Bank of Canada concerned about government, household debt
By Julian Beltrame, The Canadian Press

OTTAWA - Mounting governmental and household debt are posing new risks to the stability of financial systems, the Bank of Canada said Thursday in its most recent analysis.

The central bank's semi-annual "Financial System Review" finds that overall conditions have improved in the short term since it last reported in June.

But it adds that record-high debt by Canadian households pose an elevated medium-term risk if a second financial or economic shock were to materialize.

Bank of Canada governor Mark Carney has warned in the past about Canadians getting in over their heads with large mortgage commitments that don't appear problematic given today's low interest rates.

The bank repeats the warning in its systems review, stressing that rates aren't going to remain at historic lows forever and mortgage payments will rise.

This is both a potential problem for households and banks, the report states.
"When borrowing funds, especially in the form of mortgages, households need to assess their ability to service these debt obligations over their entire maturity, taking into account likely changes in both income and interest rates," the report stresses.

And the bank says lenders, such as the chartered banks, should be careful about extending mortgage loans even if they are insured.

That's because a borrower's default on mortgages would impact other loans.
The Bank of Canada notes that its review of potential risks is not intended as a prediction of what is likely to occur, but an early warning system of potential risks.

In this regard, one risk that is emerging is massive debt being taken on by governments throughout the world as they try to cope with the fall-out the deep recession.

The deteriorating fiscal positions leaves many governments vulnerable to future economic shocks, in that they are left with fewer resources.

The bank adds that the ability of governments to address current account imbalances - one of the believed root causes of the global downturn - would be hindered by the debt overload.

Although Canada remains in a fiscally strong position in relation to many other economies, with a debt-to-gross domestic product ratio projected to peak at about 35 per cent, it too would be impacted by the problems of others.

"Our financial system would be affected indirectly," the bank says, "since higher borrowing costs facing those countries with large financing needs would mute the global recovery."

"In addition, disorderly fluctuations in exchange rates could cause financial stress for Canadian businesses, financial institutions, and households."

The central bank says the outlook for the global economy has improved since June, but cautions that growth "is nonetheless likely to remain subdued for some time."

This makes global economies more vulnerable to any new shock that may emerge, the bank states.
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If you would like a FREE 30 minute debt consultation, please contact email me at lewis @ vtmm.ca to set up an appointment.

Here is a sample household budget for your use.

Lewis

Economic recovery is 'solidly entrenched': BoC
Paul Vieira, Financial Post

OTTAWA -- After months of uncertainty, the economic recovery now appears to be "solidly entrenched," the Bank of Canada said Tuesday, indicating its forecast for growth should unfold as envisaged.

Still, in its latest interest rate announcement, the central bank reiterated, as expected, its conditional commitment to keep its key policy rate at a record low 0.25% until June 2010 as inflation is still not expected to hit its preferred 2% target until the second half of 2011.

Recent data – from retail sales to a stunningly strong jobs report for November -- have painted a mostly cheer picture of the Canadian economy, analysts say, even though third-quarter GDP growth of 0.4% annualized came in well below the central bank's 2% expectation.

Since the central bank's latest economic forecast in October, "global economic developments have been slightly more positive and the global outlook has improved modestly," the bank's governing council said in its statement, adding though that "significant fragilities" remain.

The central bank said the composition of economic growth is unfolding as expected, highlighted by a shift toward stronger domestic demand and less reliance on exports.
"The main drivers and the profile of the projected recovery in Canada remain consistent with the bank's [outlook]," it added. "The bank continues to expect economic growth to become more solidly entrenched over the projection period and inflation to return to the 2% target in the second half of 2011."
According to the central bank's outlook, Canada is expected to grow 3.3% this quarter, followed by expansion of 3% next year and 3.3% in 2011. Predictions for strong growth gained steam late last week when data indicated the Canadian economy added 79,000 jobs in November.

Further, the central bank on Tuesday played down the impact of the stronger dollar, even though it acknowledged it remained a key risk to its forecast, and "could act as a significant further drag" on growth and inflation. The stronger loonie, which has advanced as much as 25% this year against its U.S. counterpart, led to a surge in imports in the third quarter – resulting in net exports acting as a drag on the economy of roughly 5.3 percentage points.

Since the last rate announcement, however, the dollar has on average traded a couple of cents below the central bank's working assumption of a US96¢ loonie.
Most analysts were looking for any change in nuance in the bank's statement – in particular a hint or two that it might move before its conditional pledge to keep rates at a record low until June 2010 given the surge in domestic consumption as households take advantage of record low borrowing costs.

Instead, the central bank reiterated that its target rate of 0.25% "can be expected" to remain intact until the end of the second quarter of next year. The pledge is conditional on inflation hitting the 2% target in the third quarter of 2011, as the bank expects.

The last time the bank raised its key policy rate, to 4.5%, was in July of 2007 – and shortly afterward the first signs of the credit crisis emerged.
Some economists, such as Ryan Brecht of Action Economics, expect the central bank to begin hiking its policy rate, and aggressively, starting in the second half of next year.

In a note released Tuesday morning, Mr. Brecht, the firm's senior North American economist, said he envisaged the Bank of Canada raising its target rate by 175 basis points before December of 2010, for a policy rate of 2%, or "more normal levels." Still, that would be below the 3% level in September of 2008, when Lehman Bros. collapsed, or the 4.5% peak hit more than two years ago.

Financial Post

Bank of Montreal, the first Canadian bank to report fourth-quarter results, said profit rose 16 percent to its highest in more than two years on increased business lending and lower provisions for bad loans.

Net income for the quarter ended Oct. 31 climbed to C$647 million ($610 million), or C$1.11 a share, from C$560 million, or C$1.06, a year earlier, the Toronto-based bank said today in a statement.

B.C. hikes HST new housing rebate eligibility
Last Updated: Thursday, November 19, 2009 | 12:28 PM PT
CBC News

New homes will be eligible for a tax rebate when B.C. adopts the HST next year. New homes will be eligible for a tax rebate when B.C. adopts the HST next year. (CBC)The B.C. government is raising the maximum value for new homes that will get a rebate on the provincial portion of the coming HST.

Under the proposed changes the threshold for the new housing rebate on the harmonized sales tax will increase to $525,000 from $400,000.

The decision means home buyers will receive a rebate of 71 per cent of the provincial portion of the HST paid on a new home, up to a maximum of $26,250.

'This increase will move the threshold to above the average new home price in the province— Finance Minster Colin Hansen

Finance Minister Colin Hansen made the announcement Thursday, saying the move represents the highest maximum provincial rebate in Canada.

"We heard the concerns from consumers and industry about how the HST might affect home buyers, and this increase will move the threshold to above the average new home price in the province," said Hansen in a statement released on Thursday morning.

The HST takes effect on July 1 next year and the province is also proposing new rules to ensure the provincial portion of the HST would not apply to the sale of new homes where ownership or possession is transferred before that date.

In addition, sales of new homes under written agreements of purchase and sale entered into on or before Nov. 18, 2009, would generally not be subject to the provincial portion of the HST, even if both ownership and possession are transferred on or after July 1, 2010, officials said.

The HST will replace the GST and PST on all goods and services sold in B.C. with the single harmonized tax of 12 per cent. Currently there is no provincial sales tax on new homes.

BMO study says variable-rate mortgages better deal for borrowers most times
by THE CANADIAN PRESS
Friday, October 23, 2009provided bymoney.thecanadianpress.com

TORONTO - Fixed mortgage rates may help you feel secure in your budgeting, but the Bank of Montreal (TSX:BMO) says the more volatile variable rate mortgages will save you money in the long run.

The bank put out a report Friday showing that, over the past 30 years, variable-rate mortgages have been more cost-effective about 82 per cent of the time.

That may come as a surprise to some after studies have shown many Canadians prefer a fixed-rate mortgage.

A fixed rate locks the borrower into a set interest rate for a certain period of time.

That gives many borrowers peace of mind knowing how much money to set aside each month for their mortgage payment.

Variable rates change along with interest-rate moves.

BMO said the Bank of Canada's overnight lending rate is at its lowest possible point now, which could mean there are fewer benefits to a variable rate in the foreseeable future.

BMO highlighted two historical periods when fixed rates were considered beneficial - in the late 1970s and late 1980s - and both were just before interest rates started rising again.

The bank added that the current interest environment is similar to both of these periods.

"Short-term rates are at extreme lows and pressure is likely to build for higher rates in the year ahead," said deputy chief economist Doug Porter in the report.

