FedSpeak and Canadian Mortgage Rates | Canadian Mortgage Trends

FedSpeak & Canadian Mortgage Rates

Ben-bernankeWith Canada so married to the U.S. economy, Canadian rate speculators are perpetually glued to U.S. Fed announcements.

Today we had a unique opportunity to watch U.S. Fed chief, Ben Bernanke, hold a scheduled press conference (Fed chairmen never do that). He said he wanted to “add transparency” to the Fed’s plans for future monetary policy.

Bernanke made several points of note for Canadian rate watchers. He said:

  • “Exceptionally low” U.S. interest rates will last for an “extended period.” The Fed has used that “extended period” phrase since March 2009.
  • U.S. inflation is picking up but “longer term inflation expectations have remained stable and measures of underlying inflation are still subdued.”
  • 2011 U.S. growth expectations have been cut to 3.1% (from 3.3%)
  • The U.S. labour market is in a “very, very deep hole”
  • Long-term U.S. unemployment is the “worst” it’s been since WWII
  • Rising oil prices are “bad for the recovery.”

All the Fedspeak of late continues to point to a slow and measured increase in U.S. rates, starting no earlier than late this year or early 2012.

A cautious Fed means the Bank of Canada will continue to be under less pressure to lift rates here. Mind you, analysts still expect the BoC to operate somewhat independently of the Fed thanks to Canada’s firmer economic footing.

The Fed aside, most economists are still predicting the next Canadian rate increase will fall on July 19…for what that’s worth.

Sidebar:  Bernanke said today that the reason he makes vague projections is because “we don’t know with certainty” how the economy will evolve.

That’s a good reminder of how imperfect economic forecasting is…because if the Fed doesn’t know, no one knows.

Rob McLister, CMT



Could a backlash against Donald Trump hurt his new Toronto hotel? | Daily Brew – Yahoo! News

Could a backlash against Donald Trump hurt his new Toronto hotel?


Playing politics may turn out to be not that great for Donald Trump’s business.


The real estate baron’s pursuit of the Republican presidential nomination has led to a call for a boycott over his opposition to same sex-marriage, and accusations of racism, despite the overriding assumption the run is mostly an ill-conceived publicity stunt.

And, it has all come just in time for the grand opening of Trump’s entry into Canada.

Construction of the Trump International Hotel & Tower at the corner of Bay and Adelaide streets in downtown Toronto, has reached the stage where its first overnight guests have booked for June.

The residential component of the 59-storey skyscraper, which will incorporate the highest condominiums in the country, is slated for completion later this year. Alex Shnaider, the billionaire owner of one of the penthouse suites, received his occupancy permit last month.

With hopes of renting out 261 luxury hotel rooms each night, however, a backlash doesn’t seem like something the Trump Toronto can afford.

The Gay and Lesbian Alliance Against Defamation has launched the “Tune Out Trump” campaign geared to draw attention to the candidate’s stance against marriage equality, which prompted Rosie O’Donnell to cancel her stay at his hotel in Chicago.

Celebrity critics have also condemned Trump as racist for furthering the view Barack Obama wasn’t born in the U.S. The president’s release of his birth certificate on Wednesday was regarded as a signal the “birther movement” baiting crossed a line.

The tactics could further tarnish the mogul’s reputation in Canada, where the blowhard Republican act can only be regarded as a freak show, even if columnist Peter Worthington of the Toronto Sun has stepped up to assert Trump can’t be taken seriously.

Nonetheless, the candidate has maintained he expects to be.

When it comes to promoting the Toronto venture, The Donald can deflect criticism by leaving the publicity to daughter Ivanka, who visited the construction site last summer.

But a ribbon-cutting appearance may be delayed due to the birth of her first child right around the time Trump Toronto checks in its first guest.

(AFP Photo)


Tim Cestnick’s tax tips for investors – The Globe and Mail

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Tim Cestnick’s tax tips for investors

Globe and Mail Update

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Most Canadians hold some investments outside of RRSPs and RRIFs, where taxes can easily impact the growth of those assets. Tim Cestnick, managing director at WaterStreet Family Wealth Counsel and author of 101 Tax Secrets for Canadians, says there are two things in particular that will determine how much tax you pay annually on your non-registered investments: portfolio make-up and portfolio turnover.

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“Canadians are starting to recognize the impact taxes can have on a portfolio,” Mr. Cestnick writes. “I’m here to tell you that focusing on after-tax returns is so important when investing outside an RRSP or RRIF that it could mean the difference between having plenty in retirement, and moving in with the kids or performing on a street corner to make ends meet (and unless you’re Bono, performing on a street corner is not likely to get you far).”

Mr. Cestnick is here now to discuss strategies to keep the tax collector away from your money and to answer your questions. Mobile users can join the discussion by clicking here.

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Toronto Real Estate and Neighbourhoods Blog | Move Smartly: Free Passes to the Property Show this Sat April 30th

April 25, 2011

Canadian Mortgage Trends: 10% Down Payments & Other Policy Debates


Canadian home sales rise – Investors.com

Canadian home sales rise


Home resales edged up 0.1% in March to 38,710 homes while the average sales price rose 0.7% to $386,500, the Canadian Real Estate Assoc. said as the once robust housing sector slows. Compared with a year ago, sales were down 6.6% while prices were up 8.9%.


Real estate: comparing Canada and the US – From the Desk of the Editor

KUOW radio in Seattle  this morning had a discussion about home ownership around the world, comparing Canada, the United States and Europe. As it turns out Canada has one of the largest percentages of home ownership – between 60 to 70 per cent.

In prepping to take part in the discussion (as the Canadian voice) I discovered a few interesting stats.

The main thing is that while insurance is available (and usually mandatory) for borrowers who have less than 20 per cent of a down payment, the insurance isn’t automatic. In fact, according to mortgage broker Feisal Panjwani the Canada Mortgage and Housing Corp, as well as the other mortgage insurers like Genworth, still have pretty stringent rules about what mortgages they will insure. So borrowers still need to have a good credit rating, good income to make the payments and an acceptable debt service ratio. That’s probably the biggest difference between the Canadian and US housing markets. In the US one of the problems was that insurers were insuring sub-prime mortgages, where the lenders didn’t have good credit, and whose income may have been sketchy. Then when the borrower defaulted the insurer was left holding the bag (or the bank if the insurer – and there were many of them – didn’t have the money).

Even when the CMHC agreed to insure zero-down 40-year mortgages, it still required the good credit rating and income, Panjwani said.

With those requirements arrears on mortgages in Canada are about 0.42 per cent (no numbers are available for actual defaults) according to the Canadian Association of Accredited Mortgage Professionals. CAAMP has some other interesting statistics. For example, while the total value of owner-occupied housing in Canada is estimated at $2.91 trillion, mortgages on these homes total $820 billion, or only about 28 per cent. In other words, most people have quite a bit of equity built up in their homes.

In a survey carried out last year by CAAMP (read their full report here) respondents said they could afford to pay another $1,000 a month on average on their mortgages if rates went up.

So overall it sounds like the Canadian real estate market is in pretty good shape. As always there will be people who do overextend themselves, and may be in trouble if rates go up or worse, they lose their job. But I think everyone would be in trouble in the latter case. But it does sound like being conservative, like our mortgage insurers and lenders have been, has kept the Canadian real estate market relatively safe.