Tag Archives: Bank Of Canada

Canadian housing market had strong finish to 2009

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The housing market in Canada has been stronger in the second half of 2009 than was widely anticipated. That has been particularly true for residential resales.

The first quarter of 2009 was nearly disastrous for the existing home market, but all of that turned around in late spring and early summer. Record low mortgage rates have done the trick.

Potential homebuyers know that they are not likely to ever see interest rates this low again.

As for new home construction, it is worth remembering that an existing home sale is often a prelude to a new home purchase.

There have been other factors that have contributed to recent resale strength as well.

The home renovation tax credit extending through February of next year is an incentive to spruce up one’s property and then, perhaps, put it on the market.

Also, Canadian labour markets have held up better than in the U.S.

The service sector in particular has experienced little in the way of job losses.

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The November labour report showed an overall increase in employment in Canada of 79,000 jobs.

There has been only one really bad labour market report in the past four months, in October, and that was partly an adjustment after strong August and September numbers.

The improving labour market overall, the Bank of Canada’s commitment to keep its trend-setting overnight rate at 0.25% until next summer, and the end to the recession are all serving to raise consumer confidence levels.

Add to the foregoing that foreign investors are seeing this country as well-positioned to benefit from the recovery. Foreign investment money is being attracted to Canadian stocks, commodities and to commercial and residential real estate.

The net effect is to raise the prospects for new home construction. CanaData has somewhat revised upward its housing starts forecasts for next year. The latest figures are set out in the accompanying tables.

It is remarkable the degree to which housing starts in the largest cities in Canada dominate their provincial residential markets. In Quebec, Montreal usually accounts for almost 50% of total starts in the province.

Toronto housing starts are usually slightly more than half of the total in Ontario. Calgary and Edmonton each account for about one-third of Alberta’s total.

Finally, Vancouver starts traditionally make up between 55% and 60% of total starts in British Columbia.

http://dcnonl.com/article/id36930

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BMO: Time for Homeowners/Prospective Buyers to Stress Test their Budget

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Talk to a BMO Bank of Montreal banker about considering a bigger downpayment and reducing the amortization on your mortgage to save money

The housing market in Canada has seen existing Canadian home sales surge 76 per cent from their January lows. Not only that, in November, existing home prices spiked 19 per cent above year-ago levels, the second fastest clip in two decades. With record low interest rates, more people than ever are looking to purchase a home. However, BMO experts are predicting that interest rates will rise in 2010.

“We expect the Bank of Canada’s overnight rate target to climb from 0.25 per cent beginning in July 2010, to 4.25 per cent in mid-2012. In turn, consumers can also expect mortgage rates to increase,” said Sal Guatieri, Senior Economist, BMO Capital Markets. “While today’s ultra-low borrowing costs represent a unique opportunity to purchase a property, home buyers need to proceed with caution and keep in mind that renewal rates will likely be substantially higher in coming years.”

“Stretching the limits of your budget by choosing the maximum amortization period and a minimum downpayment leaves you little wiggle room to deal with an unexpected financial challenge,” said Jane Yuen, Senior Manager, Mortgages, BMO Bank of Montreal. “A meaningful down payment and shortening your amortization by making extra payments on your mortgage will save you tens of thousands of dollars in interest costs.”

http://www.newswire.ca/en/releases/archive/December2009/22/c5258.html

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Carney dismisses issue on housing bubble

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In a question-and-answer session following his speech, Mark Carney, the governor of the Bank of Canada was quick to dismiss talk of housing bubble in Canada or in Winnipeg’s stable market. Here are some of his dropped statements:

“Canada’s corporate sector begins with a number of advantages. Domestic demand is expected to be relatively strong, providing a base of support for some sectors. Corporate balance sheets are in outstanding shape, and margins have help up very well for this stage in the economic cycle. ”

“Canada’s overall financial conditions are now contributing to, rather than retarding the recovery. While net financing needs would be expected to be limited, given the stage in the economic cycle, business credit has started to grown again. In fact due to monetary stimulus, overall borrowing costs for Canadian business remain very low.”

