21 Apr

More Bank of Canada News


Posted by: John Dunford

Bank of Canada governor Stephen Poloz has given a strong hint that there will be no further interest rate cut in the near future. Speaking in New York Mr Poloz said that the January cut of 0.25 per cent seems to have done the job the bank wanted; insuring against the oil price slide. With oil prices holding more steadily for now it is looking unlikely that there will be a reduction from the 0.75 per cent current rate. The governor also said he expected a bounce back in the economy in the second quarter after a weak start to the year.

15 Apr

Bank Of Canada Announces Overnight Rate


Posted by: John Dunford

Despite a “stalled” economy in the first quarter of 2015, the Bank of Canada revealed some optimism as it held steady the target for the overnight rate.

“Risks to the outlook for inflation are now roughly balanced and risks to financial stability appear to be evolving as expected,” the Bank of Canada wrote in an official release. “The Bank judges that the current degree of monetary policy stimulus remains appropriate and therefore is maintaining the target for the overnight rate at 3/4 per cent.”

The total CPI inflation is at one per cent, due to a drop in consumer energy prices and core inflation has hovered around 2 per cent over the past few months, according to the BoC.

“The Canadian economy is estimated to have stalled in the first quarter of 2015,” the Central bank wrote. The Bank’s assessment is that the impact of the oil price shock on growth will be more front-loaded than predicted in January, but not larger.”

The BoC also stated it will continue to monitor the impact oil price shock will have on the economy. However, it is expecting a the economy to rebound in the coming months.

“As the impact of the oil shock on growth starts to dissipate, this natural sequence is expected to re-emerge as the dominant trend around mid-year,” the BoC wrote. “Real GDP growth is projected to rebound in the second quarter and subsequently strengthen to average about 2 1/2 per cent on a quarterly basis until the middle of 2016. The Bank expects real GDP growth of 1.9 per cent in 2015, 2.5 per cent in 2016, and 2.0 per cent in 2017.”

It’s a different tune than the one sung in January, when the Bank of Canada shocked the country by cutting its long-held rate by ¼ per cent.











14 Apr

Bank of Canada Report


Posted by: John Dunford

When the Bank of Canada releases its latest monetary policy report this week mortgage lenders will be looking for any hints that could suggest an interest rate cut. It’s been three months since the last one but since then there has been a more cautious approach to further cuts. Most experts are not expecting this Wednesday to bring good news for borrowers; the bond markets for example are only factoring in a 10 per cent chance of a cut. The policy may be more revealing as the central bank weighs the continued weakness in the oil industry and sets out its forecast for the wider economy. There is little consensus on whether further interest rate cuts will be required and even less on when and how fast they might happen; this week’s report may provide some clues.

5 Apr

CMHC Premium Hikes Are Coming


Posted by: John Dunford

If you plan to buy a home with less than 10% down and get CMHC insurance, get ready to pay another $450 per $100,000 of mortgage.

That’s what CMHC’s just-announced premium hike amounts to.

It’s the second time in about a year that CMHC has raised its fees on homeowners. The new premiums are a 14-15% increase over today, or 31% if you compare them to CMHC’s fees last year.

CMHC’s move targets only those putting down less than 10%, which amounts to 56.8% of CMHC-insured borrowers, as of CMHC’s latest reported quarter. The company says the decision is not because of an increase in borrower risk.

“For the average Canadian homebuyer who has less than a 10% down payment, the higher premium will result in an increase of approximately $5 to their monthly mortgage payment,” the agency said in its release today.

“CMHC completed a detailed review of its mortgage loan insurance premiums and examined the performance of the various sub-segments of its portfolio,” said SVP of Insurance Steven Mennill. “The premium increase for homebuyers with less than a 10% down payment reflects CMHC’s target capital requirements which were increased in mid-2014 (to 220% of the minimum OSFI requirements).”

