Royal, TD raise mortgage rates in sign era of historically low rates ending
29/03/2010 1:27:00 PM
THE CANADIAN PRESS
TORONTO - Two of Canada's biggest banks are increasing some of their residential mortgage rates effective Tuesday in the latest sign that the era of historically low rates could soon come to an end.
The changes affect closed mortgages with terms of three, four and five years at RBC Royal Bank (TSX:RY) and TD Canada Trust (TSX:TD). Rates for mid-term mortgages like these tend to reflect the banks' borrowing costs on bond markets.
The biggest increase announced Monday affects five-year mortgages. Both banks are hiking their posted rate by six-tenths of a per cent to 5.85 per cent from 5.25 per cent.
A homeowner taking on a mortgage of $250,000 at the new rate of 5.85 per cent over a 25-year amortization period would pay $1,577 per month. Prior to Tuesday's hike, that mortgage would have cost $1489 a month, or $88 less.
The Bank of Canada is expected to begin raising lending rates this summer as it moves to fight growing inflationary pressures in the economy. The bank has kept its key overnight rate at a historic low of 0.25 per cent for more than a year to help stimulate the economy.
CIBC (TSX:CM) chief economist Avery Shenfeld said the central bank begins to step on the brake when it sees overheating in the economy, and economic growth in the first quarter has outperformed the central bank's forecast.
CIBC has lifted its own growth outlook for the first quarter of the year to over five per cent, due to strong indicators of recovery.
"The only reason the market is building in expectations for rate hikes is because it's seeing the economy as better able to withstand them," he said.
"Once the Bank of Canada starts pushing up short-term interests rates, and even in anticipation of that, it tends to spill out across the rest of the curve."
Mortgage rates hikes are a trend consumers should expect to continue, Shenfeld added.
He predicts the Bank of Canada will gradually raise key lending rates this summer, resulting in an increase of 0.75 per cent to one per cent by the end of the third quarter.
That would raise the average prime rate at the banks from 2.25 per cent to three per cent, which could tack on three-quarters of a per cent to the rates of homeowners with floating mortgage rates, Shenfeld said.
"Consumers are forewarned that when they look at borrowing today they have to factor in potentially higher costs," he said.
"Consumers have to be aware in taking on debt at historically low interest rates that down the road they will be higher and have to leave room for their ability to pay those higher rates."
When the Bank of Canada lifts rates, part of its intention is to take the fire out of the most interest sensitive segments of the economy, including the housing market, which has seen a particularly strong recovery, Shenfeld said.
The hot housing market is being driven, in part, by an influx of consumers willing to pay a premium for home ownership before interest rates rise.
Shenfeld said the rate increase could help dampen the house price inflation seen over the past several months.
And he added that the outperformance of the economy in the first half of the year will be countered by a slowdown in the second half.
"Not only do we expect weaker growth in the key US export market by then, but Canadian consumers may also be more temperate in the wake of a debt financed binge."
Monday, March 29, 2010
Interest Rates maybe on the rise
RBC, TD hike mortgage rates
http://www.cbc.ca/money/story/2010/03/29/mortgage-rates-up.html
Other banks expected to follow suit
Last Updated: Monday, March 29, 2010 | 10:24 AM ET Comments44Recommend43
CBC News
Royal Bank and TD Canada Trust announced Monday they are increasing several mortgage rates by up to 6/10ths of a percentage point.
The biggest jump is attached to the popular five-year fixed closed rate, which moves from 5.25 per cent to 5.85 per cent at both banks. That's the posted rate, which is routinely discounted by the big banks.
RBC's new discounted rate for the five-year term also rises 6/10ths of a percentage point to 4.59 per cent. TD's rises the same amount to 4.55 per cent.
Both banks also raised their three-year and four-year fixed closed rates. The posted three-year rate at Royal Bank climbs one-fifth of a percentage point to 4.35 per cent, while the posted rate at TD jumps 4/10ths of a point to 4.70 per cent.
The posted four-year rate at both banks jumps 4/10ths of a percentage point to 5.34 per cent.
Other banks are expected to follow suit. The new rates, effective Tuesday, represent the first hike in Canadian mortgage rates since last October.
Variable mortgage rates, which rise in tandem with the Bank of Canada's key overnight lending rate, are unchanged. But they are likely to be heading up soon too.
