Bank of Canada Maintains Interest Rate

October 28th, 2009 No comments

OTTAWA, Ontario, October 20, 2009 — The Bank of Canada held its benchmark overnight lending rate steady at 0.25 per cent at its setting on October 20th, 2009. The trend-setting Bank rate, which is set 0.25 percentage points above the overnight lending rate, remains at 0.5 per cent.

The Bank acknowledged that recent indicators point to the start of a global recovery, and that economic and financial developments have turned more favourable than it had previously expected.

In its September announcement to hold interest rates steady, the Bank forecast that inflation would return to its two per cent target in the second quarter of 2011. The Bank has now moved that date out to the third quarter of 2011.

The Bank’s commitment to keep interest rates on hold until the second half of next year is conditional on the outlook for inflation. Since inflation is not expected to pick up sooner than it previously expected, the Bank repeated its commitment to keep interest rates on hold. “Conditional on the outlook for inflation, the target overnight rate can be expected to remain at its current level until the end of the second quarter of 2010 in order to achieve the inflation target.”

The Bank pointed to the rapid rise in the Canadian dollar in recent weeks as a risk to the Canadian economic recovery, saying “Heightened volatility and persistent strength in the Canadian dollar are working to slow growth and subdue inflation pressures.” The Bank now expects that the domestic economy will be a greater source for economic growth, at the expense of weaker net exports.

“The Bank threw cold water on recent speculation that it may raise interest sooner rather than later,” said CREA Chief Economist Gregory Klump. “By highlighting the recent rapid rise in the Canadian dollar while intentionally failing to mention the rebound in the Canadian housing market as sources for concern, the Bank aimed to end recent speculation that it will hike rates before its repeated pledge of not doing so until at least July 2010.”

As of October 20th, the advertised five-year conventional mortgage rate stood at 5.84 per cent. This is down 1.36 per cent from one year earlier, but stands 0.35 per cent above where it stood when the Bank made its previous interest rate announcement on September 10th.

Improving credit market conditions have enabled lenders to reintroduce discounts off posted mortgage interest rates. Discounts of up to a percentage point can be negotiated, depending on lender-broker relationship.

News source: The Canadian Real Estate Association (CREA)

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‘Defying Gravity’; Household Credit Is Rising At The Fastest Rate Seen In Any Post-War Recession.

October 13th, 2009 No comments

Household credit is “defying gravity,” growing at the fastest pace of any recession since the Second World War when adjusted for inflation, a new report from CIBC World Markets shows.

A booming real-estate market that has sent outstanding mortgages surging 7.8% year-over-year in August is the primary driver, accounting for almost 70% of the 7% increase in overall household credit, said Benjamin Tal, senior economist at CIBC World Markets.

That is in stark contrast to the 1991 and 2001 slumps, when mortgage growth ground to a halt on an inflation-adjusted basis, the report notes.

“During a recession, usually mortgage markets go down, but this time it hasn’t and the reason is affordability, driven by low interest rates,” Mr. Tal said. “The Bank of Canada cut interest rates to stimulate the economy, and it’s working.”
Debt interest payments as a share of disposable income at 7.7% are also at their lowest point since 2006. In the 1991 recession, this ratio was more than 10%.
Craig Alexander, deputy chief economist with TD Economics, said a major part of the real-estate boom comes from pent-up demand as nervous Canadians started to realize this spring that the recession was not as bad as once feared.
“People were [also] responding to mortgage rates that are too good to last, so it’s stealing some of the 2010 sales,” he said. About half of that trend has already been absorbed, he said.

“Canada is in a unique situation where we are in the best position to provide credit and Canadians are in the best position to accept that credit,” Mr. Tal said. “It’s almost a crime not to take advantage of it. But we have to do it in a responsible way.”

Neither Mr. Tal nor Mr. Alexander see the current pace of growth in real estate continuing because the Bank of Canada will step in and raise interest rates if the real-estate market runs out of control.

 

Source: Eric Lam 07/10/2009 National Post

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Does a Home Equity Line of Credit Make Sense for You?