“Taken together, results from the bank’s latest Senior Loan Officer Survey and the Business Outlook Survey suggest that, following a period of substantial tightening, credit conditions for businesses eased slightly in the fourth quarter of 2009, for the first time since the financial crisis began. The improvement in credit conditions mainly affected large firms, as some small and medium sized entities continued to experience tightened conditions.”

“It is in this environment that the first signs of thaw corporate attitudes have begun to emerge. In our latest Business Outlook Survey, more firms said they are now planning to increase investment sending and employment than did either last summer or fall. With the improvement in financial conditions, economic activity, commodity prices and growing confidence, business fixed investment should pick up in 2010. This recovery will be relatively modest; it is not until 2011 that we anticipate an acceleration of investment sending, as the excess supply in the economy is taken up.”

“However, given the external environment, the question is whether this pickup will be sufficient. The significant drop in investment that occurred during the recession included spending on new technology, which could have helped firms address coming economic challenges. The relatively slow recovery expected in our most important trading artner, along with ongoing sectoral adjustments, means that firms have to find new markets. In doing so, they will face increased competition. For example, due to exchange rate moves and stellar productivity performance, the competitiveness of the U.S. corporate sector has improved significantly. The need for capital investment by Canadian businesses to meet these challenges is clear.”

“In short, Canadian companies are emerging from the recession to an altered world— one that may require deeper restructuring and bolder strategic initiatives than currently contemplated. New suppliers need to be sourced; new markets opened; a new approach to managing for a more volatile environment developed. To recognize this reality is also to recognize the opportunities available to corporate Canada.”

“To conclude, recent events were a watershed. The global economy that emerges from the recession will be different than the one that led into the crisis. A powerful and sustained restructuring of the global economy has begun. Canadian business will need to develop new markets as the traditional advantage of relatively open access to U.S. market becomes less valuable. To seize new opportunities our productivity levels must improve.”

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Housing Market on recovery

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“In the last six to nine months, demand for housing was decrease in Winnipeg and in Manitoba, but it has picked up a good deal. Sales of existing homes in November, 2009 set a dollar sales record of $173 million compared to $113 million in November, 2008. People have recognized that the worst of the downturn is over. Potential home buyers are now more willing to enter the marketplace, confident of what the future holds.” said Jeff Powell, senior market analyst for Canada Mortgage and Housing Corporation in Winnipeg.

This can be seen as a good sign of recovery, well, at least for the housing market. The prices of built houses are in recovery and more homes and condos are being constructed based from what Canada Mortgage and Housing Corporation issued. The CMHC data foresees a 10% improvement in building and sales activity in 2010. However, the price growth of houses is yet unclear due to rising interest rates on Main Street which will have an impact with the Main Street recovery.

The said recovery is supported by growing employment rates and increased consumer confidence. As a matter of fact, The Bank of Canada will be raising short interest rates and lenders, who have more positive response to what the bond market says money cost, are already pricing higher rates into mortgages. The economic recovery and the status of the housing market right now rest on increasing consumer confidence. This could take an effort to maintain considering changing interest rates moving from a low 1.5% to 3% and 4$ or more.

Housing market trends in Canada had gone up and down for one reason, market liquidity. When market declines, houses for sale rise, house owners want to sell but couldn’t find the right deal. This goes the same way with buyers which yield to no closed business. On the other hand, during good market condition, house buyers become more eager to make deals before prices appreciate more. Liquidity rate and sales volume mark significant growth.

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Canadian Federal Changes Mortgage Rules

