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Dmitri Tkachenko

Surprise: Low interest rates seen sticking around - The Globe and Mail - 0 views

www.theglobeandmail.com/...article2032075

Low Interest Rates Bonds Financial Industry Inflation Stock Market

shared by Dmitri Tkachenko on 25 May 11 - No Cached
  • Dmitri Tkachenko on 25 May 11
     
    "Interest rates have recently being going somewhere unexpected: down. With the United States government bumping up against its debt ceiling, inflation ticking upward, and a growing debt crisis in Europe, most expected interest rates to be increasing.If so, it will mean pain for savers, but good news for borrowers .A drop in interest rates is equivalent to a sale on the price of money, and corporations are already rushing to take advantage of the easy lending conditions, even if they're in no immediate need of funds. Mortgage rates have fallen, too - good news for homeowners looking to refinance. But lower rates have not turned out so well for some of the market's savviest players, including Bill Gross, the founder of Pimco, the world's biggest bond fund. Earlier this year, he sold his U.S. Treasuries, because he thought interest rates were poised to rocket higher, which would drive down prices of bonds. Oil has been trading consistently around the $100-a-barrel level, thereby lifting inflation, another bond-market negative. Investors are getting nervous and growing more willing to buy super-safe government bonds."
Heshani Makalande

Banks trim mortgage rates - The Globe and Mail - 0 views

www.theglobeandmail.com/...article2037912

Mortgage rates

shared by Heshani Makalande on 28 May 11 - No Cached
  • Four of Canada’s biggest banks are once again lowering residential mortgage rates at a time when falling government bond yields are cutting funding costs for financial institutions.
  • Royal Bank of Canada, Toronto-Dominion Bank, Bank of Nova Scotia and Bank of Montreal are all trimming their posted rates on popular five-year fixed-rate mortgages by 0.1 percentage point to 5.49 per cent among other reductions.
  • The last time they did so was on May 19 when rates for five-year closed mortgages fell by 0.1 percentage point to 5.59 per cent.
  • ...4 more annotations...
  • RBC, TD, Scotiabank and BMO are also trimming interest rates on Saturday for a number of other residential mortgage products, including various special offers.
  • This latest round of mortgage rate cuts was prompted by falling yields on government bonds across a range of terms, said TD spokeswoman Barbara Timmins in an e-mail.
  • For instance, the yield on the five-year Government of Canada benchmark bond was 2.33 per cent on Thursday, down from 2.58 per cent on May 2 (the first business day of the month), according to data on the Bank of Canada’s website.
  • Banks usually try to match maturities when they use bonds to finance consumer mortgages. As a result, a five-year government bond would be matched up with a five-year consumer mortgage.
    • Heshani Makalande
      Heshani Makalande on 28 May 11
       
      Currently it is easy to get a mortgage because the interest rates are low. This is good news for consumers who will continue to enjoy record low interest rates on mortgages and other borrowing.
Maria Li

Rate hikes okay for most but a 'financial shock' for many - The Globe and Mail - 0 views

www.theglobeandmail.com/...article2041683

Consumer Debt Mortgages

shared by Maria Li on 03 Jun 11 - No Cached
  • Most Canadians should be able to handle higher interest rates expected later this year, but many will still see a "financial shock," Toronto-Dominion Bank economists say
  • "The main question is how households will respond to the eventual rebalancing of monetary policy, TD economists Craig Alexander and Diana Petramala write in a new report that looks at indebtedness among Canadian households.
  • Canadians will experience a financial shock when interest rates eventually rise, but the vast majority of households should be able to cope so long as interest rates rise only gradually
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  • Bank of Canada held its benchmark overnight rate steady at just 1 per cent, citing global uncertainty and the impact of the strong Canadian dollar, but said rates must eventually rise
  • Annual personal credit growth slowed to a year-over-year pace of 6.4 per cent in April, compared to an average 10.9 per cent in a period spanning 2004 to 2008
  • The moderation in credit growth has been evident in all measures of debt
  • The debt-service ratio, the interest households must pay on their debt each month as a share of personal disposable income, climbed to a two-year high of 7.6 per cent in [the first quarter of] 2011, despite still record low interest rates.
Steven Iarusci

Ottawa resale market to cool in 2011; sales to fall 8%: CMHC - Residential - Real Estat... - 0 views

www.obj.ca/...1

demand supply housing mortgage

shared by Steven Iarusci on 02 Jun 11 - No Cached
  • local sales of existing homes listed on the Multiple Listing Service are anticipated to fall to an estimated 13,750 units from 14,923 in 2010, a 7.9-per-cent drop, before picking up again to approximately 14,100 units in 2012.
  • Higher anticipated mortgage rates have resulted in a pull-forward effect on housing demand
  • sales were higher in late 2010 and early 2011 as buyers rushed to avoid rising interest rates and new mortgage rule changes
  • ...13 more annotations...
  • still at historic lows, moderate raises in mortgage rates will impact carrying costs negatively, thus slightly subduing housing demand
  • Average resale prices are expected to rise by a brisk 11.5 per cent to $340,000 this year, but the growth rate will slow significantly in 2012, to 2.9 per cent
  • that segment falling 20.1 per cent to 1,975 units
  • 5,950 total housing starts forecast for 2011, up 2.3 per cent from the previous year
  • single-detached market is anticipated to be the hardest-hit
  • result of an ongoing shift towards more affordable housing types
  • New home construction is also expected to cool down this year
  • first-time homebuyers and downsizing empty-nesters at the forefront of Ottawa's housing market
  • raising the popularity of more affordable housing types such as condominium apartments, townhouses and semi-detached homes
  • soaring gas prices and lengthening commute times will push up interest in homes in the core
  • Elsewhere in the country
  • MLS sales, meanwhile, are expected to be between 429,500 and 480,000 units, with 2012 sales anticipated to be in the range of 410,000 to 511,900 units
  • slowdown affecting both single-detached homes and multi-family housing
  • Steven Iarusci on 02 Jun 11
     