"The question of whether to lock in to a longer-term fixed mortgage rate or stay in a variable rate has become an increasingly complex and important issue."

Canada has been in a long-term declining rate environment since the early 1980s, the bank suggested.

As a result, the spread between five-year fixed mortgages and variable mortgages has been pushed wider in recent years, and is now near an all-time high

Prime rate holds steady, "conditionally"

As expected, the Bank of Canada announced that it will be maintaining the overnight rate of a quarter per cent, with a continued "conditional commitment" to maintain that until the second quarter of 2010.

In its official press release it stated that "recent indicators point to the start of a global recovery from a deep, synchronous recession .... This resumption of growth is supported by monetary and fiscal stimulus, increased household wealth, improving financial conditions, higher commodity prices, and stronger business and consumer confidence."

The Bank then went on to use language that it would seem still give it room to manoeuvre before the second quarter of 2010 if need be. It said: "However, heightened volatility and persistent strength in the Canadian dollar are working to slow growth and subdue inflation pressures. The current strength in the dollar is expected, over time, to more than fully offset the favourable developments since July.

" Growth, it said, is also projected to be "slightly higher" than previously forecasted in the second half of this year, but lower overall. "The Canadian economy is projected to grow by 3.0 per cent in 2010 and 3.3 per cent in 2011, after contracting by 2.4 per cent this year.

This is a somewhat more modest recovery in Canada than the average of previous economic cycles," it said.

A full outlook for the economy and inflation will be made available Thursday, 22 October, while the next scheduled date for announcing the overnight rate target is 8 December 2009.

Rent-to-own your home: Pro and con

It's tough for buyers to find financing and hard for sellers to find buyers. A solution that can work well for both is renting with an option to buy.

CNNMoney.com staff writer

Last Updated: June 4, 2009: 4:51 PM ET

Before You Rent to Own What you should do before buying a home on a lease option. 1. Get a title report. That should tell the buyer whether the seller can deliver the title when the time comes and what the outstanding liens are. If there are extensive tax or mechanic's liens on the house, that could be a red flag. 2. Get an appraisal. This will ensure that the house is worth the agreed-to price. 3. Get an inspection. If the foundation is cracked or the furnace needs replacement, you'll want to know that before you sign a contract. 4. Seek legal help. You should approach it like you are buying a home; a real estate attorney can help you avoid any contract missteps.

Mortgage Rates

Variable	2.25%
5 yr fixed mtg	3.89%
1 yr fixed mtg	2.25%

NEW YORK (CNNMoney.com) -- With buyers scarce and financing tight, some home sellers are offering rent-to-buy options to potential buyers. In fact, there's been enough of a spike in interest that ForSaleByOwner.com added it as a search option on the site, says spokesman Eric Mangan.

These deals, also called rent-to-own and lease-option, usually require buyers to pay extra rents each month plus up-front fees of about 5% of the purchase price. The regular rent then goes in owner's pocket (presumably to pay the mortgage), but the additional payments are used to buy down the price of the home.

"Lease option agreements, if properly drafted, by and large are an effective way of enabling people to buy who are having trouble arranging financing or coming up with down payments," said Lawrence Jacobson, a real estate attorney in Los Angeles.

The Advantages

Because the contract is typically written to close in 12 to 36 months, it gives buyers the chance to experience homes and neighborhoods without having to make major commitments.

But the biggest reasons buyers opt for rent-to-buy deals are to build up down payments and to improve their credit profiles so obtaining a mortgage is easier.

For example, if they buy a $200,000 home, paying $5,000 up-front and a rent premium of $400 a month on top of their $1,000 market rent, they'll have $9,800 saved after one year and $19,400 after three.

In New York City, condo conversions are increasingly offering the option after having units sit empty. For example, the developers of a former commercial building on Wall Street are offering to apply 100% of "buyers" rents toward the purchase prices. And there are no up-front fees.

It's a luxury building with prices starting at $630,000 for a studio to $8.4 million for a four-bed penthouse. Sales were slow because buyers were having difficulties arranging financing, according to sales director Larry Kruysman.

"What we were finding from customers was that banks were making it more difficult to purchase," he said. The lenders were asking borrowers to put up 30% of the purchase price to obtain a mortgage rather than the traditional 20%.

But most rent-to-buy offers are from individual sellers, often people who have purchased new homes, can't sell their old ones and need to offset some of their mortgage costs.

Renee Haworth, a Louisiana homemaker, tried to sell a house in Mandeville, La., for many months without success.

"We had two or three buyers ask us if we would do a lease option," she said. "We hadn't thought about it before that."

She consulted an attorney and made a deal this past March. It calls for a sale price of $217,000 for the four-bedroom two-and-a-half bath house. The buyer put $3,000 down and pays $1,400 a month, $400 of which accumulates toward the sale price.

The renters agreed to exercise their option after 12 months. Under terms on their contract, if they decide to walk away, they lose both the $3,000 deposit and the $400 per month they pay over normal market rents.

The Drawbacks

But there are drawbacks to these deals. You need a good contract and a healthy sense of "buyer besmeared."

Losing your investment: For one, there's little protection for buyers who fall behind in payments. If you fall behind and are evicted, you lose any up-front fees and rent premiums you paid.

Can't get a loan: If you still can't arrange financing at the end of the rental period, you may have to forfeit all the extra cash you've invested. The terms for that scenario would need to be spelled out in the contract. In buyers' markets, you may have the leverage to get a contingency clause specifying any up-front fees and extra rent be returned if you don't qualify for a loan.

Falling home prices: Buyers may be hesitant to lock into a set price a year in advance considering how much home values are plunging. If the comparables are significantly more attractive when it's time for your deal to close, you can sometimes renegotiate, but that's at the seller's discretion. If renegotiating is impossible, then you have to decide whether it's cheaper to walk away or go through with the deal.

Foreclosure scams: Some renters have been burned by doing lease-option deals with owners who are going through foreclosures. After months of taking the inflated rent payments even though they are in foreclosure, the owners finally have the home repossessed by the bank and the renters are served with eviction notices and are out their investments.

There have also been instances of foreclosure-prevention scams in which fraudsters take title to homes and do lease-option deals with unsuspecting renters. Instead of applying the initial deposit and the extra rent money to the down payments, the scam artists simply pocket everything and disappear. Because the renters don't get a title to the property until they close the bank loan, they are again out their investments.

Walk aways: Pitfalls exist for sellers as well. Renters may decide to not exercise their options if prices fall. That can leave sellers with large paper losses by the end of the lease compared with if they had sold the home when they originally planned. They are also stuck carrying the costs of the home until they find other buyers or tenants.

Affordability

Most importantly, however, buyers must be cautious about entering into a deal that's unaffordable. The payment can seem manageable when you're just looking at the monthly "rent" payment. But there are more expenses than that.

First, the mortgage payment on a $200,000 home after paying $20,000 down, comes to more than $1,000 a month at the current very low interest rates, which are only available to borrowers with the best credit.

Over the past few weeks, rates have been creeping up again, so there's no guarantee they will be as low when the purchase is completed. Plus, credit-damaged buyers can expect to pay one or two percentage points higher at a minimum. That could add another $250 or more to the monthly bill.

Then add in private mortgage insurance, property taxes, all the utility and routine maintenance costs, and it could push the monthly payment past $2,000 - and affordability.

Out of work: Kelowna bucks national trend with more on unemployment lines

Tuesday, September 29th, 2009 | 7:00 am

By Kathy Michaels

The number of Kelowna residents in need of Employment Insurance benefits continues to climb despite the fact things are looking up in other parts of the country.

Statistics Canada reported that 787,700 Canadians received regular Employment Insurance benefits this July. That number marks a drop of 31,500, or 3.8 per cent, beneficiaries from a month earlier.

While that figure has been lauded as the first decrease in 11 months, it’s largely due to a bounce back in eastern provinces. Kelowna, on the other hand, experienced a surge in claims, both in monthly and yearly reports.

This July there were 4,010 locals receiving the subsidy, compared to 1,630 in July, 2008. Year-over-year, that’s an increase of 146 per cent. Month over month, the number rose 7.2 per cent from 3,740.

That news didn’t come as a big surprise to Dan Tellier, owner and operator of Okanagan Educational Centre, a business that offers a work search strategies program for unemployed and underemployed locals.

“I have a good pulse on what’s happening in the various sectors and I am not seeing a (bounce-back) yet,” he said.

Tellier explained that when the manufacturing sector started to stagnate, there were reverberations all the way down the supply chain and that’s impacting every aspect of the local job market.

