Sep
02
Key interest rate expected to remain unchanged
Canada’s economy shrank in the second quarter for the first time since the recession two years ago, as a high dollar boosted imports and curbed exports while natural disasters interrupted energy and automobile production.
Gross domestic product fell at a 0.4 percent annualized pace during the April-June period following a 3.6 percent gain in the first three months of the year, Statistics Canada said today in Ottawa. Economists surveyed by Bloomberg forecast no growth in the quarter, based on the median of 23 responses, with nine calling for an expansion and six for a contraction.
The world’s 10th largest economy joined Japan in shrinking in the second quarter, reflecting weakness in the U.S. and Europe, its biggest trading partners. The report adds pressure on Bank of Canada Governor Mark Carney to keep his policy interest rate at 1 percent at the Sept. 7 announcement, with some investors betting he may need to cut borrowing costs.
“No matter what, we are getting growth that isn’t going to be going anywhere for some time,” said Derek Holt, Scotia Capital’s vice-president of economics in Toronto, by telephone.
“The Bank of Canada has full reason to remain parked on hold for at least the next year or so,” Holt said. “When they do start to raise interest rate, I can’t see them doing more than capping off at around 2 percent into 2013.”
Aug
19
Calgary Inflation second highest in Canada
Inflation rates in July :
Calgary: 0.5% (From June); 1.8% (YTD)
Alberta: 0.3% (From June); 1.9% (YTD)
Canada: 0.2% (From June); 2.7% (YTD)
In Alberta, prices advanced 1.9 per cent in July after increasing 2.1 per cent in June. Consumers paid 23.0 per cent more for gasoline and 4.1 per cent more for food purchased from stores. The cost of homeowners’ home and mortgage insurance also went up
Aug
19
Bank of Canada suggests a higher percentage of down payment?
The latest Bank of Canada Review — Summer 2011 special issue: Real-Financial Linkage, is just released.
The article “Mortgage Debt and Pro-cyclicality in the Housing Market” catches our attention. The findings could suggest a lower LTV to fight against procyclicality in the housing market, which is an important ingredient in the emergence of booms and busts.
- Research from a number of countries suggests that the setting of the maximum limit on the loan-to-value (LTV) ratio on a residential mortgage could help to moderate procyclical movements in house prices and housing market activity
- Models developed at the Bank of Canada and elsewhere allow researchers to examine the link between the level of the LTV ratio and the degree of procyclicality in the housing market. They demonstrate that an LTV ratio set at a lower level would dampen procyclicality. Varying the LTV ratio for mortgages countercyclically could mitigate procyclicality even further.
Will Jim Flaherty follow the suggestion?
Aug
15
Maintain a good credit record
A good credit record means a lot to you. You can’t afford to ruin it. Here is how to maintain a good credit record:
- Pay your bills promptly, especially credit cards
- Borrow only what you need and what you can afford
- Try to pay off loans on time and as quickly as possible
- Get reference letters from landlords and creditors and add them to your personal file
- Make sure incorrect information is removed quickly from your credit file
- If you are having difficulty paying a bill, contact the creditor immediately
- If you are ill or disabled, find out if you have insurance on the loan or credit card that will make the payments if you can’t
Aug
15
Mortgage Fraud Red Flags
Mortgage fraud is not a get rich quick scheme — it’s illegal. Getting involved in a mortgage scam can damage your credit rating, your current and future employment prospects and your professional designation
Pay attention to following red flags and protect yourself from being an unwilling participant in mortgage fraud!
- Someone offers you a fee to use your name and credit information to obtain a mortgage!
- You are encouraged to include false information on a loan application!
- You are asked to leave signature lines or other important areas on a loan application blank!
- The loan amount on the mortgage is significantly higher than the value of the property!
- The mortgage has been refinanced several times and in each instance, the amount of the mortgage has increased!
- The seller or investment adviser discourages you from seeing or inspecting the property you are offering to purchase!
Aug
10
Economy to push clients to ARM
One of my clients applied fixed mortgage at 3.59% for 5 years with Merix financial just before the August long weekend. It’s good for him that Merix announced rate reduction to 3.49% early last week. However, he said his joy just lasted a few days. Following the collapse of stock market since late last week, he decided to take a variable rate mortgage rather than the fixed one he once preferred.
He is not alone!
