Wednesday, June 21, 2006

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Thursday, June 15, 2006

Home inspectors save future headaches

It looks like your dream house on the outside, but a few weeks after you move in, you discover mice, electrical problems or asbestos.

Like a scene out of the 1986 comedy, The Money Pit, the beautiful house you were excited to move has now become a financial burden.

This is the case for some new home buyers who don't cover all their bases by doing research before moving into a new home.

Hiring a home inspector is a part of the home buying process that is optional, but may save numerous headaches down the road.


30 per cent of Canadian renters plan to purchase a home within three years,

Canadians continue to favour home ownership over renting despite rising home prices and modestly higher interest rates, according to the results of a study released today by Scotiabank, which indicates that 30 per cent of Canadian renters plan to purchase a home within three years.

"Steady job and wage gains continue to support Canadians who want to make the move from renting to owning," said Adrienne Warren, Senior Economist, Scotia Economics. "Many potential new homeowners, however, will look to less expensive housing options such as townhomes and condominiums due to some erosion in overall affordability."

Despite the optimistic view of homeownership, current renters who are not planning to buy, outlined a number of deterrents to purchasing a home. The study found the most commonly cited reasons include: commitment of ownership (37%), high cost of real estate (17%), living paycheque to paycheque (12%), poor credit (7%), and student loans (5%).


Mortgage rate peak near

Mortgage rate peak near economists: 'The end's not far away'

The short-term outlook for inflation and interest rates in Canada is a whole lot less clear since Friday's jobs report that signalled the economy is hotter than expected, but the long view is that borrowing costs and the pace of price increases are approaching their apex.

After Friday's report that Canada created almost 100,000 jobs last month, the Canadian dollar has shot up almost US2 cents to US91 cents in the past two trading days on bets the Bank of Canada is not done raising interest rates to corral inflation, and probably has one more quarter-percentage-point increase to go. That's a change from earlier last week, when the expectation was that the central bank's trend-setting target for overnight interest rates wasn't going any higher than the 4.25% it is now.
"If we are not done watching the Bank of Canada raise interest rates, we're 25 basis points from it, so the end's not far away," said Craig Wright, chief economist at Royal Bank of Canada.

The report that changed the view, and that has people calling mortgage brokers again on concern they should lock in before rates rise further, showed the economy created almost four times as many jobs as economists had expected. The unemployment rate dropped to 6.1%, the lowest since 1974.


Ontarians Eager to Buy Homes but Lack Understanding of Legal Risks

Only 10% Understand Real Estate Lawyer's Role

Many Ontarians have jumped into the busy real estate market without fully appreciating the legal dimensions of home buying.

Homebuyers put a great deal of time and energy into finding their dream home. Real estate lawyers put the same careful attention into investigating the legal issues related to the property and closing the sale," says Kathleen Waters, an experienced real estate lawyer and Vice President, TitlePLUS. "That's where your real estate lawyer becomes an invaluable resource: he or she navigates you through the major legal implications of home purchase, and can help prevent a dream home from turning into a nightmare."


Homeowners can expect more interest rate hikes

Homeowners can expect to another half percentage point interest rate hike over the next year, says the chief economist with the Canadian Institute of Mortgage Brokers and Lenders.

Will Dunning said that increase might take a little of the heat out of the real estate market, but he doubts it would be enough to cause prices to fall.

New home sales are strong, prices are continuing to rise and the new housing starts are either growing slightly or remain flat in most parts of the country, he said.

Speaking at a mortgage symposium in Halifax Monday, Mr. Dunning said fixed rates remain the most popular mortgage choice for homeowners, but the heavily promoted combination fixed rate/variable rate mortgages are gaining in acceptance as people looking at the uncertainty in the marketplace see them as a way of managing the risk.

Drawing on the results of a survey he carried out in March, he said most people renewing their mortgages are happy with their situation, generally because their payments on a five-year mortgage are less today than they were when they last renewed. People who took out a one-year mortgage might not be as happy as their payments are likely going up.

The survey also found that 66 per cent of people believe mortgage rates will continue to climb, but only 25 per cent believe the increases will negatively impact their standard of living.

With increasing rates, Mr. Dunning said mortgage holders will likely shop around more, a practice he encourages.

"Negotiate, negotiate, negotiate. The gap between the posted rates and the discount rates is as large as I’ve ever seen."

The posted rate at many major banks is around 6.75 per cent, while the discount rate is as low as 5.3 per cent, he said.

At least part of the reason for the gap is the tremendous growth in the number of companies getting into the mortgage business over the past few years and with an increasing number of players comes heightened competition.