Reflecting back on boom times, Tellier pointed out that employers were offering more and more money to lure prospective employees through their doors. Those days are no more.

“What’s somewhat unique about the Kelowna marketplace, is that wages have gone down and businesses are taking advantage of that,” he said. “The reality is that basically from two years ago, until September, 2008 wages were on the increase and employers were having difficulty retaining people. Now employers are back to the status quo.”

Of note, he said, is the retail and food service industries have again started offering lower wages.

Gloom and doom aside, Tellier said there is still work for those who know how to market themselves. On his side of things, they’ve worked to ensure that 75 per cent of the people who come through their doors find work on their way out, and that’s a mandate that they’ve continued to meet.

“There are opportunities out there and our students are finding jobs,” he said. “The key is to continue to believe in oneself… people will find work if they are competitive in their job search. Sitting at the computer, looking at help-wanted ads and never contacting the employer won’t help.”

kathy@kelowna.com

Canadian housing markets buck recession and trend upwards, says RE/MAX

KELOWNA, BC, Sept. 24 /CNW/ - With the worst of the recession over, residential real estate markets in major Canadian centres are poised for growth in the final quarter of 2009, according to a report released today by RE/MAX.

The RE/MAX Bricks and Mortar Report found the bounce back that began in early Spring has made this recession one of the shortest on record for real estate. Low interest rates, pent-up demand, and improved affordability levels have all played a role in the recovery now well-underway. Percentage increases in sales from January to August 2009 were led by Vancouver, (up a substantial 14 per cent to 23,158), Victoria (up 7.4 per cent to 5,266), Edmonton (up 6.2 per cent to 13,691), Regina (up five per cent to 2,597), Ottawa (up 2.4 per cent to 10,830) and Toronto (up 1.8 per cent to 58,421). Housing values are already ahead of record-breaking 2008 levels in seven of the 11 markets surveyed, including Newfoundland-Labrador (18.1 per cent year to $203,584), Regina (6.4 per cent to $244,088), Halifax-Dartmouth (3.5 per cent to $239,633), Winnipeg (3.5 per cent to $207,006), Ottawa (3.3 per cent to $301,684), and Toronto (up 0.3 per cent to $385,978). Nationally, average price hovers at $312,585, up 0.5 per cent over one year ago.

"The strength of the residential housing sector cross-country has taken many economists and housing analysts by surprise once again," says Elton Ash, Regional Executive Vice President, RE/MAX of Western Canada. "In terms of its impact on the resale market, by historical standards, this recession was one of the mildest. The resilience of bricks and mortar has been demonstrated time and again. While there may still be some challenges down the road, the worst is definitely behind us in the housing industry."

The recovery of Canada's resale housing markets speaks to the tremendous value Canadians place on the importance of owning a home. The number of Canadians overall who own a home has increased since 1981 from 62.1 per cent to 68.4 per cent, with some markets posting even higher homeownership rates -- Calgary (74.1), St. John's (71.5), Regina (70.1), and Edmonton (69.2). Significant gains have also been made over the same period in markets such as Ottawa -- where homeownership levels rose from 51.4 per cent to 66.7 per cent -- and Toronto, where levels rose fro m 57.3 to 67.6 per cent.

"Markets are heating up across the country," says Michael Polzler, Executive Vice President, RE/MAX Ontario-Atlantic Canada. "Purchasers are clearly taking advantage of affordable prices and rock bottom interest rates. Those who missed the boat in years past have found that sitting on the sidelines can be a costly move. Prices are on the upswing and inventory levels are tightening, so the push toward homeownership is expected to continue throughout the Fall and possibly into early 2010."

Over the past thirty years, the Canadian residential real estate market has experienced three major downturns - 1981, 1989, and 2008. While there have also been regional fluctuations throughout the years, return on investment over this period has been substantial, with Vancouver, Victoria, Toronto, Regina and Ottawa leading the country in terms of price appreciation.

The overall stability of real estate as an investment has also played a role. Markets like Halifax-Dartmouth, Regina, Ottawa, Winnipeg and London have provided steady returns (especially in recent years), with minimal fluctuation.

Public sentiment can best be illustrated by a recent Angus Reid Omnibus Survey* that asked the question "In which do you feel more comfortable investing your money? The stock market or real estate." Out of 1,000 respondents from coast-to-coast, 77 per cent chose real estate. The results of the RE/MAX Bricks and Mortar Report are clearly representative of this national dynamic at work.

    Please click here to read the RE/MAX Bricks & Mortar Report:
   http://files.newswire.ca/577/REMAX-BRICKS.pdf

RE/MAX is Canada's leading real estate organization with over 17,000 sales associates situated throughout its more than 677 independently-owned and operated offices across the country. The RE/MAX franchise network, now in its 36th year, is a global real estate system operating in more than 70 countries. Over 6,700 independently-owned offices engage nearly 100,000 member sales associates who lead the industry in professional designations, experience and production while providing real estate services in residential, commercial, referral, and asset management. For more information, visit: www.remax.ca.

    * The Angus Reid Omnibus Survey was conducted on September 15, 2009 and
       yields a margin of error of +3.1 per cent, 19 times out of 20.


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                            Homeownership Rates
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                          Canada and Major Centres
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                                                          1981         2006
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   Canada                                                 62.1         68.4
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   Metropolitan Areas*
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   St. John's                                             69.5         71.5
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   Halifax                                                55.6         64.0
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   Ottawa                                                 51.4         66.7
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   Toronto                                                57.3         67.6
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   London                                                 58.0         65.9
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   Winnipeg                                               59.1         67.2
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   Regina                                                 65.4         70.1
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   Calgary                                                58.4         74.1
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   Edmonton                                               57.9         69.2
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   Vancouver                                              58.5         65.1
   -------------------------------------------------------------------------
   Victoria                                               59.8         64.7
   -------------------------------------------------------------------------

   -------------------------------------------------------------------------
   Source: Canada Mortgage and Housing Corporation (May 2008)
   -------------------------------------------------------------------------
   * Homeownership rates based on 1986 boundaries for the Census
   Metropolitan Area (CMA)
   -------------------------------------------------------------------------


   -------------------------------------------------------------------------
   Top Performing Markets by Price Appreciation
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   -------------------------------------------------------------------------
                                           1980       YTD 2009   % Increase
   Market                                 Avg. $       Avg. $     1980-2009
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   -------------------------------------------------------------------------
   Greater Vancouver                     $100,065     $574,061       473.7%
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   Victoria                               $85,066     $466,611       448.5%
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   Greater Toronto                        $75,694     $385,978       409.9%
   -------------------------------------------------------------------------
   Regina                                 $48,628     $244,088       402.0%
   -------------------------------------------------------------------------
   Ottawa                                 $63,177     $301,684       377.5%
   -------------------------------------------------------------------------
   Halifax-Dartmouth                      $53,161     $239,633       350.8%
   -------------------------------------------------------------------------
   Winnipeg                               $50,491     $207,006       310.0%
   -------------------------------------------------------------------------
   Calgary                                $93,977     $380,489       304.9%
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   London-St. Thomas                      $55,210     $213,683       287.0%
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   Newfoundland & Labrador                $52,768     $203,584       285.8%
   -------------------------------------------------------------------------
   Edmonton                               $84,623     $319,939       278.1%
   -------------------------------------------------------------------------

   -------------------------------------------------------------------------
   Canada                                 $67,024     $312,585       366.4%
   -------------------------------------------------------------------------

   -------------------------------------------------------------------------
   Source: Canadian Real Estate Association (CREA), RE/MAX
   -------------------------------------------------------------------------

For further information: Elaine Langhout, RE/MAX of Western Canada, (250) 860-3628; Eva Blay, Charlene McAdam, Point Blank Communications, (416) 781-3911

Fall home maintenance tips

September 21, 2009

Muriel Draaisma

Now that summer has ended, the kids have gone back to school and the days have started to get shorter, it's time to think about getting your house ready for a cooler season.

Alisa Metcalfe-Haggert, 43, a Toronto self-employed education and rehabilitation consultant, has made a long list of outside and inside things to do to prepare her east end home for the fall — everything from garden grooming and furnace cleaning to major reorganizing of clothing before winter.

GARDEN CLEANUP

As she surveys her "low maintenance" garden in the front yard of her detached home, Metcalfe-Haggert says she knows her first priority will be cutting back her flowers after the blooms shrivel and fade.

Her garden is a catching site on the street, an array of yellow, green and pink. There are black eyed susans, hostas, coneflowers, day lilies and irises crowding into view. She spent $200 on her front and back gardens this year, using transplants from the flower beds of friends to give her home a fresh look. Now, however, it's time to prune.