    A few numbers pertaining to supply of housing in the Ottawa market. Talks a little of why demand is changing in the market.
naheekim

Housing prices to drop 25%, forecaster predicts - thestar.com - 2 views

www.thestar.com/...to-drop-25-over-next-few-years

Housing Prices Recession

shared by naheekim on 28 May 11 - No Cached
  • House prices in Canada will fall over the next several years by as much as 25 per cent, creating a massive impact on the economy and possibly pushing the country into recession, says a forecast
  • predicting house prices will fall by a cumulative 25 per cent over the next several years
  •  Madani says the effects on consumer spending and housing investment could be significant and perhaps strong enough to “push the economy into another recession
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  • “If house prices are to fall, there needs to be a mechanism — an excess of supply relative to demand,”
  • Last year, the Canadian Real Estate Association modified its forecasts at least four times. After initially predicting housing prices would increase in 2011, it now says prices will fall by 1.3 per cent — far below the eye-catching 25 per cent forecast by Capital Economics.
  • Financial agencies such as the Canadian Mortgage Housing Corporation, which provides mortgage loan insurance, could also be exposed to significant losses
  • The Capital Economics forecast is not the first to predict a bubble in the Canadian market. Gluskin Sheff & Associates chief economist David Rosenberg has also predicted a 25 per cent drop in Canadian housing prices, as has The Economist magazine.
  • As in the U.S., financial innovation and very low interest rates have allowed Canadian consumers to take on more debt, and house prices are high relative to income
  • However, consumers have remained complacent because low rates are keeping mortgage payments low.
  • The historical home price-to-income ratio is 3.5, but now it's hovering around the 5.5 mark, meaning average house prices are more than five times the income of workers
  • naheekim on 28 May 11
     
    The economists and forcasters are predicting that housing prices will decrease over the next several years by 25%.
Linda Lei

Consumer debt and home equity | Direct Talk with Peter Aceto - 0 views

blog.ingdirect.ca/...the-last-time

consumer debt

shared by Linda Lei on 03 Jun 11 - No Cached
  • Here are some facts. In this low interest rate environment, Canadians’ debt levels – including credit cards, loans and mortgages – have grown much faster than their incomes. Debt levels are now about one and a half times disposable income, an even higher level than the debt-to-income levels of Americans. Total consumer debt in Canada now exceeds a staggering $1.4 trillion. The Bank of Canada and the Finance Department have expressed concern about personal debt, specifically about what would happen if interest rates were to rise and Canadians discovered they could not afford to be carrying these debt levels.
Susan Cui

Bad housing advice of the day, Philly edition | Felix Salmon - 4 views

blogs.reuters.com/...vice-of-the-day-philly-edition

Housing Price Advice Gold vs House

shared by Susan Cui on 23 May 11 - No Cached
  • house prices are falling, gold prices are rising, and therefore before you go ahead and buy a house, you should probably consider whether you’d be better off buying gold instead.
  • house prices are falling, gold prices are rising, and therefore before you go ahead and buy a house, you should probably consider whether you’d be better off buying gold instead.
  • homes are not an investment, they’re more of a consumption good.
  • ...4 more annotations...
  • Maybe you’ve saved enough for a down payment. But should you bet your money on home prices, even with a tempting low-interest, fixed-rate mortgage? Or is it financially smarter to continue renting and invest the money in an asset that could appreciate for at least another few years?
  • Being “financially smart” is not the same as investing in whichever asset gives you the highest return over some given time horizon.
  • Essentially, Arvedlund is proposing an exotic relative-value trade here: she’s saying that houses will underperform gold, or that the price of a house in gold is going to go down rather than up.
  • the price of a house in gold has gone down, and you would have been financially better off buying gold than taking that money and using it as a down-payment for a house.
Maria Li

House prices fall sharply in May - Hometrack | Reuters - 0 views

uk.reuters.com/...ometrack-idUKTRE74S2XA20110529

Housing Prices

shared by Maria Li on 03 Jun 11 - No Cached
  • House prices in England and Wales dropped at their fastest annual pace in over 1-1/2 years in May as demand fell for the first time since January
  • Property research company Hometrack said prices were 3.7 percent lower in May compared with a year ago, the biggest decline since October 2009.
  • Economists expect high inflation, weak wage growth, tax rises and public spending cuts to weigh on consumer spending and house prices this year, despite record low interest rates.
  • ...5 more annotations...
  • The GfK NOP measure showed its biggest rise in almost 20 years in May, although analysts said it may have received a temporary boost from unusually fine weather, the royal wedding and a run of public holidays.
  • The Hometrack survey showed that the number of new buyers registered with estate agents fell by 0.5 percent in May, the first decline since January.
  • The number of sales agreed rose by 1.6 percent in May, lower than the 8 percent jump seen in April and March's 12.6 percent rise.
  • London continued to buck the national trend, with prices up by 0.2 percent on the month.
  • "With concern over household finances and the wider economic outlook, demand for housing is likely to continue to post further modest declines over the summer,"
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