28 Apr

Interest Rate Cut Unlikely but Low Rates Set to Remain


Posted by: John Dunford

The governor of the Bank of Canada gave a speech in New York Tuesday in which he highlighted the weakness in the global growth outlook and how lower interest rates are likely to be the new normal. Stephen Poloz ruled out a further cut in Canada’s interest rates though, unless there is a “shock of some significance.” While the governor’s words were uncomfortable for investors – pension funds were specifically warned to expect lower rates for some time – it is clearly good news for mortgage rates.

27 Apr

Slowing Trade Isn’t a Reason for Investors to Worry, Poloz Says


Posted by: John Dunford

Global trade has reached a new “balance point” where it will contribute less to international growth than it did over the two decades before the financial crisis, Bank of Canada Governor Stephen Poloz said today in New York.

The surge in global trade that occurred before the financial crisis was a historical exception, Poloz said in a speech to Canadian and U.S. securities industry associations, reflecting a pace of globalization that won’t be replicated. While slower trade will reduce the global economy’s ability to grow, it isn’t necessarily a sign of underlying deterioration, he said.

“The weakness in trade we’ve seen is not a warning of an impending recession,” Poloz said. “I believe that the most important factor behind the slowdown in trade growth is that the big opportunities for increased international integration have been largely exploited.”

The comments reflect recent warnings by Bank of Canada officials that the Canadian economy’s long-term capacity to grow is slowing beyond short-term cyclical factors such as declining oil prices. Those forces — which are driving down long-term interest rates — reflect a complex list of things such as an aging workforce and slowing global trade.

“My argument is that a significant part of the strong productivity performance in the two decades before the crisis was due to globalization, and that the globalization process may have brought trade in the global economy to a new balancing point,” Poloz said.

 Poloz also said investors shouldn’t presume monetary policy is no longer effective.

“One worry I hear a lot these days hits pretty close to home — the idea that monetary policy just isn’t working anymore,” Poloz said.

“That’s one myth I’d like to dispel right off the top,” he said. “The fact is that policy actions — both monetary and fiscal — taken in the wake of the global financial crisis prevented what would have been a second Great Depression.

An increase in interest rates to 3 percent or 4 percent would trigger a recession, he said.

There are reasons to still be optimistic on trade, he said. Part of the slowdown is cyclical, reflecting falling business investment, and trade should pick up as the world economy begins to gain traction. There are signs that companies and investors are finding ways to “improve the efficiency of supply chains in many geographic areas.” There is also room for policy makers to nudge the global integration process forward even if the big gains to trade have already been exploited.

“For policy makers, of course, this means we should be working to help initiatives such as Trans-Pacific Partnership and the Comprehensive Economic and Trade Agreement between Canada and the European Union become a reality,” Poloz said.

14 Apr

Top 10 Things to Consider Before Your Mortgage Matures


Posted by: John Dunford

1. Have you explored all your options. Once you receive your mortgage renewal statement, there is nothing easier than signing on for another term, heck 70% of everybody that received them from their current lender just signs over thousands of dollars. This may make sense in some cases, but your family and financial situation may change over time. I can look for opportunities that may meet or exceed your current expectations.

2. Are you comfortable with your current payments. If your monthly payments are barely letting you break even each month then it might be time to reduce payments. On the other hand, if you are earning more income then why not pay down your mortgage faster and save thousands in interest over time. Have you reviewed your prepayment options?

3. Do you need cash flow for other things. Your priorities may have changed since you purchased the home. Things like your child(s) post secondary education, planning a career change or a major purchase may now be front and centre. With ‘today’s’ current market, there may now be access to additional equity in your home that can be used for other purposes.

4. Can you handle fluctuating rates. Some homeowners are comfortable with the ebb and flow of interest rates and some are not. It is best to base your decision on your personal situation and not what you read in the daily news. I can help you decide on a fixed or variable rate mortgage options, but ultimately it’s your decision.

5. Will you sell soon. If so, consider a shorter term mortgage that has flexible manageable terms if you decide to sell your home.

6. Are you thinking of a major renovation. Upgrades can increase the value of your home but the cost of having the work done can tie up a lot your money. Make sure to allow for ample finances to complete.

7. When do you want to be ‘mortgage-free.’ Increasing your payments will raise your monthly expenses now, but you will ultimately save thousands on interest in the long term. A mortgage-free lifestyle could be just around the corner.

8. Could you use your home equity to fulfill other goals. Refinancing a mortgage can be one way to free up cash you need for other things, which could even include purchasing another property.

9. Have your insurance needs changed. If your home equity has increased, there may not be the need for default insurance anymore.

10. Are you getting the best rates and terms. In a competitive mortgage environment your good credit history can make refinancing your mortgage work to your advantage. Dominion Lending Centres analyzes mortgage markets daily to ensure you don’t miss any money saving opportunities.


8 Apr

CMHC Releases Report on Foreign Ownership


Posted by: John Dunford

“The really interesting thing about this report is the insight it provides into foreign ownership of condominiums in Canada by age of structure. For example, in the downtown core of Toronto, we know that, in buildings completed since 2010, about 10 per cent of those units are owned by foreign buyers,” Bob Dugan, chief economist, Canada Mortgage and Housing Corporation, said. “This compares to about 2.3 percent for units completed during the 1990s. This represented another piece in the puzzle of foreign investment in Canada. It remains a top priority for CMHC to continue to get more information on foreign investment in Canada’s Housing market.”

The report found that foreign ownership is most prevalent in new condo buildings in Toronto and Vancouver.

In Toronto about 10% of newer buildings (built after 2010), compared to 2% of those buildings built in the 1990s.

A similar trend was found in Vancouver, where 6% of units in newer buildings are believed to be foreign-owned.

Highlights from the report include;

•In the Toronto CMA, the share of foreign ownership is less than 2% for buildings completed before 1990 and 7% for newer constructions completed since 2010. This effect is even more pronounced in Toronto Centre where about 10% of the newer stock is owned by foreigners.

•In the Vancouver CMA, foreign buyers’ share rises from less than 2% for properties built before 1990 to about 6% for those completed since 2010.

The stats were pulled from a fall 2015 survey.

CMHC admits the data isn’t perfect.

“At this time, no existing tool can provide a definitive measure of the level of foreign investment in Canada’s housing markets,” it said in a release. “That said, CMHC regularly engages in discussions internally, as well as with industry experts, as part of its continued efforts to develop a program of work that would better capture data on foreign buyers.”