3.79% 5 year closed mortgage rate today, why take the chance and wait til tomorrow to make your application through a licensed mortgage broker?
Time to find an organizing solution?
Organizing Solutions understands that your home is an important part of your
life and that how you live and feel in it has a huge impact on your day to
day activities.
If you are living with too much "stuff" and are overwhelmed
with what to do and where to start, Organizing Solutions can help.
Professional Organizer and Owner Jenny McKee can offer ideas or give you
hands on help to set up systems in your home and make things more efficient
and easier to manage. Clear out the clutter that is weighing you down and
take back the space lost from disorganization.
Give her a call, all you have to lose is the clutter! (905)697-7006
life and that how you live and feel in it has a huge impact on your day to
day activities.
If you are living with too much "stuff" and are overwhelmed
with what to do and where to start, Organizing Solutions can help.
Professional Organizer and Owner Jenny McKee can offer ideas or give you
hands on help to set up systems in your home and make things more efficient
and easier to manage. Clear out the clutter that is weighing you down and
take back the space lost from disorganization.
Give her a call, all you have to lose is the clutter! (905)697-7006
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