BoC Governor Mark Carney has indicated that the recession is over, with conditions. Jobless numbers will still be affected and consumers (including real estate buyers) have to get the message and start spending. Here is the article from Halifax’s Chronicle Herald.
BoC: Recession over
Economy will grow this summer but job growth will lag, Carney says
By JULIAN BELTRAME The Canadian PressFri. Jul 24 - 4:46 AM
OTTAWA — The Bank of Canada is declaring the recession essentially over, saying Canada’s economy will begin growing this summer after nine months of stagnation and lead most of the industrialized world next year.
The rosy assessment — despite numerous cautions and caveats — rippled through the markets Thursday, lifting the loonie and many stocks.
"We believe the economy will grow this quarter," bank governor Mark Carney told a news conference.
"Things are unfolding a little faster in terms of the recovery in (consumer and business) confidence and financial conditions."
However, experts say the renewed growth after three quarters of economic shrinkage — two straight declining quarters is the technical definition of a recession — won’t lead to job growth until much later, when companies regain confidence and begin hiring again.
Earlier, the bank had dropped its April call for a one per cent contraction this quarter and now says the economy will instead expand by 1.3 per cent annualized.
That will be followed by a three per cent advance in the last three months of this year, and three per cent growth next year.
But Carney also issued a caution that recovery "is not a foregone conclusion," and that the economy remains dependent on massive government stimulus and his own conditional pledge to keep the policy interest rate at the historic low of 0.25 per cent until mid-2010.
Without such interventions in Canada and around the world, economies would still be spiraling downwards, he said.
Even with recent improvements, Carney said the part of the economy that impacts Canadians most directly — jobs — will continue to deteriorate even as output perks up. Economists say that’s because employers are unlikely to take on new workers until they are certain demand will last. "It is going to be a tough, long, hard slog to get this country back to full employment and Mr. Carney is hinting at that we are not out of the woods yet," agreed, Liberal Leader Michael Ignatieff, repeating his call for expansion of employment insurance benefits."
Statistics Canada calculates 370,000 jobs have disappeared since October, and some economists believe more than 500,000 will be lost before labour markets begin to recover.
While more optimistic than most forecasts, Carney concedes the bounce-back is modest by historical standards. In fact, he does not have the economy returning to full capacity until mid-2011.
Currently, the bank estimates the Canadian economy is operating 3.5 per cent below capacity.
Still, the markets chose to see the bright side of Carney’s new outlook.
The Toronto stock market surged almost 200 points late morning, while the Canadian dollar gained a full cent against the greenback and peaked above 92 cents US.
The latter result won’t please the central banker, who again voiced his concern that a stubbornly high-priced loonie will cut into the recovery because it will price some Canadian exports out of world markets.
Many economists doubt that the central bank would intervene to reign in the loonie, however, although the bank’s governing council has not ruled out action.
’Things are unfolding a little faster in terms of the recovery . . .’
MARK CARNEY Bank of Canada governor
Friday, July 24, 2009
Thursday, July 23, 2009
Rate - how important is it? Really?
Lots of info in this one. First off, I recently attended the CMHC 2009 Broker Survey meeting in Halifax and got some great information to share (some of it about rates is very surprising). And to back it up, I got an article from Canadian Mortgage Trends website that talks to the point of Best Deal over Best Rate. Enjoy.
CMHC 2009 Customer Survey
· Brokers market share
o 44% of first time buyers
o 38% of all purchasers (nationally and in Atlantic Canada)
· 24% of all mortgage transactions are done by brokers
o 16% are done by personal bankers
o 13% are done by general loans officers
o Another 7% done by bank managers/senior staff
o That’s 36% being done in the bank and another 33% done by bank’s “sales force” staff
· 90% of all renewers stay with their original lender (this speaks volumes about trailer fees offered by Merix – why swim against the current?)
o 66% of all first time home buyers stay with their original lender
· What is the customer’s main reason for remaining with their original lender?