Tuesday, June 13, 2006

Navigating the mortgage maze

Going crossed-eyed over the myriad mortgage options these days? Don't despair, says a local real estate expert and author.

With the right knowledge, research and professional team backing you up, there are some great deals to be had, says Douglas Gray, president of National Real Estate Institute Inc, and author of Mortgages Made Easy: The All-Canadian Guide to Home Financing.

And it all starts with proper preparation, including doing an online credit check to make sure your financial affairs are as they should be, and knowing how much a lender will potentially grant you, Gray says.

His No. 1 piece of mortgage advice: Don't deal directly with lenders, but work with a mortgage broker who can seek out the best deals from up to 100 different lenders.

'They know all the big players, and who's hungry - and you don't pay a penny to the mortgage broker,' says Gray, who also advises homebuyers to do a little comparison-shopping, and talk with at least three different brokers.

But with affordability rates in Vancouver at an all-time low, sometimes the best deal is still out of financial reach - and that's where parents come in.

More and more often, 'parents are giving their children a leg up, maybe because they've got a lot of equity in their own homes,' says Gray.

But don't expect them to hand over a down payment or co-sign a mortgage at the snap of your fingers - if you want your parents' help, impress them with your research and 'plant the seed' early, he says.


When it comes to mortgages, getting the best deal almost always comes down to preparation and research. Here are 10 key questions to ask yourself before you sign on the dotted line:

1. Is your income secure? Will it increase or decrease in the future?

2. Are you planning on increasing the size of your family, and therefore your living expenses?

3. Can you afford to put aside a financial buffer for unexpected expenses or emergencies?

4. Are you planning to purchase the property with someone else?

5. If so, can you depend on their financial contribution?

6. Have you determined the amount of mortgage you'll be eligible for?

7. Have you determined all the expenses you will incur relating to the purchase transaction?

8. If you're relying on income from renting out part or all of your newly acquired property, do you know the city and strata bylaws?

9. Have you researched mortgage brokers and companies on the Internet?

10. Have you run a credit check on yourself to see what lenders will see?

Source: Mortgages Made Easy: The All-Canadian Guide to Home Financing, Douglas Gray (John Wiley & Sons Canada, Ltd, 2006).

Bankruptcies keep falling

Personal bankruptcies have fallen to the lowest level in seven years, cushioned by a strong labour market, Canadian Imperial Bank of Commerce said Monday.

Bankruptcies, on average over the past three months, fell 7.6 per cent from last year but – like most economic reports of late – the headline number masked regional discrepancies. In Alberta, they tumbled 17.5 per cent, while bankruptcies in Quebec and Atlantic Canada rose 3.6 per cent and 1.8 per cent, respectively, CIBC said in its bankruptcy report.

At the same time, Ontario bankruptcies are falling as strength in Ottawa, Toronto and Kitchener offsets higher rates in Sudbury and Windsor, cities more vulnerable to the strong Canadian dollar.

“Looking at development in the pipelines, it appears that there is little risk of any significant deterioration in the bankruptcy situation in the near future,” CIBC economist Benjamin Tal said in the report.

In one barometer that shows fewer people are likely going belly up, the delinquency rate in credit cards has stabilized at about 4.6 per cent — lower than its long-term average. Mortgage arrears, meantime, remain well below their long-term average and are “unlikely to rise strongly in the near future,” the report said.

CIBC forecasts little change in the number of bankruptcies this year and a 3 per cent-5 per cent increase next year as economic activity weakens.

Business bankruptcies, meantime, have fallen more than 18 per cent, on average over the past three months, from last year — a rate not seen since late 2002.

The largest decline in business bankruptcies was in Alberta where the number of bankruptcy filings plunged by almost 40 per cent during the year ending April.

Ontario was the only province that saw an increase in the number of business bankruptcies in the period, weighed down by difficulties in the manufacturing sector.

The number of business bankruptcies is expected to fall by 7 or 8 per cent this year be little changed in 2007, CIBC said.
“At the same time, we expect the regional divergence to widen with bankruptcies in the manufacturing sector in Ontario and Quebec continuing to rise, reflecting the impact of a strong dollar and some softening in demand from south of the border.”

Thursday, June 08, 2006

Lower-income housing units get leg up

A recent forgivable loan from the Canadian Mortgage and Housing Corporation (CMHC) will ensure that residents of the Homewood Mansions near Carlton and Jarvis streets can continue to live in safe buildings.

The CMHC has passed down $762,000 in funding for the 67-unit rental apartment at 1 Homewood Ave. and $528,000 for a 44-unit rooming house at 7 and 9 Homewood Ave. The money is part of an initiative to help ensure that Toronto maintains a certain number of affordable housing units.