We’ll probably know by next week if Genworth and Canada Guarantee follow CMHC’s lead. They did last time and there’s a fair chance they will again. A Genworth spokesperson said, “We are reviewing [CMHC’s announcement] and expect to release our official announcement early next week.”

Some quick notes for homebuyers:

• If your loan-to-value is over 90% and your lender submits your complete application to CMHC before June 1, 2015, you’ll       pay the old (cheaper) CMHC fees. It doesn’t matter when your mortgage closes.

• Submitting a pre-approval as opposed to a complete application will not hold the old insurance premiums.

• If you borrow your down payment, the fee is another 5 basis points (0.05%) higher, or 3.85% of the mortgage amount.

• If you live in Manitoba, Ontario and Quebec, you also have to pay provincial sales tax on your default insurance. That sales   tax cannot be rolled into the mortgage.

2 Apr

How Is Your Credit Score?


Posted by: John Dunford

If you want to get a loan or apply for a mortgage, your credit score is everything. That’s because it tells lenders how creditworthy you are. A low score means you’re more likely to fall behind on your debts. You’ll have a hard time qualifying for new credit, and even if you do, you’ll likely be hit with a super high interest rate. High scorers get the best rates on new credit because lenders can reasonably assume that they won’t flake out on their payments.

That being said, do you really know how you score is calculated?

To simplify things, we’re going to dive into the FICO score, which ranges from 300 to 850 and is the one most commonly used by lenders today. Once you know what factors go into your score, it’s much easier to understand what kinds of moves you should make if you want to improve your score.

There are 5 main factors that determine your FICO score:

Payment history. If your credit score was a pie, the biggest piece would belong to payment history. It accounts for 35% of your score. That means making on-time or late payments on all your credit accounts can really make or break you.

Debt balance. The next piece is how much debt you owe — it makes up 30% of your score. Credit companies really like people who use less than 30% of their available debt limit. That means if you’ve got three credit cards with a total credit line of $10,000, you don’t want to ever carry a balance of more than $3,000 at once.

Length of credit history. 15% of your score is determined by how old your credit history is — in general the older your accounts are, the better it is for your score.  But  even people who haven’t been using credit long can have high scores, depending on how good the rest of their credit report is, according to FICO.

New credit applications. Applying for new credit takes up 10% of the pie. If you apply for new credit every other month, that sends a red flag to credit bureaus.

Types of credit. As for the types of credit you have, this constitutes another 10% of your score. It’s better to have low levels of revolving debt like credit cards and more kinds of non-revolving debt like a car loan or student debt. It just makes you look less risky.

Now that you know how your score is calculated, you’d probably like to know how to see your score as well. It costs about $15 to get your score from MyFico.com. If you don’t want to pay up, some credit card companies have been adding credit scores to their customers’ accounts as a kind of bonus. Barclaycard, First National Bank and Discover each provide the FICO score for free.

There are also plenty of free ways to check your credit score estimate online through sites like CreditKarma, Credit.com, Quizzle or Credit Sesame.

Just keep in mind that these sites don’t give you your actual FICO score. They base your credit score on your credit history from one of the three major credit bureaus and then use their own algorithms to generate an estimate of your score. For example, Credit Sesame offers the Experian National Risk Score, which is based on data collected by Experian only. Similarly, Credit.com bases its free score on Experian data, offering both a VantageScore 3.0 and Experian credit score. Quizzle leans on Equifax data. CreditKarma offers scores based on Equifax and TransUnion data.

Unless you’re a brand loyalist, this shouldn’t concern you too much.  Your scores will undoubtedly vary across these platforms because no two services use the same math to get your score. However, rather than focusing on matching up your scores, look at where your score falls in the credit risk range. Each site has its own version of a chart that tells you whether your score makes you a poor, good, or excellent candidate for credit. No matter which site you use, your score should land you close to the same range in each. If one score is totally out of whack, it’s a sign that there may be something fishy going on and you should review your credit history with that particular bureau.