"I'll enjoy the flowers as long as I can but when things start to look dead and unsightly, I'll cut them back. I don't cover plants. I don't wrap things in burlap. It'll get done before it gets really cold," she says.

Her outside list includes: planting about 40 bulbs in the hopes that "at least half will survive the squirrels"; storing the garden hose inside; bringing in cushions from patio furniture; hiring a contractor to insulate under her kitchen addition; and putting the snow shovel and salt handy on the front porch for when the snow flies.

PRIDE IN HOME

Metcalfe-Haggert says it's important to maintain your home not only as a way to show you care about your residence but also as a way to keep costs down by avoiding major maintenance problems later.

"It's pride in your house, wanting to maintain it," she says. "It's maintenance and upkeep. You do it in little bits and pieces. You have to figure out what your priorities are."

HOME ORGANIZATION

Her inside list for fall includes: having the furnace cleaned and the filters replaced; making soups and stews to freeze on days when she is too busy to cook; and sorting through her clothing drawers and that of her daughter, Kaitlin, 10, putting away summer things and pulling out warmer wear.

"We purge as we go," she says. "My lifestyle is such that I need to be organized. You plan your world. It means time is optimized and you keep your costs down. I love gardening, I like cooking, so all of this is fun stuff for me."

SEASONAL MAINTENANCE

The Canadian Housing and Mortgage Corporation has its own list of things it recommends that homeowners do to prepare their houses for fall.

Ken Ruest, senior researcher in the sustainable housing policy and research group for CMHC in Ottawa, says seasonal maintenance is a good way to protect your investment. He says it also makes sense to do what you can in the fall before it gets really cold.

"Winter can be severe. If there are things that can be done while the weather is nice, why not do it then? Some things, as well, are impossible to do in winter. You can't clean your eaves troughs when the leaves inside are frozen solid and it's a matted mess," he says.

"There are also safety concerns. If you are going to put a ladder against the house to check the roof, for example, to see if the wind has broken a few shingles off, it's better to do it in the fall than on frozen ground."

HEAT IN, MOISTURE OUT

Ruest recommends the following:

– Have your furnace and heating system serviced by a qualified technician.

– Check venting systems of all of your equipment to ensure there are no obstructions. For example, check your chimney for things such as bird, squirrel and raccoon nests. If the chimney is blocked, the combustion gases are not going to leave the house. The flue needs to be open. Direct vents should be checked so that there are no bees or wasp nests.

– Clean leaves from eaves troughs and downspouts to ensure proper drainage from the roof.

– If you have a heat recovery ventilator, clean the intake grill outside and the filters inside the unit. Pour water down the condensation drain to test it.

– Ensure that the ground around your house slopes away from the foundation wall to prevent water from draining into your basement.

– Check exhaust ducts from dryers, bathroom fans and kitchen ranges that lead to the outside to make sure there are no obstructions. Check under the flaps to make sure nothing is nesting inside and clean it out.

– Vacuum electric baseboard heaters to remove dust and remove the grilles on forced air systems, and vacuum inside the ducts.

– Ensure all windows and doors shut tightly, including the door between the house and garage, if you have one. It may be time to do some weather stripping.

– Run the dehumidifier in the basement throughout the fall. It should be run from spring to fall. It helps to remove a lot of moisture.

– If you have interior screens on windows and doors, remove them and store the screens for winter. It promotes better air circulation to warm the glass and it may help to prevent condensation on windows.

For homes in rural areas, Ruest adds: "don't store firewood inside because it brings in a lot of moisture; have well water tested for quality; check the sump pump and line to ensure they work properly; if you have a septic tank, measure the sludge and scum to determine if it needs to be emptied before spring."

"These things can make a difference. They help to maintain your property," Ruest says.

thestar.com

Vacancy rates keep rising in third quarter for Canada's commercial real estate sector, report shows

(CP) – 3 hours ago

TORONTO — The amount of empty office space across Canada continued to rise in the third quarter due to higher unemployment in white-collar industries and excess inventory in some cities, a new report shows.

Vacancy rates for commercial real estate are expected to keep rising "well into 2010" as the country works through the impact of the recent recession, CB Richard Ellis Ltd. said in report released Monday.

Vacancy rates rose for the third straight quarter to an average of 9.4 per cent, up from 6.3 per cent for the same time last year, said the real estate services firm.

"Limited new job creation in Canada's 'white-collar' industries and the addition of new inventory in two of Canada's three largest office markets are cited as reasons for the increase," according to the National Office and Industrial Trends Third Quarter Report.

Commercial vacancy rates rose most noticeably Calgary, Toronto and Vancouver, the report shows.

Calgary's third quarter vacancy rate jumped to 13.1 per cent, from 4.7 per cent last year, due to the impacts of a slowdown in the oil and gas industry.

"The city's oil and gas industry and commercial market remained inexorably linked, as players both large and small continue to recognize that even Calgary has not been immune to the country's new economic reality," the report states.

In Toronto, the commercial vacancy rate rose to 9.1 per cent from 6.6 per cent last year. The vacancy rate in downtown Toronto is expected to climb further in the coming quarter as space becomes available in newly constructed office towers.

In Vancouver, vacancy rates climbed to 8.9 per cent from 5.4 per cent for the same time last year. The report said Vancouver is one of the more stable markets in the country thanks to limited new development.

Montreal's vacancy rate rose to 10.3 per cent from 8.3 per cent last year, while Halifax's rose to 10.2 per cent from 8.4 per cent.

Vacancy rates also rose in the country's smaller office markets, specifically in suburban areas, but at a lesser rate, the report shows.

It said cities with government office space also saw more stability in their commercial real estate markets.

Ottawa had the lowest overall third quarter vacancy rate in the country of 5.8 per cent compared to five per cent for the same time last year, while Winnipeg's rate came in at 7.5 per cent up from 4.8 per cent last year.

The overall vacancy rate in the Waterloo Region, home to such technology firms as Research in Motion (TSX:RIM), edged up slightly to 6.7 per cent from 6.4 per cent last year.

The report predicts vacancy rates to keep rising in the fourth quarter and into 2010, "as Canada continues to grind its way out of the recession."

Copyright © 2009 The Canadian Press. All rights reserved.

Canada’s big banks enjoy ‘stellar third quarter’ (are they really looking out for you?)

TORONTO — Canada’s big banks were basking Wednesday in the afterglow of a strong third-quarter performance that came amid a worldwide financial crisis in which scores of other financial institutions around the world crashed and burned.

At a financial forum in Toronto, senior executives trumpeted the gains banks made while looking forward to some of the opportunities the global meltdown has opened up for them, particularly outside Canada.

Royal Bank CEO Gordon Nixon said he saw “significant opportunities” for acquisitions in the next few years amid further restructuring in the financial services sector, but said the bank would proceed with caution. His comments were echoed by Scotiabank CEO Richard Waugh, who said Jamaica, Mexico and Chile all offered up chances for expansion, while Bank of Montreal CEO Bill Downe said he saw the possibility of buying troubled consumer banks in the U.S., especially in the midwest.

“I’m highly confident that there will be good deposit bases that can be acquired and high-quality branches,” Downe told the Scotia Capital forum, adding he expected U.S. authorities to ramp up bank closures over the next year. “What we’ve done is invested heavily in understanding where in the market there are banks that could be good opportunities.”

A Scotia Capital research report Wednesday noted Canadian banks had reported “stellar third-quarter earnings, better than street estimates,” and the third straight quarter of outperforming expectations. Last month for example, Royal, the country’s largest bank, reported record quarterly profit of $1.56 billion.
Altogether, the five biggest banks — the Royal, CIBC, TD, Scotiabank and Bank of Montreal — earned a combined total of $4.4 billion in third quarter profits for the three months ended July 31. That was $500 million higher than the $3.9 billion a year earlier.

That was above analyst expectations and showed the Canadian banks, despite higher loans losses and problems in some of their businesses, have weathered the recession better than most.

Compared to the U.S., where the financial crisis has seen 81 banks fail in 2009 alone, the Canadian banking system is quickly establishing itself as one of the safest in the world, and this quarter only served to cement that reputation.

Once criticized for making huge profits and squeezing consumer and corporate borrowers, the Canadian industry is now being viewed by many Canadians as prudent, solid foundations of the economy which avoided the recklessness that battered big Wall Street financial companies such as Lehman Brothers, Bear Stearns and AIG.

The Scotia Capital report attributed the positive news to strong wholesale-banking earnings and trading revenue.