"Part of the review we do before giving out funding is to determine if, in fact, the tenants are lower-income earners and if, in fact, the rents are kept below a certain level," said CMHC spokesperson Mark Salerno. "We want to ensure that the buildings remain safe to live in and that we retain an affordable housing stock in the city."

While the funding comes in the form of a loan, Salerno said that the CMHC will forgive the loan provided certain conditions are met. First, the money must be used for repairs and maintenance to keep the building safe. Second, the landlord must keep rents at an affordable level.

"The system is predicated on the landlord agreeing to place a ceiling on the rent after the repairs," he said. "It's deemed fully forgivable over a period, so they have to earn that forgiveness. Over that given period, if the landlord decides to put the rent up above the agreed level, they have to pay back a prorated amount of the loan."
The money for the Homewood Mansions has been used to redo plumbing and electrical infrastructure in the buildings, as well as some more visible renovations.

"(Tenants) have new kitchens, new bathrooms, everything's new," said Homewood Mansions co-owner Mary Campisi. "With things like the plumbing and electrical, it was important to get everything up to safety code, and before it wasn't. It's an ongoing thing where we want to keep these buildings safe for our tenants."

The funding dollars are especially welcome since, with landlords of lower-income housing developments taking in less in terms of rent dollars, repair and maintenance costs often must come out of the developers' pockets. In other cases, landlords will raise rent to cover the cost of such work.

"It's important because we can make sure everything is up to par without having to take money from tenants in our building," Campisi said. "Some of them would have a hard time making ends meet if we raised the rent."

In addition to the Homewood Mansions, the CMHC also gave forgivable loans to rental apartments in North York and Bloor West Village. The Homewood Mansions were by far the largest of the buildings and received the bulk of the $1.6 million in total funding doled out by the CMHC at the end of May.

"Our main concern is when some buildings are in a poor state of repair or when there are (safety) code deficiencies," Salerno said. "It's an issue of life safety and a way to help both the landlords and the tenants."

Sunday, May 28, 2006

CIBC lowers mortgage costs

Two days after the Bank of Canada raised short-term interest costs, the Canadian Imperial Bank of Commerce (TSX: CM) said Friday it is trimming its posted mortgage rates.
Among the changes, CIBC's one-year closed rate slips to 6.25 per cent from 6.30 per cent, while the three-, five- and 10-year rates each decline by one-fifth of a percentage point, to 6.45 per cent, 6.75 per cent and 7.55 per cent.
The bank's move followed Wednesday's quarter-point increase in the prime lending rate to six per cent at all the major commercial banks, after the Bank of Canada raised its overnight rate to 4.25 per cent from four per cent.
While it increased the cost of short-term money for the seventh time since last autumn, the central bank also signalled that its series of hikes is likely over.
On bond markets, where banks fund their mortgage obligations, the Canadian yield curve flattened this week, as would be expected after the central bank's increase at the short end.
'Interestingly, though, the flattening came through entirely in the long end, where yields declined four basis points,' a commentary from the Bank of Nova Scotia (TSX: BNS) observed.
'For both the Canadian and U.S. curves, yields between the target policy rate all the way to the long end are now nearly flat.'"

Monday, May 22, 2006

A real pain in the gas

"Unlike the United States, motor fuel prices are a sleeper issue here in Canada. At least politicians, at both the federal and provincial levels, are sleepwalking through it.

Stateside, it's one of the three key issues gripping the U.S. mid-term elections (illegal immigrants and Iraq being the others) and threatening to oust the Republicans from the House and Senate, ruining George W. Bush's final two years in office.

It may be resting peacefully in the minds of the politicians here, but Canadians are wide awake on how they are getting hosed at the pumps.

Serious discontent

According to a damning - if you are an oil company or elected official - Ipsos-Reid poll released yesterday, there's a serious mood of discontent out there. That's even true in Alberta, where high energy prices bring mega-millions into the provincial treasury and have touched off the largest energy boom in the province's history.

Albertans seriously resent the high cost of gas and diesel. So much so that only 40% of Albertans polled in late April and early May feel that gas prices are set 'fairly.'

In Ontario the number who feel that gouging is going on rises to 70%. In Quebec the distrust level hits 82%.

Poll respondents also have an inkling where the extra cash is going. Overall, 71% feel that energy company prices are excessive and the feds should bring in a 'special tax on windfall profits' that are made from gas.

Maritimers were the real cost-control hawks at 79%. In Alberta, only 37% "disagreed" with going after the pump pirates. Not an overwhelming endorsement of the leaderless Alberta Tories, especially considering oilsands outfits are getting their bitumen virtually royalty-free until payout in these times of record world oil prices.