Reason Renewers Refinancers 1st time buyers Repeat buyers
Rate 45% 40% 52% 50%
Service related 33% 32% 26% 26%
Convenience 20% 17% 16% 13%
· This shows that if the client is staying with their original lender, it is usually rate/deal related, so trying to move a client for a better rate doesn’t seem to work
· And if they are switching lenders due to rate, how much of a difference does it take for them to move. You might be surprised by this:
Main Reason Renewers Refinancers 1st time buyers Repeat buyers
25 bps or less 7% 3% 5% 8%
25 to 50 bps 17% 10% 23% 21%
50 to 75 bps 8% 18% 22% 15%
75 to 100 bps 16% 13% 8% 8%
100 to 200 bps 23% 22% 21% 29%
200+ bps 24% 31% 13% 14%
· This shows that a rate difference below 25 BPS is really not that important to the clients.
· Then what drives a client’s satisfaction, if it is not just rate? Of all segments surveyed, 32% said “Best Deal” was the key driver of satisfaction. 25% said “Rate”, 20% said “Good Relationship” and 13% said “Good Service”.
These are great points to guide you as to where to focus in your business. Get the client the “Best Deal”, not just the best rate, but keep the rate in the ballpark (within 25 BPS of the others). And use a lender who will pay you after renewal (now who does that, oh yeah – MERIX), as 90% of your customers are staying with their original lender!
July 22, 2009
The Best Mortgage Rate for You
The Mortgage Centre’s rate page has a very sage title:
“Is it the best rate, or the best rate for you?”
Its point being: A lot of websites claim to have the best rates, but there’s always more to the story.
For one thing, probably 95% of “best rate” claims are false. More importantly, as the Mortgage Centre rightly suggests, the lowest rate is not necessarily the best rate for you.
Unless you know who the quoted lender is, and know that lender’s criteria for credit score, debt ratio, property type, loan-to-value, income, etc., there’s no way to tell on your own if you meet their standards. (Albeit, someone proving $100,000 income the past few years, putting down 20% on a marketable home, with a 35% TDS, and an 720 beacon score, can feel confident about qualifying at most lenders [just as an example]).
Back to the point, there are lots of qualification hoops to jump through with some lenders—especially the lowest cost lenders.
Moreover, there are various economic dangers strewn about the fine print of many mortgages. Examples include:
Zero prepayment privileges
12-month interest penalties
IRD penalties based on bond yields
Fully closed terms (no way out until maturity)
Ultra-short rate-hold periods
No pre-approvals
No portability
Other annoyances:
Horrible post-closing service
Slow approval times
No online access
Unexpected fees
It is the job of mortgage planners to filter the plethora of mortgages and present the best overall value to you. When determining overall value, rate is the #1 criteria, but only after a mortgage is determined to be suitable.
There’s no downside to good advice, so get as much of it as you can. As Canadian Mortgage Professional very wisely wrote: “Homebuyers who ask mortgage professionals 'what is your best rate?' are not going to be well served by a mortgage professional that simply responds with a number.”
Posted at 12:49 AM (www.canadianmortgagetrends.com)
CMHC 2009 Customer Survey
· Brokers market share
o 44% of first time buyers
o 38% of all purchasers (nationally and in Atlantic Canada)
· 24% of all mortgage transactions are done by brokers
o 16% are done by personal bankers
o 13% are done by general loans officers
o Another 7% done by bank managers/senior staff
o That’s 36% being done in the bank and another 33% done by bank’s “sales force” staff
· 90% of all renewers stay with their original lender (this speaks volumes about trailer fees offered by Merix – why swim against the current?)
o 66% of all first time home buyers stay with their original lender
· What is the customer’s main reason for remaining with their original lender?
Reason Renewers Refinancers 1st time buyers Repeat buyers
Rate 45% 40% 52% 50%
Service related 33% 32% 26% 26%
Convenience 20% 17% 16% 13%
· This shows that if the client is staying with their original lender, it is usually rate/deal related, so trying to move a client for a better rate doesn’t seem to work
· And if they are switching lenders due to rate, how much of a difference does it take for them to move. You might be surprised by this:
Main Reason Renewers Refinancers 1st time buyers Repeat buyers
25 bps or less 7% 3% 5% 8%
25 to 50 bps 17% 10% 23% 21%
50 to 75 bps 8% 18% 22% 15%
75 to 100 bps 16% 13% 8% 8%
100 to 200 bps 23% 22% 21% 29%
200+ bps 24% 31% 13% 14%
· This shows that a rate difference below 25 BPS is really not that important to the clients.
