Canadian economic growth in store as interest rate holds steady.

Bank of Canada governor Mark Carney

The Bank of Canada (BoC) announced today that they will keep the benchmark interest rate steady at 0.25%. Canadians who have a Variable Rate Mortgage (VRM), or Home Equity Line of Credit (HELOC) will continue to enjoy very low interest rates, and therefore very low payments.

BoC said that recent indicators are pointing to a global recovery, and that Canada is also starting to see positive economic activity.  That being said they also advised that at this time current economic conditions certainly do not warrant an increase in rates.

Mark Carney, Bank of Canada governor said in an earlier report that they would commit themselves to keeping the interest rate constant until the second quarter of 2010. He however emphasized that this was “conditional” on the outlook for inflation.

What does the future hold? Strong and steady is what BoC is reporting with their projections of economic growth of 3.0% for 2010, and 3.3% for 2011.

Fastest Growing Financial Institution in Canada, CMHC.

CMHC

The Canadian Mortgage and Housing Corporation (CMHC), Canada’s crown corporation is now one of the largest financial institutions in Canada. Its growth over the last several years is staggering. CMHC had planned on insuring approximately 578,500 homes last year for a total of $86 billion. However it insured almost 920,000 homes for a total of $148 billion. CMHC insured an extra $62 billion, nearly doubling what they insured in 2007. Last year CMHC recorded assets of $203.5 billion. CIBC, one of the “big 5” banks in Canada had assets of about $350 billion last year. Now CMHC is projecting that its assets will hit $345 billion for 2009.

CMHC is the largest provider of default insurance on mortgages in Canada. Home buyers who are putting less than 20 percent as a down payment are required to pay the insurance premium which is added on to their mortgage. This allows Canadians to get into homes sooner, without having to save for a large down payment.

The incredible growth of CMHC is from a few things. The default insurance program and the government’s strategy to spark up the housing market by buying billions of mortgage dollars from banks. There is also a growing trend where mortgage lending institutions are buying insurance for mortgages that aren’t required to be insured. This then makes is easier to sell the loans to investors to raise cash. With the continued growth of CMHC this may warrant additional attention, but the question is how big will the government let them get?

Tires, fishing rods, and…mortgages? I didn’t think so.

Ok so that didn’t last long, but nice try. Two years after rolling into the mortgage market, Canadian Tire has now gone flat.  They have just sold their existing mortgage book to National Bank at “book value”.  When it was first introduced I thought it might work.  Canadian Tire (CT) is a convenient place to shop and you know you can always count on them for a cheap toaster, spark plugs, or duct-tape.  So for Canadians to make the trip to a CT store could be often and when the consumers come in and see mortgage rates being advertised, it might have made sense.  Although CT is a recognizable household name their quality control in my opinion has been somewhat disappointing.  When you think about it there is a thick line between automotive retail, and the mortgage industry.  This sudden change of direction is blamed on current economic conditions, and also the fact that CT wants to put more focus on the more profitable credit card business.

Canadian Tire Store

Canadian banks raise mortgage rates…here we go.

Just as expected due to the bond yield increase last week, interest rates are up.  Most of the big five have increased their fixed rates by 35 basis points effective tomorrow, leaving the rest of the banks to most likely follow suit this week.

It will be interesting to see what the future has in store.  The bond market is getting its fire from positive economic news, and the surge in housing sales over the past few months.  The Canadian Real Estate Association is estimating home sales are up 0ver 18 per cent year-over-year and the average home price is up over 11 per cent during the same time. 

Financial Post Newswire

Are mortgage rates going up?

This week will be very interesting to see if mortgage rates are on the rise. We know rates are as low as they can go and their is nowhere to move but up. The question is when? and by how much?
With the spike in the Canadian bond market this past Friday, we will quickly learn what the outcome may be. Therefore the “when” is probably now, and the how much?…well we will see.

Government of Canada 5 year Bond

Hello world!

This is my first post. It’s time to start blogging!
Interesting fact, “blog” comes from the term “web-log”, that changed to “we blog”, then to just “blog”. Check it out on wiki.