Prime Minister Stephen Harper's bold plan to roll back the hated GST by 1% apparently didn't impress Canadian gasoline consumers either.

Asked if the 1% token gesture was an "appropriate" response, seven in 10 Canadians gave Stevo the thumbs-down.
But the most distressing response to the poll - if you're a politician - was what Canadians answered when asked if the government should step in and regulate gasoline prices.

Across the country, 72% back the government getting involved in setting gasoline prices. In Atlantic Canada the support was greatest at 87%. That makes sense because some provinces already regulate pump prices, and the Nova Scotia election is being fought over throwing a noose around gas companies.

But the most telling number comes from free-enterprising, redneck Alberta, where only 39% said no to government intervention at the pump.

The inflationary effect of high gasoline prices may be about to have repercussions in other parts of the economy. It's the old ripple effect.

The C.D. Howe Institute circled the wagons this week and asked a panel of economic experts what Bank of Canada governor Dave Dodge should do on May 24 when he sets Canada's trendsetting interest rate again. It was a six-to-five split decision. But the slim majority recommended Dodge nudge up the rate by another 25 basis points to 4.25%.
Some even said the country's top money man must continue jacking up rates "significantly above the current level" to keep inflation at 2%.

Higher mortgage rates

If this translates into higher mortgage rates - which it inevitably will - then it could put even more pressure on Alberta consumers.

Yesterday, the Royal Bank of Canada revealed that we face the second-worst affordability in the country when it comes to buying a house.

"The good times for the Alberta economy have come at a cost to homeowners," the RBC Financial Group gloomed. House prices may be up 25% over a year ago, and income and employment growth may be the envy of the country.

"However the price of appreciation and higher mortgage rates outpaced this growth."

Remember what happened the last time Canadians were seriously stung with high gasoline prices and a roaring Alberta economy? Pierre Trudeau was able to muster enough political clout to bring in the national energy program to skim excessive windfall profits.

Stephen Harper is no Trudeau. But the Ipsos- Reid poll shows there's serious hurt across Canada - and right here in Oilberta - over gasoline prices.

Klein and Harper have been warned.

Home buyers look south of the line

The strong dollar has Canadians snapping up properties in Point Roberts.
Out of all my buyers this month, 50 per cent were Canadian, says Paul Rush of the Points National Real Estate, via telephone.

Ive had an increase in Canadian buyers in the last two to three months, prior to that it was mostly US buyers. Canadians are strictly going by the exchange rate and they know (Point Roberts) is close.

Waterfront properties, after all, may seem more affordable in the U.S. as the going price is about $10,000 per foot (measured along the shore). Small beach-front properties are selling for US $550,000 to $600,000 although at least one luxurious home is selling for US $1.6 million.

In Tsawwassen, however, RE/MAX manager Bob Cooke could find only two listings for waterfront homes and the cheapest was $1.7 million for 3,500 square feet and a 35-foot shoreline frontage, looking west.

Views are anywhere from $1 million to $2 million, Cooke says. Waterfront starts at about $1.8 million. I think theres a shortage of waterfront properties and prices are only going to rise.

But before you sell your home or drain that bank account to join the migration, Canadian buyers need to know a few things about purchasing American land.

First off, a Canadian without a Green Card may only reside across the border for 182 days per year and must have a home in Canada. The purchase must be for recreational use or pleasure.

Rush notes there’s no guarantee you’ll be able to access your property when you want to, either.

“It’s really up to US Immigration whether they let you in at all. It’s very strict; you need a permanent residence in Canada, not just an address, and you may have to show your mortgage payments or utilities as proof. It’s a delicate thing – I’ve known them to not let people in.”

As a result, Rush has found that most of the Canadians appearing at his office have dual citizenship, like him.
“They’re taking advantage of the high prices of Canadian real estate, selling out and moving here.”

Point Roberts realtor Jim Julius says most of his Canadian buyers are grandparents who are shopping for recreational property for their grandchildren.

“What we have now is a baby boomer demand for properties. They’re looking for places for their grandchildren so their children’s children have a chance to get out of the city—that’s a big deal.”

Home-buying intentions up slightly, report says

Renovation market also staying strong
May 20, 2006. 01:00 AM

More than 380,000 households in major Canadian cities indicated they were ready to buy a home this year, according to a survey released this week by the Canada Mortgage and Housing Corp.

The results of the CMHC's Consumer Intentions to Buy or Renovate a Home survey represents an average of 8 per cent of households in Halifax, Montreal, Toronto, Calgary, and Vancouver.

