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
Are stubborn sellers killing the real estate crash? – Financial Post
It seems to be the new trend for first-time buyers: saving more while waiting for home prices to drop. And while Flaherty’s new rule that decreased the maximum amortization to 25 years is one reason buyers need to save more, waiting for prices to drop is a result of predictions that have been circulating for months. “I’m waiting for that bubble to pop that everybody is talking about,” explained Megan Vickell, a first-time buyer in Toronto.
Unfortunately, it doesn’t look like that will be happening anytime soon. “Crashes don’t just happen…you need a trigger,” says Benjamin Tal, deputy chief economist with CIBC World Markets. A spike in interest rates or major job losses could be that trigger but, so far this year, the economy looks stable. And with home prices expected to drop by 5-10 per cent this year, many sellers are pulling their homes off the market, refusing to sell at a lower price.
Finance Minister Flaherty ‘pleased’ as Canada’s housing market softens – The Globe and Mail
On Tuesday, the Canadian Real Estate Association revealed new data to prove that the rapid increase in home prices is now over. Canada’s housing market is beginning to soften and Finance Minister Jim Flaherty says he is happy with the news. “I don’t mind prices coming down a bit, too,” he added, after the data showed that home sales fell sharply in December. Continue reading
Bank of Canada Governor Mark Carney Heading to the U.K.
After months of media speculation, it finally became official – Mark Carney announced he is leaving his post as the Governor of the Bank of Canada in June 2013 to lead the Bank of England. This is a well-deserved promotion for Carney. Carney’s ability to lead Canada through the financial crisis of 2008 relatively unscathed has undoubtedly impressed the world’s second most important financial hub.
Carney has a lot to be proud of – Canada’s banks are among the world’s most stable, the housing market avoided a U.S.-style crash, and the economy is in relatively good shape. With that being said, there still remains much to be accomplished. Mounting household debt due to a prolonged period of low interest rates continues to concern Carney, as the debt-to-income ratio hit a new record of 164.6 per cent in the third quarter of 2012.
In early December, Carney announced for the 27th consecutive month in a row he was leaving the overnight lending rate at 1.00 per cent. Will Carney finally pull the trigger on rise rates before his departure in June? If household debt continues to balloon and inflation starts to become a problem he might finally raise rates. With 5-year fixed mortgage rates at an all-time low, there’s never been a better time to lock-in if you’re concerned about rising rates.
CREA Downgrades Housing Market Forecast for 2013
The housing market continues its slowdown since June 2012, when Finance Minister Jim Flaherty announced the fourth round of new mortgage rules in four years. First-time homebuyers are having a more difficult time qualifying for a mortgage, now that the maximum mortgage amortization has been trimmed from 30 years to 25 years for high-ratio mortgages. As a result, the Canadian Real Estate Association (CREA) has revised its forecasted home sales this year. Continue reading
CMHC Releases Tenth Annual Review of the State of Housing in Canada – CMHC
CMHC has released its tenth annual Canadian Housing Observer report, which gives a broad range of statistical information on the state of the Canadian housing market. The report is available both online and in print and, new for 2012, readers can now access interactive data tables that provide local reports on various housing indicators for over 160 municipalities.
Some of the important highlights in the Observer include:
- Of the major urban cities, Moncton experienced the highest growth in the number of households (followed by Kelowna, St. John’s and Calgary)
- Spending on home renovation grew 3% in 2011 to $43.8 billion
- In 2011, the average resale price of a home in Canada was $363,116
- The highest average price was $779,730 in Vancouver
- The lowest average price was $156,919 in Trois-Rivières
- In 2011, housing starts were 194,000 units, a 2.1% increase from last year
- The net worth of Canadian households increased in 2011 by roughly $7,000 (adjusted for inflation) Continue reading
Bank of Canada leaves the overnight lending rate unchanged – Bank of Canada
For the 27th consecutive month in a row, the Bank of Canada (BoC) has kept the overnight lending rate at 1.00 per cent. On Tuesday morning, Mark Carney announced that the Canadian economy’s slow growth in the third-quarter left the BoC unwilling to increase the overnight rate. Carney’s announcement did not come as a surprise and was, in fact, good news to variable rate mortgage holders whose rates are attached to prime.
