Monday, November 28, 2011

Canada’s slowing economy may need rate cuts: OECD

By Greg Quinn


Canada’s economy is slowing because of weaker foreign demand and may need new stimulus from the central bank and government if things get worse, the Organization for Economic Cooperation and Development said.

Gross domestic product will grow 1.9% next year, the Paris-based OECD predicted Monday, down from its May forecast for a 2.8% expansion. The outlook for this year was pared to 2.2% from 3% in May, and it estimated 2013 growth of 2.5%.

Finance Minister Jim Flaherty said last week he may offer additional stimulus if required, adding the risks to the global recovery from Europe’s debt crisis are increasing. Bank of Canada Governor Mark Carney has kept his key lending rate at 1% since September 2010 and has said the economy won’t fully recover until well into 2013.

“Output is projected to expand at a slow pace as exports are restrained by sluggish external demand,” the OECD report said. “Domestic spending should sustain growth but at a moderate rate, as high debt and waning sentiment curb consumption growth.”

Consumers may be discouraged from spending by debts that are a record 150% of disposable income and by a weak job market marked by government cutbacks and slow private hiring, the OECD said. Unemployment will be little changed next year at 7.3% from this year’s 7.4% according to the report.

“Risks are skewed to the downside,” the OECD said, and if they materialize “the Bank of Canada should ease monetary policy via further interest rate cuts, which in a downside scenario would be consistent with the inflation target.”

The Bank of Canada has predicted inflation will slow to 1% in the second quarter of next year from 2.7% this quarter. The bank acts to keep inflation in the middle of a 1% to 3% band.

Thursday, November 10, 2011

Bank of Canada could slash interest rates in a big way next year

John Shmuel Nov 9, 2011 – 4:10 PM ET | Last Updated: Nov 10, 2011 2:06 AM ET

As the nail biter in Europe continues this week, two economists are predicting the Bank of Canada will move to cut rates in a big way next year.

Sheryl King, an economist at Bank of America Merril Lynch, said in a note that the volatility hitting Europe and the risk of damage to the global economy means the Bank of Canada will move to cut its benchmark interest rate to ward off the risk of recession. Her prediction is the cut will be a whopping 0.75% decrease from the current rate of 1%.

“With the Eurozone sovereign debt and banking crisis showing no sign of containment, we think the Bank of Canada will cut rates back to the effective lower bound of 25 basis points (0.25%) early next year,” she said.

Ms. King forecasts that the cut would come in two phases, with a 0.50% trim being announced during the bank’s January 17 meeting, while the second and final 0.25% cut coming during the March 8 meeting.

Also predicting a lower interest rate next year was David Madani, Canada economist at Capital Economics. He is forecasting a more mild cut of 50 basis points, however, saying he expects it to occur in April or June.

Either way, Mr. Madani said he expects interest rates in Canada will remain low for some time.

“The Bank might communicate that its policy rate will remain at 0.50% for a lengthy period of time, conditional on its projected outlook for consumer price inflation,” he said, in reference to the Bank of Canada’s target of 2% annual inflation.

“Even if we are wrong, the broader message remains that interest rates will remain unusually low for a very long time.”

Most economists, however, are still predicting that the Bank of Canada will raise interest rates rather than lower them in 2012. In a recent Reuters survey of 40 economists last month, the consensus was that an interest rate increase will occur in the third quarter of next year.

If rates are cut, it will mark a sharp turnaround for the Bank of Canada, which only last year raised interest rates. Canada became one of the first advanced economies to raise its benchmark interest rates following the recession when the Bank of Canada implemented a 25 basis point hike in September of last year. The benchmark rate has since remained unchanged at 1%.

Friday, November 4, 2011

Royal LePage Launches New Mobile Site

Wednesday, 02 November 2011 09:12
In an effort to make real estate shopping more accessible, flexible and convenient, Royal LePage Real Estate Services has launched a new mobile site for Android, iPhone and BlackBerry mobile devices.
The site will provide both information about listings and neighbourhood data, as well as feedback and comments from agents and residents that know the neighbourhood inside and out-giving this tool some personal context.

This tool has been nicknamed the “Neighbourhood Navigator”, which Royal LePage describes as the combination of” seller and agent comments ... with neighbourhood "walkability scores" and consumer rankings of nearby businesses to provide valuable insights for users.”

Furthermore, users can take advantage of GPS to position themselves in their targeted neighbourhood, helping them find useful items like open houses and neighbourhood amenities like schools, banks, grocery stores, restaurants and cafes.

“Buying a home is often the largest financial decision Canadians will make in their lifetime," said Phil Soper, president and chief executive, Royal LePage Real Estate Services. "To help prospective buyers make informed decisions, our new mobile site allows users to gain extra insights from the seller about their home and comments from the agent about the neighbourhood."

"While it will take some time to get the seller and agent comments populated, we have many advanced features to serve as the backbone for the mobile site," added Soper.

"The future is mobile and we're pleased to offer homebuyers and sellers the ability to access valuable real estate information right from their mobile devices," said Soper.

Wednesday, November 2, 2011

Variable Rate Holders May Face Trouble .

CANADIANS - don't worry too much. In the USA most clients were approved at the LOWER floating rate to the maximum of their buying ability. So naturally a rate change would hurt them - if you have a VIRM in Canada you were probably approved at around 4-5% and Prime is still on 3%. Once in a while it is good not to have "The American Way".

Neil "Mortgage Man" McJannet

Monday, 31 October 2011 10:18 Newsroom . . A new report from Bank of America Merril Lynch warns about the dangers facing some Canadian mortgage holders
The report suggests that there are a vast number of variable rate mortgage holders who will be vulnerable in the event of an interest rate hike. In fact, they suggest that two of every three new mortgages is a variable rate mortgage.
In the past, according to Bank of America Merril Lynch, typically around 25%-30% of mortgages were variable rate, suggesting that the tremendous shift in appetite could spell financial disaster for a big chunk of home owners in the event of a rate hike.

The good news, at least for the moment, is that many economists have put the possibility of a rate hike off the table until around 2013- but the fundamental vulnerability remains.

While it doesn’t mean that a rate hike will spell disaster, the possibility does remain. However, as many Canadian mortgage brokers will tell you, variable rate or not- they typically qualify a client at a higher fixed rate, so as to remove them from the danger zone in the event of a rate hike, simply as a part of due diligence. While the possibility of a US- style collapse exists in theory, the prevailingly stringent attitudes towards lending in Canada suggest that there are stop gaps in place to protect against such vulnerability.

Economists at Bank of America Merril Lynch suggest that, because rates have been so low for such an extended period of time, that mortgage holders are constructing false expectations about the true cost of a mortgage, and as such are taking more risk than they perhaps should be.

They indicate that Canadian mortgage holders must be mindful of the fact that rates will likely rise. According to their research, a rise of 2% will be enough to push those on the fringe into trouble