While 8 per cent declared that they have a high chance of buying a home and could be considered as 'ready to buy' within the next 12 months, 5 per cent indicated that they have a 50-50 chance of buying. The survey is conducted using a sample of about 4,000 households in each centre surveyed.
'Intentions to buy are up from 2005 when 5 per cent of households were ready to buy a home. This year, strong intentions to buy are consistent with continued high levels of housing starts and sales of existing homes.

Favourable economic conditions, such as low mortgage rates and a healthy labour market are contributing factors to home-buying intentions,' said Bob Dugan, chief economist at the CMHC.

'Home-buying intentions are strongest in Calgary and Halifax, where 10 per cent of households reported that they are ready to buy a home. Purchase intentions are also strong in Vancouver and Toronto where 8 per cent of households are ready to buy, while the share is slightly lower in Montreal (7 per cent).

"Home renovations will remain strong this year, with 13 per cent of surveyed homeowners reporting they were ready to undertake renovations this year, costing $1,000 or more," said Dugan.
"The share of serious renovators is down compared to 2005 when 17 per cent of homeowners were ready to renovate. While the share of homeowners who intend to renovate decreased in 2006, the total dollar amount that will be spent on renovations is expected to increase."

Meanwhile, increases in Canadian house prices over the past five years — dramatic in Alberta and British Columbia and strong in the rest of the country — are the result of a robust economy that also provided a dramatic rise in key economic indicators and popular lifestyle and consumer items, according to a report released this week by Century 21 Canada.
Price increases over five years for typical homes across the country in a selection of markets surveyed by Century 21 range from as high as 129 per cent in Vernon, B.C. to as low as 12 per cent in Thunder Bay.

In Vernon, a 1,200-square-foot bungalow with three bedrooms and two bathrooms on a 55-foot by 100-foot lot increased in value to $355,000 this year (2006) from $155,000 in 2001.

The hottest housing markets in Ontario include Peterborough and Kitchener-Waterloo, Century 21 reported.

In Peterbourgh, the price of a typical home — 1,050-square-foot bungalow with three bedrooms and 1 1/2 baths — increased to $202,000 in 2006 from $131,000 in 2001, an increase of 54 per cent.

In Kitchener-Waterloo, a typical home — 1,200 square foot two-storey home with three bedrooms and two bathrooms — rose to $245,500 in 2006 from $163,000 in 2001, an increase of 51 per cent.

Monday, May 15, 2006

Hot housing market expected to cool

Boosted by Alberta�s red-hot housing market, national home sale prices jumped by the highest amount in more than 16 years in March, Statistics Canada said this week.
Eye-popping increases of 29.6 per cent in Calgary and 14.3 per cent in Edmonton helped to increase the national average rise in houses prices to an annualized 7.6 per cent in March � an increase not seen since at least January 1990.

More moderate price increases were seen in Vancouver, with a 6.9 per cent rise, while Quebec saw a 6.6 per cent increase.
The average price for a residential property in the Halifax area was $279,748, a 4.8 per cent increase last year. Toronto reported a 4.3 per cent annualized increase while in Montreal, home prices rose by 3.3 per cent.

The only monthly drop was in St. John�s, Nfld., where prices slipped 0.1 per cent from February. But if you haven�t bought your home yet, don�t panic � the federal housing agency says the market should begin to soften in 2006.

Rising mortgage prices and market saturation will begin to cool demand, at least a bit this year, says Canada Mortgage and Housing Corp.
Home construction starts will slip to 222,200 units this year, down from the 225,481 units that were built last year, the Ottawa-based agency said. 'Higher mortgage carrying costs and rising house prices will temper housing demand this year,' Bob Dugan, CMHC�s chief economist, said in a statement.
But that still represents a higher rate this year than previously forecast by CMHC.

Booming demand in Alberta and British Columbia led the agency to increase its outlook for this year’s construction to 208,700. Still, a gradual cool is coming, says CMHC.
"Over the medium term, housing starts will continue to slow gradually, reaching 184,400 units by 2010," Dugan said.
The resilient housing market is one more factor that will likely convince the Bank of Canada to raise short-term interest rates in late May, said Marc Levesque, chief fixed income strategist with TD Securities.

"This is just one more tick mark in the tightening column," for the central bank, which has already boosted its key interest rate on six consecutive opportunities to four per cent. "This is one sector of the economy that is being supported pretty well by low interest rates."

Record low unemployment and a flourishing resource sector all threaten to push up inflation, something the central bank desperately aims to avoid. Its next chance to raise rates comes on May 24 and many analysts have forecast another quarter-point rate hike as the central bank aims to hold the consumer price index to about two per cent.