“Canadian banks seem to have weathered the siege in a strong fashion,” the report states. “The most significant development this quarter, we believe, was the improvement in the net interest margin, which reversed an eight-year descent.”

Bank stocks have risen 50 per cent year-to-date, substantially outperforming the Toronto Stock Exchange, while dividend yields have been a healthy 4.1 per cent with prospects of further increases in the coming quarters.

CIBC CEO Gerry McCaughey said his bank’s strong capital levels would be used for its retail-business expansion rather than be used to reward investors.

While the bank had lower-than-expected quarterly profit in August because of funds set aside to cover bad loans, it did report a 12 per cent Tier 1 capital ratio — above the levels held by international competitors.

“Our Tier 1 (capital ration) is at the high end of what we think is required given the current environment,” McCaughey said. “But unless we have a good usage for it from the viewpoint of normal business growth, we would not be engaging in activities such as dividend increases or share buybacks in order to bring the Tier 1 down.”

Nixon said markets were showing signs of recovery and the economic tailspin was slowing. The bank’s credit profile showed improvement even in the hard hit United States, although economies around the world still faced “many challenges.”

During the forum, environmental activists asked whether Nixon was comfortable with his bank’s financing of development of the Alberta oilsands, which they view as destructive and unhealthy. Nixon said his bank tries to take a “balanced” approach and that all financial institutions invest in the energy sector.

Bank of Canada maintains overnight rate target at 1/4 per cent and reiterates conditional commitment to hold current policy rate until the end of the second quarter of 2010

OTTAWA – The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1/4 per cent. The Bank Rate is unchanged at 1/2 per cent and the deposit rate is 1/4 per cent.

Global economic and financial developments have been broadly in line with the Bank's expectations. Following a deep, synchronous recession, recent indicators point to the start of recovery in major economies, supported by aggressive policy stimulus and the stabilization of global financial markets. In Canada, economic growth, the output gap, and inflation in the first half of 2009 have evolved largely as expected in the Bank's July Monetary Policy Report (MPR).

Stimulative monetary and fiscal policies, improved financial conditions, firmer commodity prices, and a rebound in business and consumer confidence are supporting domestic demand growth in Canada. Combined with recent information on inventory adjustments and automotive production, this suggests that GDP growth in the second half of 2009 could be stronger than the Bank projected in July. Total CPI inflation is still expected to trough in the current quarter before returning to the 2 per cent target in the second quarter of 2011 as aggregate supply and demand return to balance.

Conditional on the outlook for inflation, the target overnight rate can be expected to remain at its current level until the end of the second quarter of 2010 in order to achieve the inflation target.

While the underlying macroeconomic risks to the projection are roughly balanced, the Bank judges that, as a consequence of operating at the effective lower bound, the overall risks to its inflation projection are tilted slightly to the downside.

Persistent strength in the Canadian dollar remains a risk to growth and to the return of inflation to target. In its conduct of monetary policy at low interest rates, the Bank retains considerable flexibility, consistent with the framework outlined in the April MPR.

Central banks signal low rates here to stay

Paul Vieira, Financial Post, with files from Reuters Published: Monday, August 24, 2009

OTTAWA -- Despite growing confidence that economic growth is in the offing, monetary policy around the world is likely to remain "ultra-accommodative," perhaps until 2011, as doubt remains as to whether or not the growth expected this quarter is sustainable, analysts say.

That is the view emerging following the weekend gathering of the world's leading central bankers in Jackson Hole, Wyo., highlighted by remarks from Ben Bernanke, U.S. Federal Reserve chairman, who warned of the uncertainties ahead, and Jean-Claude Trichet, president of the European Central Bank, who suggested he is in no rush to reverse emergency stimulus measures.

"The key message from Jackson Hole was ... that monetary policy is likely to remain ultra-accommodative for the foreseeable future - at least for the next several years," said Julian Jessop, chief international economist at Capital Economics of London.

"It seems more likely that there will be no increases in interest rates in any of the major economies over the next 12 to 18 months."

Strategists at RBC Capital Markets concurred, adding in a note released Monday: "We continue to believe the economic backdrop will warrant a significant additional period of low rates. Indeed, even at the Jackson Hole conference, there was not even a suggestion that we should be braced for anything other than that outcome."

This outlook applies to Canada as well. Banc of America Securities-Merrill Lynch, as part of global report on monetary policy, said it does not expect the Bank of Canada to begin raising rates until 2011 - well past its pledge to keep the key policy rate, at 0.25%, until June 2010.

Canada has a significant output gap - the difference between potential and real gross domestic product - and the rate at which money is deployed in the economy, or money velocity, has shrunk 15% since late last year even though the central bank has taken its target rate to its lowest possible level, the BofA-Merrill Lynch analysis indicates.

"To compensate, we think the Bank of Canada will probably need to keep rates lower ... to ensure that money creation remains in the double-digit [growth] territory needed to reinflate the economy and close the output gap," the report says.

This outlook is similar to what economists at Laurentian Bank Securities suggested last week. They said a lack of pricing power for firms, a sizeable amount of excess supply and virtually non-existent upward pressure from labour costs means the bulk of policy tightening would not materialize until 2011.

The Bank of Canada signalled in its last economic outlook that it expected economic growth to resume this quarter, marking, technically, the end of a deep but relatively short recession.

It expects growth this quarter of 1.3%, 3% in the final three months of 2009, and the latter again in 2010. Further boosting the recovery story was data from Japan, Germany and France that indicated economic growth in the second quarter.

But there are growing concerns about the sustainability of this emerging recovery.
In a note published last week, Olivier Blanchard, chief economist of the International Monetary Fund, warned of a difficult recovery that would take years to unfold as elements of the financial system remain dysfunctional.

Of particular concern in his outlook was the source of demand once governments phased out fiscal stimuli. The worry is that U.S. business investment and household spending would remain weak, and Asian economies would fail to pick up the slack.
Still, some leading central bankers warn about leaving interest rates too low too long.

Masaaki Shirakawa, governor at Bank of Japan, told his peers at Jackson Hole that policymakers must avoid economic bubbles fostered by expectations that interest rates will remain low.

"Shirakawa's point about the need to prevent future bubbles is weighing more on minds of central bankers, so maybe they do have to be a little more careful," said David Cohen, director of Asian economic forecasting at Action Economics in Singapore.

Alia McMullen, Financial Post

Canada's inflation rate hit a 56-year low Wednesday and will likely slip further in the coming months as the index continues to react to last year's record surge in oil prices. But while overall prices appeared somewhat deflationary in July, consumers would be forgiven for not noticing because core inflation, which excludes energy, remains higher than a year ago.

"Many Canadians are unlikely to feel their cost of living declined," said Sébastien Lavoie, an economist at Laurentian Bank Securities. He said prices of frequently purchased goods, such as food and parking, remained higher, while those of big-ticket durable goods, including cars and furniture, had fallen.

"The problem is that unless you buy these durable goods -- less likely amid the labour-market woes and increasing financial tensions -- you don't benefit from these lower prices," he said.

The all-items consumer price index declined by 0.9% in July compared with a year earlier, worse than the 0.3% drop recorded in June, Statistics Canada figures showed. It was the lowest reading since 1953 and was largely attributed to the fact gasoline prices were 23.4% lower than in July last year, when the cost of a barrel
of oil peaked at about US$147.

On the other hand, core inflation, which excludes energy, was rather resilient given the economy has been in recession. Core prices were 1.8% higher than in July 2008, down one basis point from last month but still only slightly below the Bank of Canada's inflation target of 2%.

Food prices eased from the previous month, but remained 5% higher than a year earlier, while the cost of recreation, education and reading was up 1.1% compared with 0.9% previously.

"Strip out energy volatility, and it becomes apparent that Canada doesn't have a problem with either inflation or deflation," said Krishen Rangasamy, an economist at CIBC World Markets.

Mr. Rangasamy said prices were expected to ease further in the coming months because of last year's higher oil prices, downwards pressure on some items from the recession and the recent rise in the Canadian dollar, which makes imported goods cheaper. This would allow the Bank of Canada to continue to stimulate the economy with record low interest rates and keep its conditional promise to hold the benchmark rate at 0.25% until mid-2010.

Despite an anticipated further softening in prices, economists do not expect deflation to get a stranglehold on Canada. Stewart Hall, an economist at HSBC Securities said signs of economic recovery and a decline in oil prices in the second half of last year are expected to drive headline inflation back into positive territory by the end of this year.