Bank of Canada governor Mark Carney warned last week that inflation was higher than expected. That had some market watchers forecasting that the central bank could move to raise its key lending rate as early as June.
The key rate has been at a rock-bottom 0.25 per cent since April 2009 to help the economy recover.
Fixed-rate mortgage rates tend to move higher when long-term bond yields rise.
A survey released last week by RBC found almost two-thirds of respondents expected the cost of servicing a mortgage to rise this week.
Read more: http://www.cbc.ca/money/story/2010/03/29/mortgage-rates-up.html#ixzz0jZs0hdne
http://www.cbc.ca/money/story/2010/03/29/mortgage-rates-up.html
Other banks expected to follow suit
Last Updated: Monday, March 29, 2010 | 10:24 AM ET Comments44Recommend43
CBC News
Royal Bank and TD Canada Trust announced Monday they are increasing several mortgage rates by up to 6/10ths of a percentage point.
The biggest jump is attached to the popular five-year fixed closed rate, which moves from 5.25 per cent to 5.85 per cent at both banks. That's the posted rate, which is routinely discounted by the big banks.
RBC's new discounted rate for the five-year term also rises 6/10ths of a percentage point to 4.59 per cent. TD's rises the same amount to 4.55 per cent.
Both banks also raised their three-year and four-year fixed closed rates. The posted three-year rate at Royal Bank climbs one-fifth of a percentage point to 4.35 per cent, while the posted rate at TD jumps 4/10ths of a point to 4.70 per cent.
The posted four-year rate at both banks jumps 4/10ths of a percentage point to 5.34 per cent.
Other banks are expected to follow suit. The new rates, effective Tuesday, represent the first hike in Canadian mortgage rates since last October.
Variable mortgage rates, which rise in tandem with the Bank of Canada's key overnight lending rate, are unchanged. But they are likely to be heading up soon too.
Bank of Canada governor Mark Carney warned last week that inflation was higher than expected. That had some market watchers forecasting that the central bank could move to raise its key lending rate as early as June.
The key rate has been at a rock-bottom 0.25 per cent since April 2009 to help the economy recover.
Fixed-rate mortgage rates tend to move higher when long-term bond yields rise.
A survey released last week by RBC found almost two-thirds of respondents expected the cost of servicing a mortgage to rise this week.
Read more: http://www.cbc.ca/money/story/2010/03/29/mortgage-rates-up.html#ixzz0jZs0hdne
Wednesday, March 24, 2010
Days of Rock Bottom Interest Rates are Numbered
Days of rock-bottom interest rates are numbered
http://www.theglobeandmail.com/report-on-business/days-of-rock-bottom-interest-rates-are-numbered/article1506701/
Jeremy Torobin
Ottawa — From Saturday's Globe and Mail Published on Friday, Mar. 19, 2010 10:21PM EDT Last updated on Monday, Mar. 22, 2010 6:16AM EDT
The clock is ticking on Canada's record-low borrowing costs, as inflation continues to move at a faster rate than the central bank had expected.
The hot reading on inflation issued by Statistics Canada Friday is raising expectations that the Bank of Canada could lift interest rates as early as June.
Economists, meanwhile, rushed to boost their growth forecasts as the country's economic rebound gathers steam.
The inflation figures, along with a report that showed retailers are benefiting from higher prices, pushed the Canadian dollar well past 99 U.S. cents Friday morning, before it fell back to close at 98.39 U.S. cents.
Consumer prices climbed 1.6 per cent in February, a slower pace than the 1.9 per cent in the previous month, according to Statscan. But the core rate – which strips out volatile items such as fuel – rose to 2.1 per cent from 2 per cent.
The Bank of Canada is guided by the core rate. Policy makers hadn't expected the core rate to reach the central bank's 2-per-cent target until the third quarter of 2011.
That, coupled with an improving economy, means Bank of Canada Governor Mark Carney is likely to boost rock-bottom interest rates sooner rather than later, some economists say.
“We're progressively leaving the recovery phase,” said Yanick Desnoyers, assistant chief economist at National Bank Financial in Montreal. Policy makers “are going to change their tone on the economy in April, and they're going to move in June. The longer they wait, the more aggressive they'll have to be.”
