· TSX+130.61 surged for a second day in another broad advance led by beaten-down Canadian banks and insurance companies.
· DOW +3.91New York traders turned cautious, after the previous session's furious buying which had been prompted by news that Citigroup Inc. earned an operating profit in first 2 mths
· Dollar -.06c to 77.75USD.
· Oil -$3.38 to $42.33US per barrel.
· Gold -14.80 to $910.10 USD per ounce
· Canadian 5 yr bond yields -.04bps to 1.87. Four weeks ago it was 2.12.
· http://www.financialpost.com/markets/market_data/money-yields-can_us.html
Conservatives remain rosy about economy rebound, blasts opposition gloom
Julian Beltrame, The Canadian Press OTTAWA - The Harper government continued to insist that Canada will be first out of the global economic crisis, while blasting opposition parties for talking the country down.
The economic boosterism began a day earlier with Prime Minister Stephen Harper's first major speech on the subject and was picked up by his finance minister Wednesday after an International Monetary Fund report provided a measure of cover.
"The report supports our budget, compliments our action plan," said Finance Minister Jim Flaherty after the global agency said Canada would weather the storm better than most.
And he said he would take the message to a weekend meeting of G20 countries in London, along with a call for the United States and the Europeans to get their houses in order.
"We're going to emphasize the need, the imperative of the United States to fix its banking system and the Europeans to fix their banking system, because we have to get the banking systems functional properly in order to have reasonable access to financing and credit," he explained.
Later in the day, Harper chided the Liberals as purveyors of doom and gloom, and Transport Minister John Baird built on the theme, saying the government is providing "a little bit of hope, a little bit of jobs, a little bit of opportunity."
The Conservative offensive appears designed to portray the opposition parties as economic Cassandras, while also accusing them of stalling the government's best efforts to stimulate the economy quickly.
For the second day, Harper and Flaherty charged the Liberal-dominated Senate is holding up the stimulus, although it only began hearings on the budget this week.
"The Senate is holding up nothing," said Liberal Leader Michael Ignatieff. "You can't spend the money 'till the first of April. This prime minister cannot live without creating artificial crises."
The IMF report appeared a mixed blessing for the government.
While lauding Ottawa's $40-billion stimulus over two years, it also predicts Canada's economy will worsen before it gets better and says little about Canada exiting the recession ahead of others.
"Real exports and output have fallen and are likely to decline further in coming months," it says. "Economic activity will likely decline further in the near term, before picking up on the back of the policy stimulus already in train."
And the IMF cautions: "Downside risks predominate, including negative spillovers if the global environment worsens more than expected."
As well, a new report from parliamentary budget officer Kevin Page suggests that Canada's economy may be weaker than previously reported and not much better than that of the United States.
Page pointed out in a report that Canada's gross domestic income, which measures Canadians' purchasing power, plunged 15.3 per cent in the fourth quarter over the previous three months, 10 times the U.S. contraction.
The sharp drop was primarily driven by tumbling in corporate profits as a result of the crash in world commodity prices, the report states. As a net importer of commodities, the United States generally prospers from falling raw material prices.
"When Canada was fine few people were paying attention to (domestic income) and now the tide has definitely turned," said economist Douglas Porter of BMO Capital Markets.
"Now that commodity prices have plunged, the pain that the economy is suffering might be somewhat understated by looking solely at gross domestic product."
Another study by DBRS said the government stimulus package is "unlikely to have a perceptible impact this year" to boost the economy.
Flaherty preferred to see the glass half full, however.
He said Canada's sound fundamentals and massive stimulus, if properly and swiftly implemented, will lead to a stronger and quicker rebound than the rest of the world.
"We have the strongest fiscal fundamentals in the G7, we have paid down debt, we're not creating a long-term permanent deficit... (and) that leads us late into the recession and early out of the recession," he said.
The forecast appears to derive from an analysis first outlined by Bank of Canada governor Mark Carney in January, when he projected the economy would bounce back strongly in 2010 to 3.8 per cent growth.
But Liberal MP Gerard Kennedy said the government hasn't gotten off to a particularly good start on its stimulus spending projections.
Kennedy said the government's own plans shows the green infrastructure fund will not begin until the fall and the $2 billion infrastructure stimulus fund will not start until July. Very little of the budget stimulus, he said, is slated to begin shortly after April 1, when it can legally start spending.
Flaherty said Canadians can judge how the government is doing in rolling out the stimulus through a new website - actionplan.gc.ca - that started up Wednesday morning.
Thursday, March 12, 2009
Wednesday, March 11, 2009
Financial Update for March 11, 2009
Stock markets make triple-digit gains as bank and insurer investors rejoice
· TSX+313.37 Stock markets surged on a huge runup in bank and insurance shares after American financial-services giant Citigroup Inc. said it was profitable in the first two months of this year. It was the biggest gain this year for the benchmark Canadian index.