The BoC considers a number things when determining policy and rate changes, including: levels of household debt, foreign and domestic economic performance, and the national inflation rate. The gross domestic product (GDP) grew by only 0.6 per cent in the third quarter, which was well below the 1.00 per cent the central bank was hoping for. Economists say an interest rate hike is less likely, when the economy shows moderate growth, and that we should not expect an increase anytime soon.
Flaherty admits the new mortgage rules have cooled the housing market – Financial Post
“The housing market has softened somewhat in part because of steps that I’ve taken and I’m happy about that.” That’s the message Canada’s finance minister, Jim Flaherty, put forth on Wednesday. In reaction to his limiting the maximum amortization period from 30 years down to 25, on new high-ratio mortgages, the housing market has experienced a loss of momentum, since July 9th of this year. Continue reading
Mortgage Rate Wars: Part III?
BMO re-introduced the 2.99 per cent 5-year fixed mortgage rate over the weekend. This mortgage product was the centre of controversy, earlier in the year, as the ultra-low 2.99 per cent interest rate spurred two separate mortgage interest rate wars. However, BMO’s latest offering ran for two short days, from October 13th to October 14th, perhaps to avoid further scrutiny from Jim Flaherty. Following the second round of the mortgage rate wars in March, Canada’s Finance Minister paid a visit to each bank’s CEO to discuss their institutions’ lending practices.
“You should be cautious about your lending practices, because this is the type of practice that led to a mortgage crisis in the United States several years ago,” Flaherty said, recounting what he told the CEOs. “My expectation is that you will not compete to the bottom on interest rates, which is the direction [the U.S. was] going.” 1
Immediately following Flaherty’s talk in April, discounted 5-year fixed rates shot up to 3.25 per cent from 2.99 per cent. However, only two months later, 5-year fixed rates began descending towards sub-three per cent interest rates again. Today, the lowest 5-year fixed rate available is 2.94 per cent.
It is not likely that BMO, or any other bank, will engage in a third mortgage rate war. The consequences of doing so will draw further negative attention from the Canadian government.
Each Friday, the Notable News of the Week recaps the major events from the Canadian mortgage and housing industry. This week, the new mortgage rules are starting to impact the Canadian mortgage-bond market; many first-time home buyers regret not putting a larger down payment; and we look at Canada’s 10 most expensive neighbourhoods.
Canadian mortgage-bond market react to Flaherty’s policies - The Province
The effects of Finance Minister Jim Flaherty’s efforts to tighten mortgage policies and stabilize the Canadian housing and mortgage industry are starting to impact bond sales. The Canadian mortgage-bond market is underperforming the U.S. counterpart and according to the Bank of America Merrill Lynch, Canadian bonds from one to five year yields have returned an average of 0.3 per cent this year, compared to 1.9 per cent for similar American mortgage bonds.
First-time homebuyers regret not making a larger down payment – The Globe and Mail
TD Bank conducted a survey of recent first-time home buyers and found that 60 per cent wished they had made a bigger down payment. A larger down payment means less overall interest to pay, lower mortgage insurance fees (if applicable), and a larger equity buffer if home prices fall. However, saving for a large down payment is often difficult for many new buyers because of the time required to save up. Median family incomes are approximately $70,000 and with average savings accounts at four per cent, the average family can only save about $2,800 per year. First-time home buyers pay on average $295,000 for their first home according to Genworth Financial Canada. That means the average first-time home buyer needs to save at least $16,000 to meet the five per cent minimum down payment in Canada.
Each week, Ratehub delivers the Notable News. We compile and summarize the major headlines from Canada’s housing and mortgage market to keep you informed. This week, Finance Minister Jim Flaherty makes progress in cooling Toronto’s hot housing market, the six largest Canadian banks debate whether buying ING Direct will be worth the cost, and debates arise as to whether falling house prices are actually that bad.
New mortgage rules slow Toronto’s condo sales – Financial Post
The Toronto Real Estate Board says that home and condominium sales in Toronto have started to slow compared to a year ago as sales slip 1.5 per cent. According to board president Ann Hannah, tighter mortgage rules have caused consumers to put their buying decisions on hold. The slow in condo sales has eased fears of a bubble growing in Toronto, where average condo prices have increased thirty-three percent from five years ago. The new mortgage rules have eased housing market inflation while keeping Toronto mortgage rates at all time lows.