· Then what drives a client’s satisfaction, if it is not just rate? Of all segments surveyed, 32% said “Best Deal” was the key driver of satisfaction. 25% said “Rate”, 20% said “Good Relationship” and 13% said “Good Service”.
These are great points to guide you as to where to focus in your business. Get the client the “Best Deal”, not just the best rate, but keep the rate in the ballpark (within 25 BPS of the others). And use a lender who will pay you after renewal (now who does that, oh yeah – MERIX), as 90% of your customers are staying with their original lender!
July 22, 2009
The Best Mortgage Rate for You
The Mortgage Centre’s rate page has a very sage title:
“Is it the best rate, or the best rate for you?”
Its point being: A lot of websites claim to have the best rates, but there’s always more to the story.
For one thing, probably 95% of “best rate” claims are false. More importantly, as the Mortgage Centre rightly suggests, the lowest rate is not necessarily the best rate for you.
Unless you know who the quoted lender is, and know that lender’s criteria for credit score, debt ratio, property type, loan-to-value, income, etc., there’s no way to tell on your own if you meet their standards. (Albeit, someone proving $100,000 income the past few years, putting down 20% on a marketable home, with a 35% TDS, and an 720 beacon score, can feel confident about qualifying at most lenders [just as an example]).
Back to the point, there are lots of qualification hoops to jump through with some lenders—especially the lowest cost lenders.
Moreover, there are various economic dangers strewn about the fine print of many mortgages. Examples include:
Zero prepayment privileges
12-month interest penalties
IRD penalties based on bond yields
Fully closed terms (no way out until maturity)
Ultra-short rate-hold periods
No pre-approvals
No portability
Other annoyances:
Horrible post-closing service
Slow approval times
No online access
Unexpected fees
It is the job of mortgage planners to filter the plethora of mortgages and present the best overall value to you. When determining overall value, rate is the #1 criteria, but only after a mortgage is determined to be suitable.
There’s no downside to good advice, so get as much of it as you can. As Canadian Mortgage Professional very wisely wrote: “Homebuyers who ask mortgage professionals 'what is your best rate?' are not going to be well served by a mortgage professional that simply responds with a number.”
Posted at 12:49 AM (www.canadianmortgagetrends.com)
Wednesday, July 15, 2009
Where is the 5 year rate going?
Here is an interesting article from Canadian Mortgage Trends on where the 5 year rate is headed. They say that lenders want to make sure the lower bond yields are not a “flash in the pan”, but with the bond yield going up to 2.52% and spreads falling below 2% today, I submit that we are going to continue to see that yo-yo effect on bond yields and that will keep the lenders from committing to a rate drop (based on bond yields) until there is some more stability on the spreads.
July 14, 2009
Will 5-Year Mortgage Rates Fall Further?
Banks last raised mortgage rates on June 9, when the 5-year bond yield was at 2.68%.
Since then, the 5-year yield (which guides fixed mortgage pricing) has fallen to 2.44%, but bank rates have not budged.
BMO economist, Doug Porter, told the Toronto Star it’s because banks "want to be convinced that it is not a flash in the pan and that any retreat in yields is sustained."
He says: "I believe that we are probably not too far away from that point. It might take a little more of a deeper rally (in bond prices) to make it completely convincing."
The often quoted CIBC economist, Benjamin Tal, thinks yields could fall another 0.05% to 0.10%, but any drop in fixed-rates will be short-lived. "By the end of the year, we'll start seeing rates rising," he says.
If rates do drop another 0.10%, it would translate into a $5.50 monthly payment savings for every $100,000 of mortgage. That’s a total savings of $478 over five years, assuming a 25-year amortization and typical fixed rates.
But remember, trying to time bond and mortgage rates is financially hazardous. While you’re waiting, rates can move the wrong way—quickly.
You’re usually better served by focusing on factors that can dwarf a 0.10% rate savings, like finding a mortgage with the optimal term and just the right amount of flexibility (pre-payment options, openness, re-advanceability, etc.). Too much flexibility is a waste, and too little can cost you in the long-run.
Posted at 12:03 AM in Mortgage Rate Trends
July 14, 2009
Will 5-Year Mortgage Rates Fall Further?
Banks last raised mortgage rates on June 9, when the 5-year bond yield was at 2.68%.
Since then, the 5-year yield (which guides fixed mortgage pricing) has fallen to 2.44%, but bank rates have not budged.