· DOW +379.44 Traders were also encouraged as Federal Reserve chairman Ben Bernanke outlined measures to prevent another financial crisis. These would include legislation to handle the failure of a huge financial institution in an orderly way, along with tighter supervision of risk at companies regarded as too big to be allowed to fail.
· Dollar +.83c to 77.81USD. The U.S. dollar eased in general and the loonie benefited as Singapore's government investment council released a statement favouring investing in Canada
· Oil -$1.36 to $45.71US per barrel. Crude oil, gasoline and other fuel prices tumbled after the U.S. government again lowered its forecast for global energy demand and said average oil prices for this year will likely be below current levels.
· Gold -22.10 to $895.90 USD per ounce
· Canadian 5 yr bond yields +.05bps to 1.91
· http://www.financialpost.com/markets/market_data/money-yields-can_us.html
The 5 year bond yield is 1.91, up 0.05 from yesterday. Four weeks ago it was 2.12.
Canada to emerge from global crisis before others and stronger than before: Harper
Allison Jones, The Canadian Press BRAMPTON, Ont. - Canada will emerge from the global recession before any other country and in a stronger economic position than ever, Prime Minister Stephen Harper said Tuesday as his government aggressively moved to sell its fiscal plan.
The rosy picture Harper painted of the ability to not only recover but profit from the worldwide crisis came as he dispatched two of his top lieutenants to deliver variations of the same message: the Conservative stimulus package will put the country on the right track and the opposition must support it.
The notion that the opposition was stalling economic recovery raised the ire of Liberal Leader Michael Ignatieff, who said the party is doing everything it can to help get the money out the door.
Harper, in his address to a business crowd in Brampton, Ont., noted that "Canada was the last advanced country to fall into this recession."
"We will make sure its effects here are the least severe, and we will come out of this faster than anyone and stronger than ever."
The crisis, ultimately, is an "opportunity to position ourselves so that when the recovery comes, we're among the first to catch the wave."
While Harper placed Canada at the forefront of economic relief, he also said our fortunes depend on those of the United States.
"We will not turn the corner on this global recession until the American financial sector is fixed," he said.
Across town, Industry Minister Tony Clement echoed that sentiment following a speech to the C.D. Howe Institute which focused - like his boss's address - on the government's plan to navigate the crisis.
Only American consumers can save the flattened auto industry from extinction, he said.
In Ottawa, Finance Minister Jim Flaherty delivered the hard-sell as he demanded that the Liberal-dominated Senate pass his budget bill and its $40-billion stimulus package.
The simultaneous sorties by the prime minister and his two most senior economic ministers in three different locations represent an aggressive shift into selling the economic plan.
Harper's own MPs have complained privately that there has been too much gloom and not enough reassurance about Canada's economic future in the six weeks since the budget was delivered.
The prime minister took on a more prominent role after the Jan. 27 federal budget and has been visiting various pockets of the country to make stimulus-funding announcements.
He spent this past weekend at his official residence typing away at Tuesday's 3,300-word address - one of the rare occasions when Harper has written a speech from start to finish.
In his speech, Harper suggested that the opposition is standing in the way of the fiscal rescue plan - pointing to the proposed $3-billion fund aimed at quickly stimulating the economy.
The Liberals have said they won't support it without having some idea how the money would be spent.
"We cannot have the opposition in Parliament replacing bureaucratic red tape with political red tape," Harper said.
Liberal Leader Michael Ignatieff said he found Harper's comments laughable.
"It's a comic spectacle but it's a spectacle of misrepresentation," he said after Question Period in Ottawa.
"We passed the budget last week. Did anybody notice? We passed the budget... We have done everything we can to get the money out the door quickly.
"There will be literally no delay, repeat, no delay from the Liberal Party of Canada in getting needed, needed stimulus to Canadians."
At least one economist agreed with Harper's assertion that Canada is in a better position to weather the economic crisis and will not be hit as hard as other nations.
Still, TD chief economist Don Drummond said he was "less certain about the bit that we will recover faster."
Canada's economy is inextricably linked to the global economy through our exports to the United States and it's hard to imagine Canada recovering faster, Drummond said.
"In our forecast we have the recoveries occurring simultaneously."
TD has predicted Canada's economic troubles will ease at the end of the year, but Drummond said that may change.
"We will be putting out our forecast on the 12th and we go through five key assumptions that one has to make, but if any of those don't get fulfilled then I think it's going to get delayed beyond that."
· TSX+313.37 Stock markets surged on a huge runup in bank and insurance shares after American financial-services giant Citigroup Inc. said it was profitable in the first two months of this year. It was the biggest gain this year for the benchmark Canadian index.
· DOW +379.44 Traders were also encouraged as Federal Reserve chairman Ben Bernanke outlined measures to prevent another financial crisis. These would include legislation to handle the failure of a huge financial institution in an orderly way, along with tighter supervision of risk at companies regarded as too big to be allowed to fail.