Mounting speculation that the central bank will begin boosting interest rates before the U.S. Federal Reserve moves has helped push the loonie close to parity with the U.S. currency.
Canada is on course to become the first in the Group of Seven – which also includes the United States, Great Britain, France, Germany, Japan and Italy – to raise borrowing costs since the global crisis. The U.S., in contrast, shows no signs of hiking rates any time soon. U.S. consumer prices last month failed to increase for the first time in almost a year, and producer prices dropped.
In Asia, however, inflation is roaring back as growth accelerates. India's central bank surprised markets yesterday with a rate hike, calling a fight against inflation “imperative.” China, which the World Bank suggested this week should do more to keep a lid on a potential bubble in its property market, posted a 16-month high in its consumer price index last month.
Still, many economists said Canada's core inflation numbers were skewed because of hotels in Vancouver that charged exorbitant rates during the Winter Olympics. In one case, a hotel that normally marketed itself as a discount option was charging $1,200 a night for a suite that sleeps six people, a steep markup from the usual maximum of about $280.
But Mr. Desnoyers noted that, assuming the “Olympic effect” temporarily added 0.2 percentage point to core inflation, a reversal of that boost would still leave the rate above the Bank of Canada's 1.6 per cent projection for the first quarter.
“It's going to be very hard to meet the Bank of Canada's projected inflation path with the kind of numbers we've seen recently,” he said.
Retail sales, meanwhile, rose 0.7 per cent in January, Statscan said, largely because of a rush for home-improvement products before the federal government's Home Renovation Tax Credit expired. In volume terms, overall sales were up just 0.1 per cent, which means the gains were driven by higher prices.
Mr. Carney pledged last April to keep the benchmark rate at 0.25 per cent through the middle of this year, or longer depending on the inflation outlook. He will update his inflation and growth forecasts during the week of April 20.
Increasingly, economists say if he doesn't start tightening in June, then he'll likely hike rates the following month.
Avery Shenfeld, chief economist at the Canadian Imperial Bank of Commerce, said Mr. Carney may be getting an “itchy trigger finger” but will likely wait until July, having said in a March 11 speech that borrowing costs staying where they are until the end of June would be “appropriate.”
Nonetheless, Mr. Shenfeld said CIBC is now raising its first-quarter growth forecast to “roughly 5 per cent” from 4.1 per cent. Bank of Montreal deputy chief economist Douglas Porter said Friday that his firm has lifted its forecast to 4.7 per cent from 3.7 per cent, “and that may not be the final word.” If they're right, it would be the second straight three-month period with growth at or close to 5 per cent. That compares with the central bank's estimate of 3.3 per cent for the final three months of 2009, and its prediction of 3.5 per cent for January through March.
There is an outside chance Mr. Carney could use a speech in Ottawa on March 24 to lay the groundwork for a rate hike on April 20, but virtually all analysts say the earliest he could possibly tighten would be at a June 1 decision, and most maintain that he'll wait until his next opportunity on July 20.
Most economists say Canada's central bank will lift rates in increments of no more than 0.25 of a percentage point and may stop after a few moves to re-evaluate. That's how the Reserve Bank of Australia has proceeded since last fall, when it became the first major central bank to tighten as the dust started to settle on the crisis.
Scotia Capital's Derek Holt, who has said for weeks that Mr. Carney could start raising rates as early as next month, predicts “non-emergency, but low” rates for years.
With a report from Bloomberg News
http://www.theglobeandmail.com/report-on-business/days-of-rock-bottom-interest-rates-are-numbered/article1506701/
Jeremy Torobin
Ottawa — From Saturday's Globe and Mail Published on Friday, Mar. 19, 2010 10:21PM EDT Last updated on Monday, Mar. 22, 2010 6:16AM EDT
The clock is ticking on Canada's record-low borrowing costs, as inflation continues to move at a faster rate than the central bank had expected.
The hot reading on inflation issued by Statistics Canada Friday is raising expectations that the Bank of Canada could lift interest rates as early as June.
Economists, meanwhile, rushed to boost their growth forecasts as the country's economic rebound gathers steam.
The inflation figures, along with a report that showed retailers are benefiting from higher prices, pushed the Canadian dollar well past 99 U.S. cents Friday morning, before it fell back to close at 98.39 U.S. cents.