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Canadian home buyers should be reassured by the government’s changes to the rules governing mortgages and go forward with confidence when making a home purchase in 2009. If anything, things are looking more favourable this year for mortgage financing with the Bank of Canada rate now sifting at an historic low of 1.25 per cent. As a result, there will be significant pres sure on financial institutions to pass on the reduction when setting their mortgage interest rates.
Understanding the new rules
Changes to Canada’s mortgage lending rules, news of turmoil in global financial markets and problems in the U.S. housing market have some Canadian home buyers wondering about their homeownership options.
Fortunately, the news is good. Recent government changes to mortgage lending should have little impact on home buyer choices.
The federal government implemented new mort gage criteria, which came into effect on October 15.
They apply to individuals who purchase a home and obtain a mortgage with a down payment of less than 20 per cent from a federally regulated lender, such as a bank or credit union.
There are two major changes. First, the time allowable to pay off a mortgage, called the maximum amortization period, has been reduced from 40 to 35 years. And home purchases now require a minimum down payment of five per cent. Home buyers can no longer borrow 100 per cent of the cost of their new home, as they could do prior to the change.
The requirement for home buyers with a down payment of less than 20 per cent purchase mortgage de fault insurance remains unaffected by the new rules.
The new mortgage criteria will not make it more difficult for most home buyers get a mortgage with an affordable monthly payment. For example, the majority of buyers who chose a 40 qualified for a shorter mortgage, whether 25, 30, or 35 years. Put in dollar terms, reducing a 40-year, $200,000 mortgage with a six percent interest rate to a 35-year mortgage at the same rate increases the monthly mortgage payments by only $41, but saves the homeowner $49,000 in interest payments (Source: Department of Finance Canada).
Generally, most mortgage loans in Canada have five- year terms, after which the homeowner may choose a shorter amortization period or other payment terms that may be right for them at the time.
Canadians regularly exercise their options to pay down their mortgage debt sooner. In fact, most Canadian homeowners repay their mortgage in 15 to 20 years, or in far less time than the amortization periods affected by the new criteria.
While the changes won’t deny many people the chance to own a home, they will help ensure our housing market stays strong.
Genworth Financial Canada’s Homeownership.ca website has tips and tools such as a rent vs. buy calculator, advice from third-party industry experts and information on mortgage options for prospective home buyers. For new immigrants to Canada, the site includes a specifically designed section that explains the home buying process in seven different languages.

Canadian home buyers should be reassured by the government’s changes to the rules governing mortages and go forward with confidence when making a home purchase in 2009. If anything, things are looking more favourable this year for mortgage financing with the Bank of Canada rate now sifting at an historic low of 1.25 per cent. As a result, there will be significant pres sure on financial institutions to pass on the reduction when setting their mortgage interest rates.

Understanding the new rules

Changes to Canada’s mortgage lending rules, news of turmoil in global financial markets and problems in the U.S. housing market have some Canadian home buyers wondering about their homeownership options.

Fortunately, the news is good. Recent government changes to mortgage lending should have little impact on home buyer choices.

The federal government implemented new mort gage criteria, which came into effect on October 15.

They apply to individuals who purchase a home and obtain a mortgage with a down payment of less than 20 per cent from a federally regulated lender, such as a bank or credit union.

There are two major changes. First, the time allowable to pay off a mortgage, called the maximum amortization period, has been reduced from 40 to 35 years. And home purchases now require a minimum down payment of five per cent. Home buyers can no longer borrow 100 per cent of the cost of their new home, as they could do prior to the change.

The requirement for home buyers with a down payment of less than 20 per cent purchase mortgage de fault insurance remains unaffected by the new rules.

The new mortgage criteria will not make it more difficult for most home buyers get a mortgage with an affordable monthly payment. For example, the majority of buyers who chose a 40 qualified for a shorter mortgage, whether 25, 30, or 35 years. Put in dollar terms, reducing a 40-year, $200,000 mortgage with a six percent interest rate to a 35-year mortgage at the same rate increases the monthly mortgage payments by only $41, but saves the homeowner $49,000 in interest payments (Source: Department of Finance Canada).

Generally, most mortgage loans in Canada have five- year terms, after which the homeowner may choose a shorter amortization period or other payment terms that may be right for them at the time.

Canadians regularly exercise their options to pay down their mortgage debt sooner. In fact, most Canadian homeowners repay their mortgage in 15 to 20 years, or in far less time than the amortization periods affected by the new criteria.

While the changes won’t deny many people the chance to own a home, they will help ensure our housing market stays strong.

Genworth Financial Canada’s Homeownership.ca website has tips and tools such as a rent vs. buy calculator, advice from third-party industry experts and information on mortgage options for prospective home buyers. For new immigrants to Canada, the site includes a specifically designed section that explains the home buying process in seven different languages.

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