BMO economist, Doug Porter, told the Toronto Star it’s because banks "want to be convinced that it is not a flash in the pan and that any retreat in yields is sustained."
He says: "I believe that we are probably not too far away from that point. It might take a little more of a deeper rally (in bond prices) to make it completely convincing."
The often quoted CIBC economist, Benjamin Tal, thinks yields could fall another 0.05% to 0.10%, but any drop in fixed-rates will be short-lived. "By the end of the year, we'll start seeing rates rising," he says.
If rates do drop another 0.10%, it would translate into a $5.50 monthly payment savings for every $100,000 of mortgage. That’s a total savings of $478 over five years, assuming a 25-year amortization and typical fixed rates.
But remember, trying to time bond and mortgage rates is financially hazardous. While you’re waiting, rates can move the wrong way—quickly.
You’re usually better served by focusing on factors that can dwarf a 0.10% rate savings, like finding a mortgage with the optimal term and just the right amount of flexibility (pre-payment options, openness, re-advanceability, etc.). Too much flexibility is a waste, and too little can cost you in the long-run.
Posted at 12:03 AM in Mortgage Rate Trends
Wednesday, July 8, 2009
Atlantic Canada better than most in Canada for housing
Here is a great article to share with your clients and referral sources. Looks like Atlantic Canada is doing better than most other regions.
Transmitted by CNW Group on : July 8, 2009 05:00
Atlantic Canada sails through the housing storm with minimal damage, says RBC Economics
TORONTO, July 8 /CNW/ - The cost of owning a home in Atlantic Canada continues to improve with housing affordability rates among the best in the country, according to the latest housing report released today by RBCEconomics.
"Generally favourable affordability levels in Atlantic Canada have giventhe region some protection against the housing storm," said Robert Hogue,senior economist, RBC. "Home prices have sailed through mostly unscathed, withfew declines reported since last fall."
RBC's affordability measures in the Atlantic Provinces improved again inthe first quarter between 2.1 and 3.5 percentage points, marking the thirdtime this has occurred in the past year, for all housing types.
The report noted that St. John's continues to be Canada's housing hotspot, showing significant price appreciation over the past year although thepace has slowed in recent months. The price of homes in Halifax, Saint Johnand Charlottetown also grew, despite increased levels of volatility.
RBC's Affordability measure for a detached bungalow for Canada's largestcities is as follows: Vancouver 62.6 per cent, Toronto 45.9 per cent, Ottawa39.1 per cent, Montreal 36.5 per cent and Calgary 35.1 per cent.
The report also looked at mortgage carrying costs relative to incomes fora broader sampling of cities across the country, including St. John's,Halifax, Saint John and Charlottetown. For these cities, RBC has used anarrower measure of housing affordability that only takes mortgage paymentsrelative to income into account.
The property benchmark for the Housing Affordability measure, which RBChas compiled since 1985, is based on the costs of owning a detached bungalow.Alternative housing types are also presented including a standard two-storeyhome, a standard townhouse and a standard condo. The higher the reading, themore costly it is to afford a home. For example, an Affordability reading of50 per cent means that homeownership costs, including mortgage payments,utilities and property taxes, take up 50 per cent of a typical household'smonthly pre-tax income.
Highlights from across Canada:
- British Columbia: In the first quarter, housing affordability in B.C. showed the sharpest improvements since 1991. Sales of existing homes have picked up vigorously since the November-January lows, prices appear to be leveling off and more balanced supply and demand conditions are expected to emerge in coming months.
- Alberta: The drop in mortgage rates and sinking home prices have fully restored homeownership affordability in the province. Sales of existing units have rebounded smartly this spring from earlier depressed levels and market conditions have tightened. Alberta's housing market is likely at the point of turning the corner.
- Saskatchewan: Significant improvement in affordability has helped the Saskatchewan housing market pick up pace again after bottoming at the start of the year. Moderately stronger sales of existing homes this spring and a slower pace of home sale listings have restored some balance into the market.
- Manitoba: Supported by relatively favourable affordability rates, Manitoba's market continues to be among the most resilient in the country. A relatively robust economy, steady population growth and recent improvement in affordability should support housing demand in the period ahead.
