Story about interest rates
By Mark Schadenberg
There is a new boss at the Bank Of Canada, and even though the Canadian
dollar is hovering around 95 cents versus the U.S. buck, Stephen Poloz (pictured below) is
keeping interest rates consistent and low.
My best advice anytime to anyone, who is thinking of purchasing a home,
is to visit your bank, be guaranteed at a certain interest rate for 120 days,
and continue to live a modest lifestyle. In other words if you have been
pre-approved for a $200,000 mortgage, now is not the time to buy five new appliances,
book a trip to the sunny south, and buy another vehicle.
In my recent move to a new address, I quickly realized that the 5-year
fixed mortgage numbers are now higher than the 3-year quoted percentages. That
fact alone indicates that current microscopic interest rates will not and can
not continue forever.
At the same time, if you bought locally before 2005, you have now
amassed a huge equity in your current house, so now would be a great time to
call me and plan a move as you should have over 25% down to buy that dream home
based solely on built-in value for your home. For example, if you bought in
2004 and only did respectable and necessary upgrades, that house should now be
worth $275,000. Assuming you made all your mortgage payments and did not
re-finance for an y reason, you should have in excess of $120,000 to move
forward.
Here is one story I found online about interest rates with references
made to the worldwide economy and U.S. dollar:
()()()()()()()()
Bank of Canada holds
rates steady
By Louise Egan and Randall Palmer, Reuters
OTTAWA
- The Bank of Canada held its key interest rate steady on Wednesday but
signaled it has concerns about global economic uncertainty and the health of
the country's export sector, suggesting it is in no rush to follow the U.S.
Federal Reserve in altering monetary policy.
In
a statement accompanying its widely expected rate decision, the central bank
repeated its vague tightening bias, pointing to higher rates somewhere on the
horizon. But it also highlighted the slack in Canada's economy and muted
inflation, and cited signs of improvement in household debt and in the housing
market, all of which suggested such a move is some way off.
By
contrast, forecasts are for the Fed to start scaling back its bond purchases
soon as a first step towards eventual rate hikes.
The
Bank of Canada was the first Group of Seven central bank to tighten policy
following the global financial crisis, hiking its main interest rate three
times in 2010 to the current level of 1%. It has since kept to the sidelines.
Economists surveyed by Reuters in late August expected the bank to resume
raising rates in the fourth quarter of 2014.
The
bank said on Wednesday its outlook for the domestic and global economies is
largely unchanged from July. Yet it noted "less momentum overall than
anticipated" in the U.S. economy.
Analysts
saw a slight dovish slant in the bank's wording, but doubted there would be
much change in terms of a timetable for eventual rate hikes.
"On
the margins, it was a bit on the dovish side, but really it's steady as she
goes," said Andrew Kelvin, senior fixed income strategist at TD
Securities.
The
bank predicted the economy would begin to absorb excess slack in 2014, puzzling
some economists who had seen that process beginning later this year, based on
the bank's own growth forecasts in July.
The
bank believes the economy must grow by more than 2.1% to narrow the output gap
- the difference between how much the economy produces and its potential
production. In July, it projected third- and fourth-quarter growth at 3.8% and
2.5%, respectively.
"Realistically,
if you look at their most recent quarterly forecast ... they had suggested it
would begin to narrow in the second half of this year, so maybe at the margin
slightly dovish, but mostly in line with expectations," said Mark
Chandler, a fixed-income and currency strategist at Royal Bank of Canada.
EXPORT
COMEBACK DELAYED
The
bank also noted that exports and business investment, which it sees as key
ingredients for a full economic comeback in Canada, have not yet replaced
consumers as the main engine of growth as it had hoped.
"Uncertain
global economic conditions appear to be delaying the anticipated rotation of
demand in Canada towards exports and investment," the bank said.
Consumer
spending and a frothy housing market powered Canada's quick recovery from the
2008-09 recession but now policymakers, worried that Canadians are taking on
too much debt, are looking to exporters and corporations to take the reins.
"Perhaps
for Canada the important thing here is that the so-called great rotation from
consumer spending and housing to business investment and exports has
disappointed the bank," said Doug Porter, chief economist at BMO Capital
Markets.
"That
came through loud and clear in the second quarter numbers," he said.
The
lack of major surprises in the statement was seen as neutral for the Canadian
dollar, which nonetheless strengthened after the release of the bank statement
as it caught up with other currencies rallying on upbeat global economic data.
It
was trading at C$1.0487 versus the U.S. dollar, or 95.36 U.S. cents, at about
12:50 a.m. (1650 GMT), firmer than Tuesday's North American finish of C$1.0530,
or 94.97 U.S. cents.
As
Fed officials talk of scaling back the U.S. central bank's $85 billion-a-month
bond purchasing program, possibly as soon as September, the market reaction is
being felt in Canada.
Since
the Bank of Canada's July statement, the Canadian dollar has weakened against
the greenback, which should benefit hard-hit exporters. But five-year bond
yields have increased, pushing mortgage rates higher and potentially cooling
the housing market.
Bank
of Canada Deputy Governor John Murray said last month the net effects on Canada
of Fed "tapering" would be positive.
While
Canada's housing market has been stronger than anticipated, the strength has
been tempered by slower credit growth and higher mortgage rates, the bank said,
signaling no major concern on that front.
Mark
Schadenberg, Sales
Representative
Royal
LePage Triland Realty
757 Dundas
St, Woodstock
www.wesellwoodstock.com
(519) 537-1553,
cell or text
Email:
mschadenberg@rogers.com
Twitter:
markroyallepage
Discussion
. . . Direction . . . Determination . . . Destination
