Archive for the ‘Interest Rates’ Category

Market Commentary

November 4th, 2015 No comments

Hand writing Trends for 2015 with red marker conceptThe latest quarterly report from Canada Mortgage and Housing Corporation has some market watchers seeing red. But the agency points out its market assessment is an early warning signal and not a sign of a housing bubble that is about to burst.

The report indicates there are signs of over-valuation in 11 of Canada’s 15 major markets. Toronto, Winnipeg, Saskatoon and Regina all come in as “code red” for strong indications of problematic conditions.

Among the factors CMHC monitors are price acceleration, job and income growth, and overbuilding. The agency says it wants to promote stability by advising buyers, lenders and builders when a market is out of sync with economic fundamentals.

Montreal showed a moderate risk of over-valuation due low growth in first time buyers, weak income growth and a glut of unsold condos.
Vancouver – by far Canada’s priciest market – along with Calgary and Edmonton came in with low risk factors. Changes in those markets are in line with the local economies.

From: First National Financial LP

Residential Market Update

October 27th, 2015 No comments

Market Commentary

CMBondThe household debt to income ratio has hit an all time high – 165%. Yet the Bank of Canada seems to have gone strangely quiet on the subject.

Former bank governor Mark Carey routinely warned of the potential dangers brought by the lure of low interest rates, especially in the housing market.

Recently, though, new governor Stephen Poloz told a banking audience in Washington that it is not the Bank of Canada’s job to fix bad debt decisions made by consumers.

It is useful to note how the central bank views its own job. Poloz says lenders, and borrowers themselves, are the first line of defence against bad debt decisions. He says bank’s job is to manage inflation and the main tool for doing that is interest rates.

The Bank of Canada cannot separate the low interest rates meant to inspire business borrowing from the low rates that are fuelling the real estate boom.

Poloz does say, though, that the Bank of Canada is keeping a very close watch on those household debt levels.

From First National Financial LP

Liberal Government – How will their policies affect interest rates?

October 21st, 2015 No comments

LiberalGood evening,

Charmaine’s comment:   The prediction is that if there is going to be growth in the economy due to the Liberal Infrastructure program, this could lead to an increase in mortgage interest rates sooner than previously expected.



  • The federal Liberal Party, led by Justin Trudeau, appears likely to have taken 184 seats (54% of the newly expanded house) in last night’s election, a strong gain from the 36 seats (12%) held pre-election; handily passing the 170 seat threshold required for a majority government.
  • In their election platform, the Liberal party promised a revamping of the tax system and increased infrastructure spending, supported by deficits. Highlights include a new Canada Child Benefit, tax reductions targeted at middle income earners, and the creation of a new tax bracket for those earning more than $200K per year.
  • While it is difficult to assess potential impacts with any certainty at this early stage, the Liberal infrastructure program could boost annual growth in 2016 and 2017 by up to 0.1 and 0.3 percentage points, respectively.
  • Markets were noisy overnight, but the Canadian dollar has since recovered relative to yesterday’s close. Over the longer term, there is the potential for upward pressure on longer term yields resulting from increased deficit borrowing, but any impact is likely to be quite small given Canada’s favourable debt position relative to other countries, and the relatively small size of the additional borrowing.

From: Observation – TD Economics Oct 20th, 2015

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October 20th, 2015 Comments off

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Bank of Canada maintains overnight rate target at 1/2 per cent

September 23rd, 2015 No comments

calculatorThe Bank of Canada today announced that it is maintaining its target for the overnight rate at 1/2 per cent. The Bank Rate is correspondingly 3/4 per cent and the deposit rate is 1/4 per cent.

Inflation has evolved in line with the outlook in the Bank’s July Monetary Policy Report (MPR). Total CPI inflation remains near the bottom of the target range, reflecting year-over-year price declines for consumer energy products. Core inflation has been close to 2 per cent, with disinflationary pressures from economic slack being offset by transitory effects of the past depreciation of the Canadian dollar and some sector-specific factors. The dynamics of GDP growth in Canada outlined in July’s MPR also remain intact. The stimulative effects of previous monetary policy actions are working their way through the Canadian economy.

Canada’s resource sector continues to adjust to lower prices for oil and other commodities, with some spillover to the rest of the economy. These adjustments are complex and are expected to take considerable time. Economic activity continues to be underpinned by solid household spending and a firm recovery in the United States, with particular strength in the sectors of the U.S. economy that are important for Canadian exports.

Increasing uncertainty about growth prospects for China and other emerging-market economies, in contrast, is raising questions about the pace of the global recovery. This has contributed to heightened financial market volatility and lower commodity prices. Movements in the Canadian dollar are helping to absorb some of the impact of lower commodity prices and are facilitating the adjustments taking place in Canada’s economy. While the overall export picture is still uncertain, the latest data confirm that exchange rate-sensitive exports are regaining momentum.

Meanwhile, risks to financial stability are evolving as expected. Taking all of these developments into consideration, the Bank judges that the risks to the outlook for inflation remain within the zone for which the current stance of monetary policy is appropriate. Therefore, the target for the overnight rate remains at 1/2 per cent.

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