Read more: http://www.ctvnews.ca/canada/bank-of-canada-holds-key-lending-rate-at-1-per-cent-1.1125728#ixzz2IpLOjghd

In June, Finance Minister Jim Flaherty unveiled major changes to the limits of what the Canada Mortgage and Housing Corporation is allowed to insure, effectively tapping the brakes on a housing industry that many experts worry has become too hot.

Starting Monday, lenders can only issue home equity loans up to a maximum of 80 per cent of a property’s value — down from 85 per cent. And anyone wanting to buy a home worth more than $1 million, for instance, must now have a downpayment of at least $200,000.

But the biggest change of all is the shortening of the maximum amortization period to 25 years from 30 years — forcing borrowers to pay back their debts sooner. That will reduce the amount of interest they’ll pay over the life of the loan, but make mortgage payments larger as more debt gets paid back with each payment.

http://www.cbc.ca/news/business/story/2012/07/09/bmo-mortgage-housing.html

Flaherty says he took action last week because there was no sign of a let-up in the hot condo market in major cities and because many Canadians can’t seem to resist the lure of low mortgage rates.

TD Bank has estimated that Ottawa’s move to reduce the maximum amortization period to 25 years from 30, effective next month, will curtail economic growth by about 0.2 percentage points in 2013.

Flaherty told reporters in a conference call from Ireland that he realizes the action may dampen the economy.

But he says the risk of a housing bubble if had he not acted would have been greater.

In fact, he says it would be a good thing if Canada’s housing market cools somewhat.

http://business.financialpost.com/2012/06/29/new-mortgage-rules-may-dampen-economic-growth-flaherty/

The Canadian economy continues to operate with a small degree of excess capacity. Total CPI inflation is expected to fall below 2 per cent in the short term, as a result of lower gasoline prices, while core inflation is expected to remain around 2 per cent.

Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate at 1 per cent. To the extent that the economic expansion continues and the current excess supply in the economy is gradually absorbed, some modest withdrawal of the present considerable monetary policy stimulus may become appropriate, consistent with achieving the 2 per cent inflation target over the medium term. The timing and degree of any such withdrawal will be weighed carefully against domestic and global economic developments.

Posted by Bank of Canada dated June 05, 2012: http://www.bankofcanada.ca/2012/06/press-releases/fad-press-release-2012-06-05/

labels: bank of canada, canadian economy, market trends, real estate, residential mortgages

The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1 per cent. The Bank Rate is correspondingly 1 1/4 per cent and the deposit rate is 3/4 per cent.

The profile for global economic growth has improved since the Bank released its January Monetary Policy Report (MPR). Europe is expected to emerge slowly from recession in the second half of 2012, although the risks around this outlook remain high.  The profile for U.S. growth is slightly stronger, reflecting the balance of somewhat improved labour markets, financial conditions and confidence on the one hand, and emerging fiscal consolidation and ongoing household deleveraging on the other.  Economic activity in emerging-market economies is expected to moderate to a still-robust pace over the projection horizon, supported by an easing of macroeconomic policies.  Improved global economic prospects, supply disruptions and geopolitical risks have kept commodity prices elevated.  In particular, the international price of oil has risen further and is now considerably higher than that received by Canadian producers.  If sustained, these oil price developments could dampen the improvement in economic momentum.

Overall, economic momentum in Canada is slightly firmer than the Bank had expected in January. The external headwinds facing Canada have abated somewhat, with the U.S. recovery more resilient and financial conditions more supportive than previously anticipated.  As a result, business and household confidence are improving faster than forecast in January. The Bank projects that private domestic demand will account for almost all of Canada’s economic growth over the projection horizon.  Household spending is expected to remain high relative to GDP as households add to their debt burden, which remains the biggest domestic risk.  Business investment is projected to remain robust, reflecting solid balance sheets, very favourable credit conditions, continuing strong terms of trade and heightened competitive pressures.  The contribution of government spending to growth is expected to be quite modest over the projection horizon, in line with recent federal and provincial budgets. The recovery in net exports is likely to remain weak in light of modest external demand and ongoing competitiveness challenges, including the persistent strength of the Canadian dollar.

The Bank projects that the economy will grow by 2.4 per cent in both 2012 and 2013 before moderating to 2.2 per cent in 2014. The degree of economic slack has been somewhat smaller than the Bank had anticipated in January, and the economy is now expected to return to full capacity in the first half of 2013.

As a result of this reduced slack and higher gasoline prices, the profile for inflation is expected to be somewhat firmer than anticipated in January.  After moderating this quarter, total CPI inflation is expected, along with core inflation, to be around 2 per cent over the balance of the projection horizon as the economy reaches its production potential, the growth of labour compensation remains moderate, and inflation expectations stay well-anchored.

Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate at 1 per cent. In light of the reduced slack in the economy and firmer underlying inflation, some modest withdrawal of the present considerable monetary policy stimulus may become appropriate, consistent with achieving the 2 per cent inflation target over the medium term. The timing and degree of any such withdrawal will be weighed carefully against domestic and global economic developments.

labels: bank of canada, canadian economy, market trends, real estate, residential mortgages

The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1 per cent. The Bank Rate is correspondingly 1 1/4 per cent and the deposit rate is 3/4 per cent.

The heightened uncertainty around the global economic outlook has decreased in the weeks since the Bank released its January Monetary Policy Report (MPR). With tentative signs of stabilisation in European bank funding and sovereign debt markets, conditions in global financial markets have improved and risk aversion has decreased. However, the global economy is still expected to grow below its trend rate as the deleveraging process in advanced economies proceeds.

The U.S. expansion is proceeding at a modest pace, reinforced by recent improvements in the labour market.  Growth in China is moderating to a still-high rate as expected, in response to past policy tightening and weaker external demand. Commodity prices are higher than anticipated, supported by improved global economic conditions and a geo-political risk premium on oil.  If sustained, the latter could ultimately dampen the improvement in global economic momentum. Recent developments suggest that the outlook for the Canadian economy is marginally improved from the January MPR.  Although the economy will likely grow faster than forecast in the first quarter due to temporary factors, underlying economic momentum remains around trend, balancing domestic strength and external weakness.  Private demand is now expected to be slightly stronger than projected, owing to improved sentiment and highly-supportive financial conditions.  Canadian household spending is expected to remain high relative to GDP as households add to their debt burden, which remains the biggest domestic risk.  Net exports have been supported by stronger-than-anticipated U.S. activity but are expected to contribute little to growth, reflecting still-moderate foreign demand and ongoing competitiveness challenges, including the persistent strength of the Canadian dollar.

The profile for core and total CPI inflation is somewhat firmer than previously anticipated as a result of reduced economic slack and higher oil prices.  After moderating in the second quarter, total inflation is expected, along with core inflation, to be around 2 per cent over the forecast horizon, reflecting the combination of modest growth of labour compensation, an economy operating around its potential over time, and well-anchored inflation expectations.

Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate at 1 per cent. With the target interest rate near historic lows and the financial system functioning well, there is considerable monetary policy stimulus in Canada. The Bank will continue to monitor carefully economic and financial developments in the Canadian and global economies, together with the evolution of risks, and set monetary policy consistent with achieving the 2 per cent inflation target over the medium term.

Posted by Bank of Canada dated March 08, 2012 http://www.bankofcanada.ca/2012/03/press-releases/fad-press-release-2012-03-08/

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