- Ontario: Spring resales figures show a surprising amount of activity in Ontario, with average prices for existing homes climbing back to where they were mid-2008. Much of this resurgence in the province is due to greater affordability, with homeownership costs for detached bungalows and condominiums dropping below long-term averages.
- Quebec: Resale activity has rebounded quickly in Quebec, reflecting a homeownership market that is now more accessible than has generally been the case in the province since the mid-1980s. Home prices have generally stayed their upward course, even through the period of weaker resale activity earlier this year.
The full RBC Housing Affordability report is available online, as of 8a.m. EDT today at www.rbc.com/economics/market/pdf.house.pdf. /For further information: Robert Hogue, RBC Economics, (416) 974-6192;Matthew Gierasimczuk, RBC Media Relations, (416) 974-2124/
Transmitted by CNW Group on : July 8, 2009 05:00
Atlantic Canada sails through the housing storm with minimal damage, says RBC Economics
TORONTO, July 8 /CNW/ - The cost of owning a home in Atlantic Canada continues to improve with housing affordability rates among the best in the country, according to the latest housing report released today by RBCEconomics.
"Generally favourable affordability levels in Atlantic Canada have giventhe region some protection against the housing storm," said Robert Hogue,senior economist, RBC. "Home prices have sailed through mostly unscathed, withfew declines reported since last fall."
RBC's affordability measures in the Atlantic Provinces improved again inthe first quarter between 2.1 and 3.5 percentage points, marking the thirdtime this has occurred in the past year, for all housing types.
The report noted that St. John's continues to be Canada's housing hotspot, showing significant price appreciation over the past year although thepace has slowed in recent months. The price of homes in Halifax, Saint Johnand Charlottetown also grew, despite increased levels of volatility.
RBC's Affordability measure for a detached bungalow for Canada's largestcities is as follows: Vancouver 62.6 per cent, Toronto 45.9 per cent, Ottawa39.1 per cent, Montreal 36.5 per cent and Calgary 35.1 per cent.
The report also looked at mortgage carrying costs relative to incomes fora broader sampling of cities across the country, including St. John's,Halifax, Saint John and Charlottetown. For these cities, RBC has used anarrower measure of housing affordability that only takes mortgage paymentsrelative to income into account.
The property benchmark for the Housing Affordability measure, which RBChas compiled since 1985, is based on the costs of owning a detached bungalow.Alternative housing types are also presented including a standard two-storeyhome, a standard townhouse and a standard condo. The higher the reading, themore costly it is to afford a home. For example, an Affordability reading of50 per cent means that homeownership costs, including mortgage payments,utilities and property taxes, take up 50 per cent of a typical household'smonthly pre-tax income.
Highlights from across Canada:
- British Columbia: In the first quarter, housing affordability in B.C. showed the sharpest improvements since 1991. Sales of existing homes have picked up vigorously since the November-January lows, prices appear to be leveling off and more balanced supply and demand conditions are expected to emerge in coming months.
- Alberta: The drop in mortgage rates and sinking home prices have fully restored homeownership affordability in the province. Sales of existing units have rebounded smartly this spring from earlier depressed levels and market conditions have tightened. Alberta's housing market is likely at the point of turning the corner.
- Saskatchewan: Significant improvement in affordability has helped the Saskatchewan housing market pick up pace again after bottoming at the start of the year. Moderately stronger sales of existing homes this spring and a slower pace of home sale listings have restored some balance into the market.
- Manitoba: Supported by relatively favourable affordability rates, Manitoba's market continues to be among the most resilient in the country. A relatively robust economy, steady population growth and recent improvement in affordability should support housing demand in the period ahead.
- Ontario: Spring resales figures show a surprising amount of activity in Ontario, with average prices for existing homes climbing back to where they were mid-2008. Much of this resurgence in the province is due to greater affordability, with homeownership costs for detached bungalows and condominiums dropping below long-term averages.
- Quebec: Resale activity has rebounded quickly in Quebec, reflecting a homeownership market that is now more accessible than has generally been the case in the province since the mid-1980s. Home prices have generally stayed their upward course, even through the period of weaker resale activity earlier this year.
The full RBC Housing Affordability report is available online, as of 8a.m. EDT today at www.rbc.com/economics/market/pdf.house.pdf. /For further information: Robert Hogue, RBC Economics, (416) 974-6192;Matthew Gierasimczuk, RBC Media Relations, (416) 974-2124/
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