Mortgage professionals anticipate renewed interest in variable rates. All are pointing to the S&P downgrade for the U.S. government and the ensuing tumult in world stock markets. Economic crisis in Europe and the real threat of default by several EU member nations has also raised speculation that the Bank of Canada will now have to put off any attempt to raise its overnight rate above one per cent. The global economic uncertainty is simply too great, say economists, for the Bank to remove that stimulus, given the real possibility of another recession in the U.S. and its knock-on effect for its biggest trading partner.
Aug
05
Job Growth Trails Expectations in July
FACT:
Statistics Canada announced today there were 7,100 more people working in July. Most economist expected 15,000 though. Now unemployment rate fell to 7.2% from 7.4% in previous month.
- Private sector added 94,500 jobs
- Public sector cut 71,500 jobs
- Self-employed sees a decline of 15,900
- Full time employment up 25,500
- Part time employment down 18,400
- Employment grow in sectors such as construction, transportation, warehousing, wholesale and retail trade
- Looking across the provinces, Alberta, and Newfoundland and Labrador, saw job gains of 12,400 and 3,800, respectively, while there were 22,400 fewer workers in Ontario. Other provinces saw little change.
COMMENT:
Douglas Porter, deputy chief economist with BMO Capital Markets, said the jobs data was “not exactly what the doctor ordered, but not bad,” noting the gains in full-time and private-sector employment.
He also pointed out that the unemployment rate is the lowest it’s been since late 2008, and there was a 1.2 per cent rise in hours worked last month.
“The one downbeat aspect of the release is that average hourly earnings faded further to just a 1.4 per cent (gain) year-over-year . . . falling further below recent headline inflation trends of more than three per cent,” Porter added.
CIBC World Markets senior economist Peter Buchanan said the jobs data was “a fairly mixed report overall, with the details somewhat better than the headline.”
He noted the rise in “paid employment jobs” overall versus people being in business for themselves, saying the former “tend to be of higher quality.”
Employment growth in July was seen in the sectors of construction, transportation and warehousing, as well as retail and wholesale trade. There were fewer positions in health care and social assistance, educational services, business, building and other support services, natural resources and agriculture.
Aug
03
Real Estate Market Watch July 2011
Here are the latest housing market statistics for Calgary and Edmonton Areas:
Calgary Housing Market July 2011
Edmonton Housing Market July 2011
Aug
01
Turning your principal residence into a rental
So, you’re ready to move out of your starter home and into a larger residence. The thing is, your first home is so well-located that you’d love to hold onto it for a little longer – and maybe use it as a tool to launch you into the rental market. Before you make the commitment, however, here are a few things to consider:
1. Will you need to refinance?
Chances are, in the time you’ve owned your primary residence, you’ve had an opportunity to build up equity. The question is, will you need some of this equity to use towards a down payment on a second home – or do you have a separate down payment fund saved up?
If you need to tap into your home’s equity, you’re going to have to refinance – and you can only do so up to 85% of the value of your home. You’ll also have to consider that, with a refinance, you’ll likely have to take on a new mortgage term, rate and amortization – and, depending on the details of your mortgage, this may come with some hefty fees. It should also be noted that keeping that 35-year amortization with less than 20% equity can prove difficult since it’s been phased out under new government rules.
2. Ensuring positive cash flow.
If you have to pull out some equity in your home for a second down payment, your mortgage payments are going to increase on your primary residence. For a rental property to make sense, you’re going to have to make sure that you have positive cash flow - which means the going rental rate can cover your mortgage payments, property taxes and maintenance costs. Check out similar rental properties in your area either through viewit.ca, craigslist.com or kijiji.ca.
To keep your costs as low as possible, it’s best to go with the longest amortization you can get your hands on - and the lowest mortgage rate.
3. Tax implications.
If you end up using the money from your refinanced first property as a down payment for your second, you’re going to find it difficult to legally take advantage of the tax deductibility of your new rental property. This is because borrowed funds are only tax deductible if they’re used to fund a rental property - and you’ll be using them to fund a new primary residence. This article at Million Dollar Journey does a great job of explaining the issue, and ways to get around it:
http://www.milliondollarjourney.com/converting-a-principal-residence-into-a-rental-property.htm
4. Are you really ready to be a landlord?
Becoming a landlord brings on its own new set of responsibilities - and potential late-night emergencies. Before you pull the trigger, really think about if you’re ready to take care of the maintenance needs of two residences - and if you’re prepared to carry the costs of two residences if you can’t rent your first one out for a month or two.
For further reflection, consider reading these articles about nightmare tenants:
13 outrageous tenant excuses
http://realestate.msn.com/13-outrageous-tenant-excuses?page=2
Tenants from hell
http://www.property118.com/index.php/tenants-from-hell-part2/
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