I always listen to music while writing, as I find it allows ideas to flow more freely. Today, I’m listening to Lauren Hill’s Doo Wop, which is a cautionary tale, albeit about men, with no clear relation to mortgages. But – and bear with me here – let’s go with the cautionary theme for this month’s mortgage update.
The Bank of Canada reiterated its concerns over Canadian household debt and the country’s resilient housing market, at this month’s interest rate announcement, which reignited discussions on further intervention in the mortgage market by the Department of Finance. Continue reading
Poloz spells out ground rules for rate hike - The Globe and Mail
This week, Stephen Poloz delivered his first interest rate announcement as the newly-appointed Governor of the Bank of Canada (BoC). Along with leaving the overnight lending rate at 1.00 per cent, Poloz spelled out what he would need to see happen in the economy before the central bank would consider raising interest rates. As long as there is excess capacity in the economy, and the outlook for inflation remains muted, rates will remain low. In the same announcement, the BoC also lowered their global economic predictions, after seeing sluggish growth in Canada and abroad. Economists welcomed the clarity from Poloz, who responded to the question of when he expects interest rates to rise with, “The honest answer is we really don’t know”. The central bank projects economic growth in Canada to be 1.8 per cent this year, with growth of 2.7% in both 2014 and 2015. These projections are largely due to a recovering U.S. economy and strengthening business confidence. Continue reading
Stephen Poloz named Canada’s next central bank chief – Financial Post
After months of anticipation, Finance Minister Jim Flaherty shocked many by announcing that Stephen Poloz would be taking over Mark Carney’s position as Governor of the Bank of Canada. Most news sources had predicted Flaherty would appoint Tiff Macklem, the bank’s senior deputy governor, as his current position leaves him as the most obvious choice. However, Flaherty believes Poloz is the strongest candidate, as he brings a previous 14-year stretch at the Bank of Canada as well as years working abroad – including stints at the International Monetary Fund in Washington and the Economic Planning Agency in Tokyo. “Mr. Poloz has significant knowledge of financial markets and monetary policy issues and extensive management experience. We are confident Mr. Poloz will make an outstanding contribution to the work of the Bank and uphold its reputation as a leading central bank,” said David Laidley, Chair of the Special Committee of the Board of Directors.
Stuck in traffic: How mortgages could ease congestion – CBC News
A recent Pembina Study found that 80 per cent of residents in the Greater Toronto Area would give up the suburban lifestyle (big house, big car), in order to live in one of the walkable and transit-friendly neighbourhoods in the downtown core. Unfortunately, this tends to be more of a dream than a reality for most people, especially first-time buyers, as downtown property comes at a high cost. Continue reading
Are banks racing to the bottom?
If you’re thinking of buying a home this spring, there’s never been a better time to get a mortgage. Despite the fact that most lenders are no longer offering juicy discounts on variable mortgage rates today, you can still lock into some of the lowest fixed mortgage rates Canadians have ever seen. And with the housing market cooling – home sales are down 15.8 per cent nationally compared to a year ago – some banks are trying to woo homebuyers back into the market.
In early March, the Bank of Montreal (BMO) brought back its 2.99 per cent 5-year fixed rate mortgage. While locking in at 2.99 per cent may sound like a good deal, the product – which stemmed a string of mortgage rates wars among banks in early 2012 – comes with some serious restrictions. For example, if you’re planning to aggressively pay down your mortgage, you unfortunately only get 10%/10% prepayment privileges (many lenders offer 20%/20%). You also don’t have the option to transfer your mortgage to another lender until your 5-year term is up.
Despite the fact that mortgage brokers have been offering sub 3.00 per cent mortgage rates with better prepayment privileges for months now, Finance Minister Jim Flaherty felt the need to step in and ask other banks not to follow in BMO’s footsteps. Continue reading
Brokers pursue mortgage break for first-time homebuyers – The Globe and Mail
The federal government implemented new mortgage rules in July of last year which have undoubtedly been a major source of the current cooling in the housing market. Sales have declined since the rules were implemented in July, however prices have not. The rule changes have made it particularly hard for first-time homebuyers to enter the market; mortgage brokers have recognized this and are reaching out to the federal government for a revision in the rules. Brokers are asking that the government increase tax incentives for first-time buyers, as well as to insure 30-year amortized mortgages again, giving buyers the option to have smaller monthly payments. Phil Soper, the chief executive of Royal LePage, agrees that the rule changes went too far, but suggests the best thing to do is to wait until interest rates increase before offering incentives to first-time buyers.
Flaherty thanks banks for holding mortgage rates steady after BMO cut – The Globe and Mail
Canadian Finance Minister Jim Flaherty released a rare statement earlier this month. In it, he praised Canada’s big banks for not matching BMO’s new 5-year fixed mortgage rate of 2.99 percent. Flaherty and the federal government are often reluctant to get involved with the decisions that individual banks make. However, Flaherty does not want to see the market overheat, after implementing multiple recent lending rule changes in an attempt to cool it. Continue reading