Monday, May 08, 2006

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Monday, May 01, 2006

Housing market continues

Eric Beauchesne, CanWest News Service
Published: Saturday, April 29, 2006
OTTAWA - Home sales and prices hit all-time highs in the first quarter of this year, according to a report Friday which will add to puzzlement, and possibly more inflation worries, at the Bank of Canada.
There were 125,142 existing homes sold from January through March, up 2.4 per cent from the fourth quarter of last year, and 0.2 per cent above the previous record high set in the third quarter of last year, the Canadian Real Estate Association said.
Earlier in the week, Bank of Canada governor David Dodge said ``we're a little bit surprised'' at the strength of the housing market considering the steady climb in interest rates and prices since last summer.
And real estate association chief economist Gregory Klump agreed it was a surprise that sales hit new record highs.
``Rising household incomes and upbeat consumer confidence are keeping resale housing activity on a tear, even with rising home prices and interest rates,'' Klump said.
The industry association reported sales reached their highest level of any quarter on record for both the number of units sold and the total dollar volume. The value of sales reached $33.4 billion, a 5.8 per cent increase from the final quarter of 2005, and the highest level ever, with records set in most provinces.
New quarterly sales records were set in Alberta, Nova Scotia, Prince Edward Island and Newfoundland and Labrador.
The quarterly surge in sales was despite a decline in March, when sales slipped 1.4 per cent from February, which was the second highest month of sales on record. British Columbia, Alberta and Ontario led the decline in sales, while sales rose in Quebec, New Brunswick, and in Nova Scotia where sales hit a record for the month of March.
While sales slipped in March, the average home price continued to rise to reach a record $274,163, up 12.4 per cent from a year earlier. The average price in the quarter was up 12.1 per cent from the same quarter in 2005, which was the steepest increase since the 1980s housing boom, which eventually went bust.
In March, the average price of a home was at an all-time high in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, and Prince Edward Island. And during the quarter, the average price was at an all-time high in every province except Quebec.
The average price of a home sold in March was highest in British Columbia at $383,712, up nearly 20 per cent from a year earlier. The steepest increase in the average price was in Alberta at 24.7 per cent to $267,641.
While most analysts continue to predict housing sales should eventually slow this year and price increases moderate, they say that unlike during the 1980s, there is no housing bubble to burst.
``Interest rates are widely expected to be near their peak,'' Klump noted. ``The continued ability to negotiate rates is also helping to keep sales activity high by keeping monthly payments down and affordability reasonable.''
The posted five-year closed mortgage rate is now 6.6 per cent, which is up less than a full percentage point from a low of 5.7 per cent last July, before the Bank of Canada resumed raising rates.
``It's not a substantial increase,'' Klump said, noting a recent survey by mortgage brokers found even with the higher rates, families are finding their housing payments manageable.