Consumer prices climbed 1.6 per cent in February, a slower pace than the 1.9 per cent in the previous month, according to Statscan. But the core rate – which strips out volatile items such as fuel – rose to 2.1 per cent from 2 per cent.
The Bank of Canada is guided by the core rate. Policy makers hadn't expected the core rate to reach the central bank's 2-per-cent target until the third quarter of 2011.
That, coupled with an improving economy, means Bank of Canada Governor Mark Carney is likely to boost rock-bottom interest rates sooner rather than later, some economists say.
“We're progressively leaving the recovery phase,” said Yanick Desnoyers, assistant chief economist at National Bank Financial in Montreal. Policy makers “are going to change their tone on the economy in April, and they're going to move in June. The longer they wait, the more aggressive they'll have to be.”
Mounting speculation that the central bank will begin boosting interest rates before the U.S. Federal Reserve moves has helped push the loonie close to parity with the U.S. currency.
Canada is on course to become the first in the Group of Seven – which also includes the United States, Great Britain, France, Germany, Japan and Italy – to raise borrowing costs since the global crisis. The U.S., in contrast, shows no signs of hiking rates any time soon. U.S. consumer prices last month failed to increase for the first time in almost a year, and producer prices dropped.
In Asia, however, inflation is roaring back as growth accelerates. India's central bank surprised markets yesterday with a rate hike, calling a fight against inflation “imperative.” China, which the World Bank suggested this week should do more to keep a lid on a potential bubble in its property market, posted a 16-month high in its consumer price index last month.
Still, many economists said Canada's core inflation numbers were skewed because of hotels in Vancouver that charged exorbitant rates during the Winter Olympics. In one case, a hotel that normally marketed itself as a discount option was charging $1,200 a night for a suite that sleeps six people, a steep markup from the usual maximum of about $280.
But Mr. Desnoyers noted that, assuming the “Olympic effect” temporarily added 0.2 percentage point to core inflation, a reversal of that boost would still leave the rate above the Bank of Canada's 1.6 per cent projection for the first quarter.
“It's going to be very hard to meet the Bank of Canada's projected inflation path with the kind of numbers we've seen recently,” he said.
Retail sales, meanwhile, rose 0.7 per cent in January, Statscan said, largely because of a rush for home-improvement products before the federal government's Home Renovation Tax Credit expired. In volume terms, overall sales were up just 0.1 per cent, which means the gains were driven by higher prices.
Mr. Carney pledged last April to keep the benchmark rate at 0.25 per cent through the middle of this year, or longer depending on the inflation outlook. He will update his inflation and growth forecasts during the week of April 20.
Increasingly, economists say if he doesn't start tightening in June, then he'll likely hike rates the following month.
Avery Shenfeld, chief economist at the Canadian Imperial Bank of Commerce, said Mr. Carney may be getting an “itchy trigger finger” but will likely wait until July, having said in a March 11 speech that borrowing costs staying where they are until the end of June would be “appropriate.”
Nonetheless, Mr. Shenfeld said CIBC is now raising its first-quarter growth forecast to “roughly 5 per cent” from 4.1 per cent. Bank of Montreal deputy chief economist Douglas Porter said Friday that his firm has lifted its forecast to 4.7 per cent from 3.7 per cent, “and that may not be the final word.” If they're right, it would be the second straight three-month period with growth at or close to 5 per cent. That compares with the central bank's estimate of 3.3 per cent for the final three months of 2009, and its prediction of 3.5 per cent for January through March.
There is an outside chance Mr. Carney could use a speech in Ottawa on March 24 to lay the groundwork for a rate hike on April 20, but virtually all analysts say the earliest he could possibly tighten would be at a June 1 decision, and most maintain that he'll wait until his next opportunity on July 20.
Most economists say Canada's central bank will lift rates in increments of no more than 0.25 of a percentage point and may stop after a few moves to re-evaluate. That's how the Reserve Bank of Australia has proceeded since last fall, when it became the first major central bank to tighten as the dust started to settle on the crisis.
Scotia Capital's Derek Holt, who has said for weeks that Mr. Carney could start raising rates as early as next month, predicts “non-emergency, but low” rates for years.