He said a rise in Canada's composite leading index confirmed projections the recession likely ended in the current quarter were likely correct. The leading index for July rose for the first time in almost a year Wednesday to be up by 0.4%, Statistics Canada figures showed. The results signalled an improvement in the sectors of the economy that lead economic growth, such as the stock markets and housing.

"The leading economic index is coinciding with broad expectations for the Canadian economy to have turned the corner in the second half of 2009 and begun to head down the long road to recovery," Mr. Hall said.

BoC may have to break interest rate promise
Alia McMullen, Financial Post Published: Thursday, July 23, 2009

TORONTO -- The Canadian dollar hit a 10-month high Monday amid growing risk appetite and rising expectations that inflation will ultimately force the Bank of Canada to break its promise to keep interest rates on hold until mid-2010.

"The time for tightening is not yet at hand, but June 2010 seems too late," said Yanick Desnoyers, the assistant chief economist at National Bank Financial. "The day when the condition for the Bank's low-rate commitment is no longer met will probably come before then."

Mr. Desnoyers said the benchmark interest rate had been lowered to a record low of 0.25% to limit the damage of the recession and financial crisis. However, he said the rate was too low relative to core inflation, which stood at 1.9% in June, just one basis point below the bank's target rate.

The outlook for higher interest rates, whether they come sooner or after June next year, has helped support the Canadian dollar, which has increased by about 8% since the beginning of the month.

The loonie inched up US0.16¢ to US$92.50 Monday after reaching its highest level since October in intraday trade. The rise was boosted by an improvement in investor sentiment after new U.S. home sales surged by 11% in June and the three-month Libor rate, the benchmark borrowing rate banks generally charge each other, fell to a record low 0.496%.

The decline in Libor, which peaked at 4.82% in October, is a sign that credit pressures continue to ease. Commodity prices were also marginally higher amid expectations of an uptick in demand.

Aron Gampel, vice president and deputy chief economist at Scotia Capital, said the Canadian dollar has also strengthened against the greenback because many were concerned U.S. stimulus efforts would leave behind a problematic debt hangover. He said the loonie was likely on its way back to parity with the U.S. dollar.

With the Bank of Canada having declared that the recession is likely over, interest is beginning to turn to when interest rates will begin to rise. Some, such as Mr. Desnoyers, believe the Canadian recovery, bolstered by government stimulus, will push inflation up faster than expected, forcing the Bank of Canada to use its "get out of jail free card" and raise the benchmark policy rate before June 2010.

The central bank said it would keep interest rates on hold until June 2010 "conditional on the outlook for inflation".

Bond yields have risen in recent weeks and now reflect a 90% chance of an interest rate rise withing nine months.

Others, such as Mr. Gampel, believe the central bank will keep interest rates on hold until mid next year, but embark on an aggressive tightening thereafter.

However, he said the economy was at a turning point and the Bank of Canada's ultimate decision would depend on the speed of economic recovery.

"They could be looking at having to push interest rates up at a faster rate, and sooner, if the recovery takes on a greater scope going forward," Mr. Gampel said.

He said the recovery could well be on track to outpace expectations as businesses rebuild inventories, consumer spending picks up and fiscal stimulus kicks in.

However, he said evidence to date does not suggest the central bank will need to hike rates before June, particularly with a large amount of excess capacity in product and labour markets.

Bank of Canada Holds Key Rate Steady

The Bank of Canada announced this morning that it will leave its key interest rate unchanged.

The Bank also reiterated its commitment to hold its key rate at the current level until the end of the second quarter of 2010, conditional on the outlook for inflation. In its statement the Bank noted that in Canada, “stimulative monetary and fiscal policies, improved financial conditions, firmer commodity prices, and a rebound in business and consumer confidence are spurring domestic demand growth.

However, the higher Canadian dollar, as well as ongoing restructuring in key industrial sectors, is significantly moderating the pace of overall growth.”

Lenders are expected to keep their prime lending rate steady. Variable-rate mortgages, variable-rate credit cards, and home equity lines of credit are typically linked to a lender’s prime rate.

Pricing for fixed-rate mortgages is not directly affected by today’s announcement.

Worst may be over for the housing market

Garry Marr, Financial Post

New home construction rose for a second straight month in June, in what analysts say is another sign that the worst may be over for the Canadian housing market.

Canada Mortgage and Housing Corp. said Thursday there were 140,700 new homes constructed in June on a seasonally adjusted annualized basis. Construction was up almost 8% from the 130,300 May figure.

"There are some pretty good signs that we are starting to see in the housing market," said Bob Dugan, chief economist with CMHC. "We've seen it for quite a few months on the existing homes side."

Existing home sales rose 42% from January to May across the country and the early indications are that June was strongest month this year. Sales in Vancouver were up 76% last month compared with a year earlier and Calgary and Toronto both recorded 27% increases during the same period.

Existing home inventories have begun to shrink across the country, convincing builders to ramp up construction. CMHC said urban single family homes -- considered the best barometer of the new home market -- climbed 7.3% in May from a month earlier.

"It's well into seller's market territory again with the May and April numbers," said Mr. Dugan.

The optimism about the Canadian market comes despite the fact new construction at 140,000 units is way off the 200,000-plus figure the market in Canada has seen for the past seven years.

"I can only speculate, but maybe a lot of people are relieved we are not seeing the decreases we have seen in the U.S.," said Mr. Dugan. "Peak-to-trough, the decline in the U.S. was something like 80%. In Canada, that would mean we'd have to have 55,000 starts. Some people may have thought that's where the Canadian market was going."
The consensus among economist is construction won't return to pre-recession levels but will gradually improve in the coming months.

"This month's increase is an important confirmation that the Canadian housing sector is past the worst and in recovery mode," said Marco Lettieri, an economist with National Bank. "The recovery seems to be broad based with gains observed in both multiple [which includes condominium construction] and single units."

Robert Kavcic, an economist with Bank of Montreal, said there could be some room for modest growth in starts in the coming months.

"Higher affordability and improved consumer confidence brought buyers off the sidelines this spring," said Mr. Kavcic.

A report this week from RBC Economics said declining prices and lower interest rates led to one of the biggest quarterly improvements in affordability in history. The bank said monthly payments on a typical detached bungalow in Canada had decreased by almost 17% from a year earlier.

Royal LePage Real Estate Services was also forced this week to upgrade its forecast for 2009 because of the improved market conditions. It now expects 430,000 sales this year, an improvement from its previous call of 416,000, but still down 1% from a year ago.

"I think 2009 will go down as a moderate correction as opposed to the deep and sustained recession that we had first feared," said Phil Soper, chief executive of the real estate company.

Royal LePage expects prices this year will still fall but not by as much as previously feared. It expects the average sale price in 2009 to be $297,000, a 2% drop from last year. It had previously forecast a 3.5% decline.

Mr. Soper said a decline is still tough to swallow after years of compound growth of close to 10% in the housing market but it's proving to be a far cry from what has happened in the United States.

"We are long way from the 35% decline that a lot of regions in the United States are experiencing. It's a very different kind of correction," said Mr. Soper

Unemployment rises, but not as much as feared

Canada's economy lost 7,400 jobs in June, far less than expected, even as the country continued to struggle through an economic downturn.

The unemployment rate rose to an 11-year high of 8.6%, up from 8.4% in May, Statistics Canada said Friday.

"Full-time employment continued its downward trend in June, offsetting gains in part-time," the federal agency said. "Employment was little changed in June, leaving total net losses during the last three months at 13,000, much smaller than the 273,000 decline in the first three months of the year."

Most economists had expected 35,000 job losses in June, with the unemployment rate rising to 8.7%.

On Thursday, however, Finance Minister Jim Flaherty warned that job losses are likely to continue for the months ahead.

Most analysts forecast the jobless rate will peak at the mid-9% range some time next year.

"In the months ahead, given the very weak backdrop for the Canadian economy, we expect the negative labour market dynamics to continue and the pace of job losses to remain fairly brisk," Millan Mulraine, economics strategist at TD Economics, said ahead of Friday's report.

Canada's economy shrank 5.4% in the first quarter of this year, its fastest pace of contraction since 1991. That followed a 3.7% decline in the fourth quarter of 2008. The Bank of Canada expects the economy to contract a further 3.5% in the second quarter of 2009.

On Wednesday, the International Monetary Fund revised its outlook for the Canadian economy, saying GDP is now expected to contract by 2.3% this year, compared to its earlier forecast of a 2.5% decline. The IMF, which monitors the global economy, and provides financial and technical assistance to its 186 member nations, also raised its forecast for 2010 growth to 1.6% from the 1.2% it had predicted in April.