Thursday, April 27, 2006

Stock markets up on earnings; Canadian dollar at 14 1/2-year high

14:42:51 EDT Apr 26, 2006

TORONTO (CP) - Base and precious metals stock helped lift the Toronto stock market slightly higher Wednesday afternoon as investors took in another slew of positive earnings reports.
The Canadian dollar was up 0.29 of a cent at a 14 1/2-year high of 88.65 cents US, a day after the Bank of Canada raised interest rates and said another hike is likely.
'There is certainly not a lot of inducement to buy (stocks) right now,' said Julie Brough, assistant vice-president at Morgan, Meighen and Associates. 'It does look a little bit tired and the valuations, in my mind, are not anything to get excited about.'
U.S. indexes were higher on some better-than-expected corporate earnings reports, a broker upgrade for General Motors Corp. (NYSE:GM) and positive economic data.
Toronto's S&P/TSX composite index was 21.67 points higher at 12,351.46, held back by declines in tech stocks and energy stocks as oil continued to move away from last week's record highs.
The TSX Venture Exchange moved down 3.38 points to 3,091.61.
Wall Street's Dow Jones industrial average gained 62.44 points to 11,345.69, with GM jumping $1.31 to $22.72 US after Merrill Lynch upgraded the automaker one notch to 'neutral' from 'sell,' citing beliefs that its restructuring plan is moving in the right direction.
The Nasdaq rose 3.15 points to 2,333.45 while the S&P 500 was up 4.44 points at 1,306.18.
In economic news, the U.S. Commerce Department said orders of durable goods jumped 6.1 per cent in March, more than triple the 1.8 per cent economists predicted. The department also said new home sales climbed 14 per cent to 1.21 million for the month, handily beating estimates for 1.1 million despite the rebound in mortgage rates.
The base-metals sector climbed one per cent, with AUR Resources Inc. (TSX:AUR) ahead 55 cents at $16.55.
Ivanhoe Mines Ltd. (TSX:IVN) has agreed to exchange its Mongolian coal interests to Asia Gold Corp. (TSXV:ASG) for a majority stake in the junior miner. Ivanhoe shares advanced 19 cents to $10.97 while Asia Gold shares surged 29 per cent to $2.70.
The June contract for bullion on the Nymex was up $7.80 to $642 US an ounce, taking the TSX gold sector ahead 0.95 per cent. Kinross Gold Corp. (TSX:K) added 14 cents to $13.62.
Elsewhere in the materials sector, Alcan Inc. (TSX:AL) moved up $1.39 to $59.75 and Gerdau Ameristeel (TSX:GNA) rose 35 cents to $12.35.
The TSX energy sector fell 0.3 per cent as the June contract for light sweet crude on the New York Mercantile Exchange was down 63 cents at $72.25 US a barrel.
Prices headed lower as the U.S. Energy Department said gasoline inventories fell 1.9 million barrels last week while crude stocks fell 200,000 barrels.
Shares in EnCana Corp. (TSX:ECA) were 63 cents higher to $58.23 after the company said it is boosting its quarterly dividend as first-quarter profit jumped to $1.47 billion US on a huge accounting gain, while operating profit rose 14 per cent to $694 million US.
After its first reporting period as an income trust, Precision Drilling Trust (TSX:PD.UN) said its first-quarter profit rose to $224.2 million, from a year-earlier $138.5 million, and it will boost its distributions to unitholders by 15 per cent to 31 cents a unit. The company's units were up 50 cents to $41.60.
Information technology stocks losing ground included Nortel Networks Corp., (TSX:NT), down four cents to $2.97.
Potash Corp. of Saskatchewan Inc. (TSX:POT) shares fell 79 cents to $103.89 after the company reported a net profit of $125.5 million US, down from $131.3 million US for the same period last year as a pricing dispute cut fertilizer shipments to China.
Newsprint giant Abitibi-Consolidated Inc. (TSX:A) is cutting jobs and has narrowed its first-quarter loss to $33 million from $51 million a year ago as rising prices and tighter inventories helped the company improve its finances. Its shares fell 16 cents to $4.87.
Nova Chemicals shares (TSX:NCX) declined 19 cents to $34.03 as the firm swung to a first-quarter loss of $5 million US from a year-earlier profit of $94 million US.
Maple Leaf Foods Inc. (TSX:MFI) earned a $17.3-million profit in the first quarter of 2006, compared with $12.7 million in the year-ago period. Its shares edged seven cents higher to $12.90.
Fuel cell maker Ballard Power Systems (TSX:BLD) has cut its first-quarter loss to $17.2 million US from a year-earlier $32.4 million and revenues rose 14 per cent to $12.5 million US. Its shares gained 52 cents to $11.68 Cdn.
In the U.S., Boeing Co. (NYSE:BA) shares added 32 cents to $85.43 US as the company reported a better-than-expected 29 per cent jump in first-quarter profits.
Shares in PepsiCo Inc. (NYSE:PEP), the world's No. 2 soft-drink maker and owner of snacks maker Frito-Lay, were up 35 cents to $57.85 US after it said first-quarter profit jumped almost 12 per cent to $1.02 billion US. (Nasdaq:AMZN) reported earnings dropped 35 per cent after a hefty gain boosted last year's profit. The online retailer's results still met Wall Street targets and its shares gained 26 cents to $35.81.

Variable mortgage rates on the rise

Fiona Anderson, Vancouver Sun
Published: Wednesday, April 26, 2006
Homeowners with variable mortgages will see their interest rates increase in response to a boost in the Bank of Canada's trendsetting overnight rate on Tuesday.
BMO Bank of Montreal and Scotiabank both announced rate increases of 0.25 percentage points, raising their three-year open rate to 5.75 per cent after the Bank of Canada said it was increasing its overnight rate by 25 basis points. All major banks also increased their prime lending rates to 5.75 per cent.
But fixed mortgage rates have remained unchanged, at least for now.
Rob Hafer, regional sales manager for Invis on Vancouver Island, said variable rates are attached to prime rates, so anyone with a variable mortgage will see rates rise. But even though fixed rate mortgages depend on a number of factors other than the prime rate, those rates have also been going up recently.
'So the costs of borrowing for all consumers is going up unless you are already locked into a [mortgage] term,' Hafer said.
And while rates go up, consumers should shop around to make sure they are getting the best deal, he said. Over the last few years, the number of lenders have steadily increased, making the market more competitive. As posted rates go up, lenders are getting more aggressive with the discounts they will offer from those posted rates, he said."