With a report from Bloomberg News
Changes irk Real Estate Agents
Changes irk real estate agents
By JENNY YUEN, Toronto Sun
Last Updated: March 23, 2010 12:19am
TORONTO -- New changes to the Multiple Listing Service, a Canadian Real Estate Association system that allows home sellers to widely advertise their properties online, will cause great headaches to both buyers and sellers, said a Toronto real estate client co-ordinator.
The changes, which were adopted Monday by representatives of 300 real estate boards across Canada, make it possible for homeowners to pay a one-time fee to list a property on the MLS and have prospective buyers contact them directly by phone ‹ potentially saving money by cutting out the middleman.
"You can advertise on MLS but you still have to show the house and write the offer and do all that stuff," Neil Harris, previously a real estate agent with 10 years' experience in Mexico and Toronto, said Monday night.
"The lawyers will like it because they'll have a lot of lawsuits. People will learn very quickly that private sales is not the road to go." Harris used an example of a private seller unknowingly telling a buyer that they could build a second storey to the home when city bylaws wouldn't allow such construction.
"They don't know the legalities," Harris said.
Thomas Cook, a Re/MAX agent with 30 years of experience, said that the amendments are insulting to to agents.
"Imagine, you want to sell your car so you go to the local car dealer and say you want to sell your car on your lot and put a for sale sign on it and not pay anything for it. What do you think they'll say? No," he said.
"That's exactly what the Competition Bureau is saying here." North America has one of the smoothest real estate systems in the world because of MLS, Cook said.
"You go to Europe and there aren't any countries that have an MLS system and it's extremely chaotic," he said.
Housing Boom to Continue
Housing sales boom to continue: Scotiabank
23/03/2010 1:59:20 PM
CBC NewsThe prospect of rising interest rates will keep Canada's housing boom going this spring, a Scotiabank report predicted Tuesday.
The report predicted most regions of the country will remain sellers' markets for the first half of the year.
"I think you're going to have a very active spring market, probably some cooling off in the second half of the year," Adrienne Warren, the Scotiabank economist who wrote the report, said in a presentation Tuesday.
"We're looking at once in a lifetime interest rates that people are taking advantage of - but certainly confidence is coming back, the job markets are stabilizing," she said.
Scotiabank predicted 510,000 home sales this year, up 10 per cent from 2009, but just shy of the 2007 record. It expected the average price will increase by about eight per cent to a record $345,000.
Housing starts, Scotiabank expected, will reach 190,000, up from 149,000 last year.
Warren said the spring rush will also be helped by an influx of buyers hoping to avoid tighter lending rules for mortgages and the introduction of the harmonized sales tax in Ontario and B.C.
Economists expect the Bank of Canada to raise interest rates by between half a percentage point and a full point over several months beginning in late spring or early summer to fight inflationary pressures in the economy.
With files from The Canadian Press
Thursday, March 18, 2010
Home Sales Slow in Feb
Home sales slow in February
15/03/2010 11:05:52 AM Sympatico
The number of listings sold through the Multiple Listing Service Systems (MLS) dropped slightly in February, signaling a more balanced national resale housing market, says the CREA.
The Canadian Real Estate Association's (CREA) new statistics show a surge in home listings but a drop in sales of 1.5 per cent between January and February. Most of the buying activity centered in Toronto, while Vancouver's sales dropped the most sharply.
The seasonally-adjusted number of new listings in February rose 2.4 per cent over the previous month to 73,849 units - the highest number since October 2008.
"Activity is expected to remain elevated in Ontario and British Columbia over the first half of the year, with buyers looking to beat the introduction of the HST and expected interest rate hikes," said CREA president Dale Ripplinger, in a release.
The Harmonized Sales Tax, a 13 per cent sales tax, comes into effect in July in Ontario.
According to the CREA report, the average price of a home was $335,655 in February - up 18.2 per cent year-over-year.
According to new data released by the Royal Bank of Canada Monday, home affordability detoriorated considerably at the end of 2009, as home prices rose.
"The effect of higher prices was largely mitigated by a small decline in mortgage rates and continued gains in household income," Robert Hogue, a senior economist with RBC, said in a release.
The report predicts that the cost of home ownership will continue to increase due to a high demand for homes and a limited number of homes on the market.
"The anticipated and gradual rise in interest rates indicates that affordability is likely to gradually get worse as rates return to normal levels," said Hogue.
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