Canwest News Service

OECD pointers could keep variables low for longer

The Organization for Economic Cooperation and Development recommended the Bank of Canada keep its key interest rate close to zero until the end of 2010 in its most recent economic outlook.

"The Bank of England has lowered policy rates to 1/2 per cent. The Bank of Canada has cut the interest rate to 1/4 per cent, and has also conditionally committed to hold this rate until the end of the second quarter in 2010," the OECD outlook read. "In both countries, the projections warrant keeping the policy rate as close to zero as possible up to end-2010."

The report also said the Bank of Canada likely won't need to resort to other monetary measures to speed up recovery, adding, "the fiscal authorities retain room for further temporary fiscal stimulus should the recovery fail to materialize as expected." Although it didn't predict a swift recovery for Canada, the OECD did reduce its prediction of how much the country's economy will shrink in 2009 to 2.6 per cent, down from three per cent in March and said the GDP will grow by 0.7 per cent in 2010.

In his speech at the International Economic Forum of the Americas on June 11 Bank of Canada governor Mark Carney repeated his commitment to keep the key interest rates low into 2010. The Bank of Canada also recently announced it would extend the use of its temporary facilities to boost financial market liquidity until early next year as opposed to introducing new measures.
OECD pointers could keep variables low for longer

Why are rates not coming back down?

Good Morning!

As we’ve seen the spreads on the bond yields increase, the question of “when are rates coming down?” has been asked a lot!

Earlier in the year when volumes were low, volumes for the banks were also low. During Spring Market the race for obtaining 2009 market share was on! Profitability was taking a back seat to market share and we saw very competitive rates from the banks. They were treating a mortgage as a loss leader to get that client in the door. Some also had extra deposit money from RRSP season to lend out.

Now into the third quarter of 2009, profitability is again top of mind. Remember year end for the banks is Oct 31. They only have 4 months left to hit their revenue targets.
Therefore, we are now seeing banks hanging onto this higher spread for as long as they can….there may be some movement soon, but banks are ensuring bond prices stay consistent before they make a move.

If rates change-you will be the first to know!

BDC's new Operating Line of Credit Guarantee(TM) now available through financial institutions

Eligible companies can obtain up to a 40% increase in their line of
credit

MONTREAL, June 25 /CNW Telbec/ - The Business Development Bank of Canada
(BDC) is pleased to announce that entrepreneurs can now request BDC's
Operating Line of Credit Guarantee from their financial institution. The
Guarantee, which enables eligible companies to obtain up to a 40% increase in
their current operating line of credit, is designed to help creditworthy
Canadian businesses overcome temporary liquidity problems.
"As capital remains scarce in the market, an increasing number of
creditworthy entrepreneurs are finding it difficult to get the credit they
need to finance their operations," said Jean-René Halde, President and Chief
Executive Officer at BDC. "The Operating Line of Credit Guarantee helps fill
that gap. Working together with Canada's financial institutions, BDC will help
ensure that businesses have access to the short-term financing they need to
remain successful and grow in the months ahead."
The Operating Line of Credit Guarantee provides financial institutions
with the option of obtaining a guarantee for a portion of their clients'
operating lines of credit - either to increase or to maintain it. Through the
program, financial institutions and BDC will share the risk while providing
increased support to their clients. To request the guarantee, the financial
institutions contact BDC which acts as a behind-the-scenes partner throughout
the process.

Terms and eligibility criteria

The Operating Line of Credit Guarantee applies to operating Lines of
Credit with authorized limits of a minimum of $400,000 and a maximum of
$40,000,000. The guarantee supports a maximum incremental amount, or portion
of the line of credit, of between 25 and 40%. The guarantee amount ranges
between $50,000 up to a maximum of $5 million. The guarantee is valid for a
period of 12 months and can be renewed annually.
Businesses eligible for the guarantee are those who have an operating
Line of Credit secured by short term assets, such as accounts receivable and
inventory. Among other things, the business must be commercially viable, have
been in operation for two or more years, have had an operating Line of Credit
with the financial institution for at least one year and have a positive
tangible net worth.
The new guarantee is provided through Canadian financial institutions.
Interested businesses can obtain further information by consulting with their
financial institution, or on the BDC Web site.

About BDC

BDC is Canada's business development bank. From 100 offices across the
country, BDC promotes entrepreneurship by providing highly tailored financing,
venture capital and consulting services to entrepreneurs. Visit www.bdc.ca for
more information.

Don't handcuff your mortgage

Gary Marr, Financial Post Published: Saturday, June 13, 2009

Would you like to pay an extra $300 per month on your mortgage? Not likely.

That hasn't stopped a number of Canadians, with the deal of a lifetime on a variable-rate mortgage, from switching over to a more expensive fixed-rate product and paying the extra freight.

A fear of rising rates is driving the rash decision. But if you've finally managed to pin your banker to the ground, why on Earth would you let him off the mat?

More than 28% of Canadians have a variable-rate product tied to prime, according to the Canadian Association of Accredited Mortgage Professionals (CAAMP). If you negotiated a deal before October of last year, chances are you are now borrowing money for as little as 1.35%. That's based on deals that at one point saw the banks giving 90 basis points off prime. Prime is now 2.25%.

The average sale price of a home last month in Canada was $306,366. Based on a 25% downpayment and a 25-year amortization, your monthly payment would be $962.61 at 1.35%. Convert that to a five-year fixed-rate term and you're probably going to have to consider a 4% mortgage rate and a monthly payment of $1,289.04.

Rates are rising fast. Most major banks upped their five-year rate by 40 basis points this week, although discounters were still offering 4% this past week.

"It's not a mass rush yet, but we are starting to see ... people locking in. But variable rates are still so good," says Joan Dal Bianco, vice-president of real estate-secured lending, TD Canada Trust. She stops short of questioning why a consumer would pull out of these "deals" that are no longer available on the market.

Try to get a variable-rate mortgage today and the best you can probably hope to get is 60 basis points above prime, or 2.85%.

The landscape changed dramatically in October during the credit crunch. As the Bank of Canada lowered rates, the major banks reluctantly lowered prime because of the massive amount of customers with variable-rate products negotiated under the old, higher terms.

"Bonds yields are going up rapidly and people are starting to realize the rates are going to go up," Ms. Dal Bianco says. Throw in the fact the Bank of Canada used the weasel word "conditional"(on inflation rates)when it promised not to raise rates until June, and you can understand why some people think today's record-low prime rate might not hold.

But if you're someplace between 60 to 90 basis points below prime, the rate is going to have to go up pretty fast to justify locking in today at 4%, even though that is just slightly above the all-time low hit last month for a five-year term.
"I don't understand why you would lock in," says Jim Murphy, chief executive of CAAMP. "Sure, if they start to rise, but [Bank of Canada governor Mark] Carney says they won't rise, so you've got another year at that prime-minus rate."
Don Lawby, chief executive of Century 21 Canada, says even when rates do start to increase, they are not going to jump significantly right away. You are not going to get 4% on a fixed rate again, but double-digit rates seem unlikely. "The only logic two locking in would be for someone very sensitive to any rate change and they just want to be secure," Mr. Lawby says.

But at what price? If you're using the "feeling secure" logic, why not go for the 10-year fixed-rate product? Rates on that product can be locked at 5.25%, ridiculously low by historical standards. Yet fewer than 10% of Canadians consider a 10-year product.

There are some compromises you can make. For starters, there is nothing to prevent consumers from having a blended mortgage at most Canadian banks. Some banks will let you take half your outstanding debt and lock it in. Diversity is preached for stock portfolios, but few people seem to adhere to the same philosophy when managing their debt.

Consumers might want to take their cue from business. Few companies would want all of their debt coming due at the same time -- it presents too much risk. The other option is knocking down principal: Make payments based on a 4% rate and have that extra $300 go straight to your principal every month.

The bottom line is if you've got a deal on your mortgage, why would you give it back?

Gen X to flex new purchasing muscle in recreational property markets across Canada, says RE/MAX

Demographic shift underway in 74 per cent of markets surveyed

KELOWNA, BC, June 2 /CNW/ - Generation X purchasers are poised to replace
aging baby boomers as the major force in recreational property markets across
the country, according to a report released today by RE/MAX.

The demographic shift was noted in the 2009 RE/MAX Recreational Property
Report highlighting sales, pricing, trends and developments in 50 Canadian
markets. The report found demand from Gen X (those born between 1965 and 1980)
has nearly doubled over one year ago. Seventy-four per cent of markets
surveyed this year reported a marked trend toward thirty-something buyers
snapping up affordably-priced product, ranging from waterfront cottages to
resort condominiums, compared to just 40 per cent in 2008.