September 29th, 2009 No comments

Many homeowners are utilizing the equity they’ve accumulated in their homes to tap into Home Equity Loans or Home Equity Lines of Credit, sometimes referred to as a HELOC. You can use the equity in your home for many different reasons, to name a few:

• With the Home Renovation Tax Credit and the Eco-Energy Rebates, now would be a good time to make those renovations you’ve been thinking about! You would also be adding to your homes’ value, an all around win-win situation

 • If you’ve been feeling the pinch financially and are not feeling completely secure, now would be a good time to come up with a debt consolidation plan. The lower interest rates from the LOC makes payments manageable.

 • If you feel your business could use a little boost now that the economy is starting to recover, and you want to be ready, consider the benefits of the LOC; with it’s flexible terms, you can pay it off quickly when your business is back on sound footing.

 • If you’re generally good with money, a HELOC can provide a place to go for emergency funds from time to time, especially if you know you’re going to be diligent in paying it back.

Home equity is the difference between the current appraised value of your home and the amount you have paid on the first mortgage.

In these days of low interest rates, it doesn’t make sense to be paying credit card or unsecured line of credit charges. Please call Verico Designer Mortgages Inc to find out about the equity in your home and the options available to you.

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Housing Starts Increase in August

September 28th, 2009 No comments

According to the latest article from CMHC, housing starts have picked up the pace and are re-growing.

The seasonally adjusted annual rate of housing starts increased to 150,400 units in August from 134,200 units in July, according to Canada Mortgage and Housing Corporation (CMHC).

“Housing starts are trending higher, reflecting improvements in both the single and multiple segments,” said Bob Dugan, Chief Economist at CMHC’s Market Analysis Centre. “The improvement in housing starts is consistent with our expectation of a stronger second half for 2009.”

The seasonally adjusted annual rate of urban starts increased by 14.0 percent to in August. Urban multiple starts increased by 23.8 percent, while urban single starts moved up 2.5 percent units in August.

August’s seasonally adjusted annual rate of urban starts increased by 13.8 per cent in Ontario.

As Canada’s national housing agency, CMHC draws on more than 60 years of experience to help Canadians access a variety of quality, environmentally sustainable and affordable homes. CMHC also provides reliable, impartial and up-to-date housing market reports, analysis and knowledge to support and assist consumers and the housing industry in making vital decisions.

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Categories: Mortgages Tags: ,

Hamilton Rental Properties, a Good Investment?

September 28th, 2009 No comments

Vacancy rates have declined in the past year, proving good sustainability and growth in the Hamilton area.

 

Bachelor

1 Bedroom

2 bedroom

3 bedroom +

Total

 

April 08- April 09

April 08- April 09

April 08- April 09

April 08- April 09

April 08- April 09

Hamilton

8.3% – 7.1%

4.0% – 3.6%

5.1% – 3.4%

4.1% – 2.7%

4.7% – 3.6%

 

 

In 2009, the vacancy rate in Hamilton is expected to edge lower to 3.0%

Demand for rental accommodation typically comes from youth households and other households who are not planning to own a home or have not yet saved enough for a down payment. Thus, it is important to take a look at the employment market by specific age groups and types of employment. Given that there are a number of post-secondary institutions in Hamilton, it is reasonable to expect that some of these young students who rent would also hold a part time job to supplement their living expenses. This year, part-time jobs among youth aged 15 to 24 increased 2.4 per cent.

At the same time, the labour force for this age group remained relatively unchanged from a year ago. This indicates that more youth are able to find a part time job and thus afford to be in the rental market.

Individuals usually at the First Time Home buyer stage are choosing instead to stay in the rental market until economic conditions improve.

If you were thinking about buying a rental property, now might be a good time to keep investigating the market trends.
If you are looking to finance a Rental Property contact Verico Designer Mortgages Inc. we are connected with a wide variety of lenders that can assist you in this matter.

Source: Canada Mortgage and Housing Corporation

http://www.cmhc-schl.gc.ca/en/hoficlincl/homain/stda/index.cfm

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