Financial Update For Jan. 7, 2010

• TSX +56.46 to 11,944
• DOW +1.66 to 10, 573
• Dollar +.23c to 96.25cUS
• Oil +$1.41 to $83.18US per barrel.
• Gold +$17.80 to $1,136.90USD per ounce

Bond Market Waiting for Jobs Reports
Traders are treading cautiously ahead of Friday’s big U.S. and Canadian jobs reports. Bond yields are hovering just under their 15-month high.
Most lenders are holding off on further mortgage rate increases ahead of the report.
Interestingly, only a few lenders chose to raise mortgage rates following December’s big spike in yields. (Why spoil the holidays, eh?)
Looking forward, this Friday's employment report could be a huge catalyst for rate direction. It should be:
• Positive for mortgage rates if employment gains are dismal; or
• Negative for mortgage rates if job gains are strong.
Mortgage planners will probably want to have their rate locks ready in case yields happen to explode higher.
Canadian and U.S. employment reports will be released Friday, January 8, at 7:00 a.m. and 8:30 a.m. ET respectively.
Posted at 01:38 PM in Mortgage Rate Trends | Permalink

Tackling debt a growing priority
Roma Luciw Globe and Mail
More Canadians are heeding the interest-rate warnings and focusing on curbing their debt loads in 2010.
A Manulife Financial poll released Tuesday found that paying down credit cards and lines of credit is growing as a financial priority among Canadians. In fact, more than a quarter, 28 per cent, pegged debt elimination as their main goal, up from 24 per cent in 2009 and a five-year high.
The results come at a time when households are tackling post-Christmas credit card bills and struggling with record debt, both mortgage and consumer. With interest rate hikes on the horizon, Bank of Canada Governor Mark Carney last month cautioned Canadians against taking on more debt than they can handle.
Despite this red flag, Canadians dug deeper this December, with spending in the holiday period rising 3.44 per cent in volume over the previous year, according to Moneris Solutions, which processes credit, debit and online payments.
The central bank estimates there was nearly $1.4-trillion in total household credit outstanding in October, the most recent data available, up from $1.3-trillion a year earlier. Much of the growth stems from mortgage debt, which stood at roughly $950-billion in October, compared with less than $890-billion a year earlier.
The Manulife national survey of 1,000 people, conducted last month by Research House, found that the second most-cited financial priority among Canadians was paying down the mortgage. It was chosen by 14 per cent of respondents, up from 11 per cent last year.
The third priority – saving for retirement – was listed by 11 per cent of those polled, down from 14 per cent a year ago.
“Paying down debts is understandably a priority, particularly at this time of year,” Paul Rooney, chief executive officer of Manulife Manulife Canada, said in a news release. “Given the economic challenges in 2009, we shouldn't be surprised to see more Canadians focused on ensuring their financial house is in order.”
Only 5 per cent of respondents listed saving for a child's education, through a tool like a registered education savings plan, and saving for purchasing a home, as financial priorities, on par with last year's results.
Home builder backs tighter mortgage rules
BY CHUCK HOWITT, RECORD STAFF
WATERLOO — Tightening mortgage eligibility rules to prevent a housing bubble may not be such a bad idea, says the founder of Canada’s largest homebuilding company.
“Housing is meant to shelter. Secondly, it is an investment,” Peter Gilgan, chief executive officer of Mattamy Homes, told a luncheon at Wilfrid Laurier University Wednesday.
Gilgan, who was in town to accept the Outstanding Business Leader of the Year Award from Laurier’s school of business and economics, was asked about recent statements by federal Finance Minister Jim Flaherty that Ottawa may increase minimum down payments for residential mortgages to ensure that homeowners don’t face huge bills if interest rates rise.
“It would be a very responsible thing to do,” said Gilgan, whose Mississauga-based company has built several thousand homes in Cambridge, including some in an indoor factory, and has land available for development on the west side of Kitchener.
When people start treating houses “as a derivative,” as some kind of vehicle to make a quick buck, “it creates too much volatility in the market,” Gilgan said.
As for the province’s recent law establishing greenbelts around urban areas in southern Ontario to avoid sprawl, he said builders have to adjust to the new reality. Twenty years from now, all the desirable greenfield land in the Golden Horseshoe will be gone, he said.
Mattamy has enough greenfield land to build on for the next 10 years, he said, but after that it will have to adopt a new strategy of infilling, intensification and redevelopment in urban areas.
Gilgan doesn’t oppose the province’s thrust as long as everyone faces the same rules. “You can throw anything at me. As long as it’s a level playing field, we’ll figure it out.”
The development restrictions in Ontario are one of the reasons Mattamy is expanding into other geographic areas such as Alberta and the U.S., he said.
Since its launch in Burlington in 1978, Mattamy has built more than 47,000 homes in over 100 communities. Fifty per cent of those homes are in greater Toronto and beyond, Gilgan said, with Cambridge accounting for about 10 per cent of that activity.
The company has had mixed success south of the border. It has “dug a little trench” in five American cities and hopes to break even this year. Doing business in the U.S. is different, Gilgan said. While Canadians tend to plan a lot and adopt a cautious approach, Americans plunge ahead much more aggressively, he said.
Gilgan also touched on the company’s efforts over the years to be innovative. During the 1990s, it decided there was a better way to build housing than having the garage as the most dominant feature. It started building houses on wider lots, as much as 36 feet in width, so that more living space could look onto the street.
“We’re providing something more than a house, we’re providing a community.”
“Pocket parks” or smaller green spaces among subdivisions was another popular Mattamy innovation, he said.
“Be really aware of the competition,” he advised young entrepreneurs, but try to do something unique or different.
Gilgan had the audience in stitches when he told them about his daughter enrolling at Laurier 13 years ago. When he came to visit her, she and four roommates were living “in something resembling a house on King Street.” You could put your hand through open space in the front door, he said. “There was no glass there.”
He drove around the neighbourhood and found a house for sale on Ezra Street. With the help of an all-female team of architects and designers, he turned the house into a “chick machine” with five bedrooms, five bathrooms and a giant shoe rack.
He assuaged his guilt over doing this for his daughter with the knowledge that some years later “a greater fool” would buy it. And sure enough, someone did. A few years later he came back when his son enrolled at the University of Waterloo, but the house was already gone. It had been replaced by a residence for 80 students.
“At first I was offended. Then when I did the math on it, I thought, yeah, it makes sense.”