Don't rush into fixed-rate mortgage, experts suggest as rates rise

16:41:56 EDT Apr 25, 2006
TORONTO (CP) - Tuesday's rise in variable mortgage rates will have some homeowners looking to lock in their rates, but experts say not to be hasty. It could be just a blip.
The cost of a variable mortgage has risen for the sixth time since the summer, after the Bank of Canada announced Tuesday it is hiking its benchmark interest rates by a quarter-point. About 22 per cent of Canadian mortgages are now variable, moving in step with the bank's prime lending rate, says CIBC World Markets (TSX:CM) senior economist Benjamin Tal.
Andrew Moor, CEO of mortgage brokerage firm Invis, says more customers have been opting for fixed-rate mortgages over the last few months as interest rates have risen.
But, he adds, the carrying costs on a variable mortgage are still less than those on a fixed-rate mortgage.
After Tuesday's rate hikes, a competitive variable mortgage rate will be about 4.85 per cent, up from 3.45 per cent at the beginning of September, according to Invis.
As a result, the payments on a $150,000 mortgage will have risen from about $745 a month to about $860.
A five-year fixed mortgage could be obtained at 4.5 per cent in September. That would cost about $830 a month on a $150,000, 25-year mortgage.
Today the rate is more like 5.25 per cent, costing $894, Invis said.
Within hours of the Bank of Canada's announcement Tuesday, mortgage lenders were already posting new variable mortgage rates that were up by a quarter of a percentage point.
"Every time something happens with the rates, there are people who decide, instead of going variable, to go fixed," said Jim Rawson, a regional sales manager for Invis working in downtown Toronto.
But he said economists don't expect the Bank of Canada to continue its credit-tightening policy for much longer.
"It may be a blip in the market and, therefore, you may not need to worry about going into a fixed term if you're used to playing the variable game," he said.
"There's really no need to panic. For those who are finding that it may be a bit of a pinch, there are things like longer amortizations."
He said stretching mortgage payments over a 30-or 35-year window may be a good temporary solution for young homeowners who need to reduce their monthly payments in the short term but know they can increase them in a few years when their salaries are higher.
"It comes down to your risk tolerance," Rawson said of the final decision on fixed-versus-variable mortgages.
"If you're the type of person who is going to lose sleep worrying about rates ... take a fixed-rate mortgage. It's not worth it if you're going to be worrying about it every day. But there are savings to be had with a variable-rate product."
Moor added that steep competition in the Canadian mortgage market has been good news for consumers.
"The pricing of variable-rate mortgages in Canada is becoming very competitive, and in fact Invis has witnessed mortgage lenders battling for market share by offering variable-rate mortgage rates well below prime - discounts not previously seen in the Canadian market," Moor said.

Bank of Canada raises key interest rate to 4%

Updated Tue. Apr. 25 2006 11:29 PM ET News Staff
The Bank of Canada boosted its trend-setting overnight rate by a quarter of a percentage point to four per cent on Tuesday.
The latest hike will impact the prime interest rate charged by commercial banks, affecting variable mortgage rates, as well as the cost of car loans and lines of credit.
This marks the sixth consecutive rate increase by the Bank of Canada since last summer -- when it was 2.5 per cent -- and some are wondering how many more rate hikes could be on the way.
In its statement today, central bankers said 'some modest further increase in the policy interest rate may be required to keep aggregate supply and demand in balance and inflation on target over the medium term.'
The Bank of Canada said the global economy is strong. 'At the same time, global competition and the past appreciation of the Canadian dollar continue to pose challenges for a number of sectors of the economy.'
Meanwhile, the core inflation rate appears to be staying within the central bank's target band of one to three per cent. Data released last week shows core inflation held steady at 1.7 per cent in March.
Canada's annual inflation rate remained unchanged at 2.2 per cent in March as higher gasoline prices were offset by lower prices for computer gear and clothing.
'Against this backdrop, the Bank decided to raise its target for the overnight rate,' said central bankers.
CTV's business editor Linda Sims said this probably means at least one rate hike is likely on the way. However, the rate is still quite low, compared to historic levels.
'We have got good job growth and decent economic growth in this country," Sims told CTV Newsnet.
"It will not put much of a crimp on the economy, including the housing market, going forward."
The next announcement on the overnight rate is scheduled for May 24.
Looking forward, the Bank of Canada predicts the Canadian economy will grow by 3.1 per cent in 2006, 3.0 per cent in 2007, and 2.9 per cent in 2008.