"Much of the activity in the marketplace today has to do with the mindset
of this particular generation," says Elton Ash, Regional Executive Vice
President, RE/MAX of Western Canada. "More important than the investment
aspect is the commitment to lifestyle. The purchase of a waterfront home or a
condominium is more than a simple transaction to Gen X purchasers - owning a
recreational property underscores their dedication to family and balance."

The financial strength of the cohort dovetails well with current market
realities. Sixty-six per cent of recreational property markets surveyed
reported a decline in the number of recreational product sold in the first
four months of 2009, while 22 per cent indicated sales were either up or on
par compared to one year ago. While the combination of inclement weather and a
global recession clearly hampered sales activity earlier in the year, many
major centres are currently experiencing an upswing in activity as the
traditional cottage season gets underway.

"After being priced out of most markets for the better half of the last
decade, Gen X purchasers now have the financial wherewithal to buy
recreational product at virtually every price point," says Michael Polzler,
Executive Vice President, Regional Director, RE/MAX Ontario-Atlantic Canada.

"Gen X is ideally positioned to pick up any slack in recreational property
markets caused by softer demand from baby boomers and retirees. They represent
the next wave of recreational property owners in Canada and they know it."

The time to buy has never been better. With four exceptions, recreational
property prices have softened in most major markets across the country. Only
on the Newfoundland Coast and in Ontario, from Innisfil to Oro, Kingston, and
Beaverton, have values increased this year compared to 2008. Starting prices
remain similar to one year ago and in some cases are even higher.

"While buyer's market conditions exist virtually across the board,
sellers of recreational properties from coast-to-coast are clearly content to
wait out the storm," says Polzler. "They are in no hurry to unload their
product. Many have held on to their properties for generations - they're
fully-owned yet underutilized, which has prompted some aging owners to list
them for sale."

The report also found that while lowball offers are on the rise, very few
meet with success. Through tough negotiations with multiple sign backs,
purchasers who are serious tend to find out the hard way that sellers are
serious too. As a result, the sales-to-list ratio remains relatively high in
most recreational property markets across the country.

"The prospect of greater stability down the road is creating cautious
optimism in the marketplace," says Ash. "Purchasers are seeking to buy quality
product, whether it be situated on lakes, rivers, or ponds, before values
start to once-again edge up."

Highlights:
- Supply is adequate in most markets, but heated activity in the
lower-end has resulted in tight inventory levels for entry-level
product in 18 per cent of markets including: Bancroft, Combermere,
Honey Harbour/Port Severn, West Kawarthas, Orillia, Flesherton, North
Saskatchewan, and Salt Spring Island.
- Older cottage owners, many who own their properties outright, are
selling to younger purchasers with families.
- Some American cottage owners in Canada are taking advantage of the
stronger dollar to cash out of the market.
- American purchasers have largely fallen off the radar, with some
exceptions: Lake Winnipeg, Shediac Bay, and Sault Ste. Marie.
- Pent-up demand is a factor in the marketplace, as those purchasers
who had intended on buying recreational properties in the latter half
of 2008 deferred their purchases to 2009.
- Older Canadians continue to seek secondary homes in warmer parts of
the U.S such as Florida, Arizona, California, and Nevada.
- Generation X purchasers are prepared to spend their hard-earned
dollars on recreational properties, but at the end of the day, they
want to know that they've negotiated the best deal possible.
- The upper-end has somewhat softened in markets across the country.

RE/MAX is Canada's leading real estate organization with over 17,600 sales associates situated throughout its more than 677 independently-owned and operated offices across the country. The RE/MAX franchise network, now in its 36th year, is a global real estate system operating in more than 70 countries.

Over 6,700 independently-owned offices engage nearly 100,000 member sales
associates who lead the industry in professional designations, experience and
production while providing real estate services in residential, commercial,
referral, and asset management. For more information, visit: www.remax.ca.

Starting Prices for Recreational Properties(*)

-------------------------------------------------------------------------
Market 2008 2009
-------------------------------------------------------------------------

British Columbia - Gulf Islands
- Salt Spring Island(xx) $1,300,000 $890,000
-------------------------------------------------------------------------
Comox Valley -
Mt. Washington(xx) $480,000 - $800,000 $500,000
-------------------------------------------------------------------------
Vancouver Island - Ucluelet(xx) $649,000 $555,000
-------------------------------------------------------------------------
Tofino (including inlet
waterfront)(xx) $869,000 $789,000
-------------------------------------------------------------------------
Fraser Valley - Cultus
Lake/Harrison Lake $750,000 $450,000
-------------------------------------------------------------------------
Okanagan Valley - South
Okanagan $1,000,000 $800,000
-------------------------------------------------------------------------
North Okanagan/Shuswap -
Vernon $1,500,000 $1,200,000
-------------------------------------------------------------------------
Shuswap $800,000 $800,000
-------------------------------------------------------------------------
Central South Cariboo(xxx)(*) $140,000 $135,000
-------------------------------------------------------------------------
Whistler N/A $1,000,000
-------------------------------------------------------------------------
Lake Windermere $1,300,000 $1,200,000
-------------------------------------------------------------------------
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(*) Starting price for a three-bedroom, winterized recreational property
on a standard-sized waterfront lot
(xx) Oceanfront Property
(xxx) Two-Bedroom Condominium
(xxx)(*) Seasonal property


For further information: Marie Selby, RE/MAX of Western Canada, (250)
860-3628; Eva Blay/Charlene McAdam, Point Blank Communications, (416)
781-3911

First-time home buyers should be prepared, rather than surprised, by extra costs
by David Friend, THE CANADIAN PRESS

TORONTO - First-time homebuyers are scouring the market for deals, hoping to take advantage of lower prices but real estate and mortgage experts caution that shoppers need to consider the wide array costs that come with buying a home - including ones that aren't immediately obvious.

They say it's part of a planning process that should start long before the house hunt begins.

Dianne Usher, division vice-president for Royal LePage, says first-time buyers need to run through a checklist of the essential services that will add extra costs to their bottom line.

"Some of the costs that people tend to forget about, or are unaware of, are legal fees," she said.

"They're going to need a lawyer to search and confirm title to the property, physically close the transaction, to register and prepare any charge or mortgage documents.

"They're going to arrange for title insurance, which for some lawyers is an additional cost."

Then there are other factors, like initial property deposits, which are part of down payments, Usher said. Those can increase up-front costs by as much as five per cent, she suggested.

It's a confusing process for those who haven't done it before, which is why it's best to start planning early.

"When I get a client sitting down with me, we actually have a closing cost sheet," said Jeff Mayer, an agent at Mortgage Intelligence, a Toronto-area mortgage broker.

He said making a detailed list helps potential buyers determine whether they can afford that dream home they always wanted, or if they should scale back their expectations to something more reasonably priced.

Mayer said his sheets break down monthly expenses and assess general affordability factors. He said he'll ask clients to determine their maximum, medium and "comfort level" mortgage approval.

"You want to look at the actual payment on that house, meaning the mortgage with mortgage insurance," he said.

"You want to look at what your average household costs are - meaning the heat, hydro, gas, maintenance on the property, and from there you want to see if that's something you can sleep with at night."

"I always tell my clients to downgrade whatever they want to buy. So if they want to buy $500,000 buy $450,000."

Usher said that homebuyers need to choose a knowledgeable local realtor with a good reputation.

"It's always good to choose a realtor that has been referred to you by somebody who has been pleased by their service," she said.

"In some major urban centres there is a higher level of activity than a suburb environment. Sometimes the buyers can get caught up in a frenzy and not do their homework."

Once a deal is secured, and financing worked out, there can be other surprises along the way, Usher added.

"The physical cost of moving is often more than two cases of beer and five pizzas," she said.

And "a resale unit may be untidy, so it might be necessary to arrange for some professional cleaning to be done."

For new home buyers, the Ontario government plans to blend the federal GST with the provincial sales tax next year, which could significantly increase the final price.

On new homes, where GST is already included, the tax harmonization will apply another eight per cent provincial tax to houses worth more than $500,000.

New homes worth under $400,000 will not face the additional tax, while those between $400,000 and $500,000 will pay the tax but get a rebate.

However, Usher noted that there are some refunds for first-time homebuyers, including a provincial land transfer tax rebate of up to $2,000.

In Toronto, where there is also a municipal land transfer tax, first-time buyers can get up to $3,725 back.

Some provinces also offer "green incentive" rebates for energy efficient homes.