· Dollar +.83c to 77.81USD. The U.S. dollar eased in general and the loonie benefited as Singapore's government investment council released a statement favouring investing in Canada
· Oil -$1.36 to $45.71US per barrel. Crude oil, gasoline and other fuel prices tumbled after the U.S. government again lowered its forecast for global energy demand and said average oil prices for this year will likely be below current levels.
· Gold -22.10 to $895.90 USD per ounce
· Canadian 5 yr bond yields +.05bps to 1.91
· http://www.financialpost.com/markets/market_data/money-yields-can_us.html
The 5 year bond yield is 1.91, up 0.05 from yesterday. Four weeks ago it was 2.12.
Canada to emerge from global crisis before others and stronger than before: Harper
Allison Jones, The Canadian Press BRAMPTON, Ont. - Canada will emerge from the global recession before any other country and in a stronger economic position than ever, Prime Minister Stephen Harper said Tuesday as his government aggressively moved to sell its fiscal plan.
The rosy picture Harper painted of the ability to not only recover but profit from the worldwide crisis came as he dispatched two of his top lieutenants to deliver variations of the same message: the Conservative stimulus package will put the country on the right track and the opposition must support it.
The notion that the opposition was stalling economic recovery raised the ire of Liberal Leader Michael Ignatieff, who said the party is doing everything it can to help get the money out the door.
Harper, in his address to a business crowd in Brampton, Ont., noted that "Canada was the last advanced country to fall into this recession."
"We will make sure its effects here are the least severe, and we will come out of this faster than anyone and stronger than ever."
The crisis, ultimately, is an "opportunity to position ourselves so that when the recovery comes, we're among the first to catch the wave."
While Harper placed Canada at the forefront of economic relief, he also said our fortunes depend on those of the United States.
"We will not turn the corner on this global recession until the American financial sector is fixed," he said.
Across town, Industry Minister Tony Clement echoed that sentiment following a speech to the C.D. Howe Institute which focused - like his boss's address - on the government's plan to navigate the crisis.
Only American consumers can save the flattened auto industry from extinction, he said.
In Ottawa, Finance Minister Jim Flaherty delivered the hard-sell as he demanded that the Liberal-dominated Senate pass his budget bill and its $40-billion stimulus package.
The simultaneous sorties by the prime minister and his two most senior economic ministers in three different locations represent an aggressive shift into selling the economic plan.
Harper's own MPs have complained privately that there has been too much gloom and not enough reassurance about Canada's economic future in the six weeks since the budget was delivered.
The prime minister took on a more prominent role after the Jan. 27 federal budget and has been visiting various pockets of the country to make stimulus-funding announcements.
He spent this past weekend at his official residence typing away at Tuesday's 3,300-word address - one of the rare occasions when Harper has written a speech from start to finish.
In his speech, Harper suggested that the opposition is standing in the way of the fiscal rescue plan - pointing to the proposed $3-billion fund aimed at quickly stimulating the economy.
The Liberals have said they won't support it without having some idea how the money would be spent.
"We cannot have the opposition in Parliament replacing bureaucratic red tape with political red tape," Harper said.
Liberal Leader Michael Ignatieff said he found Harper's comments laughable.
"It's a comic spectacle but it's a spectacle of misrepresentation," he said after Question Period in Ottawa.
"We passed the budget last week. Did anybody notice? We passed the budget... We have done everything we can to get the money out the door quickly.
"There will be literally no delay, repeat, no delay from the Liberal Party of Canada in getting needed, needed stimulus to Canadians."
At least one economist agreed with Harper's assertion that Canada is in a better position to weather the economic crisis and will not be hit as hard as other nations.
Still, TD chief economist Don Drummond said he was "less certain about the bit that we will recover faster."
Canada's economy is inextricably linked to the global economy through our exports to the United States and it's hard to imagine Canada recovering faster, Drummond said.
"In our forecast we have the recoveries occurring simultaneously."
TD has predicted Canada's economic troubles will ease at the end of the year, but Drummond said that may change.
"We will be putting out our forecast on the 12th and we go through five key assumptions that one has to make, but if any of those don't get fulfilled then I think it's going to get delayed beyond that."
Tuesday, March 10, 2009
Financial Update for March 10, 2009
· TSX-24.53 ended at its lowest close in more than 5 years as weaker gold prices dragged down materials shares while bank worries weighed on financial issues.
· DOW -79.89 Billionaire Warren Buffett said all 535 members of Congress should stop partisan bickering about solutions and support President Barack Obama. What is required is a commander in chief that's looked at like a commander in chief in a time of economic war,''
· Dollar -.45c to 76.98USD.
· Oil +$1.55 to $47.07US per barrel.
· Gold -24.40 to $917.70 USD per ounce The drop in gold prices knocked the TSX's broader materials sector -- home to many of the country's top gold miners -- down by 0.98%
· Canadian 5 yr bond yields +.01bps to 1.86
· http://www.financialpost.com/markets/market_data/money-yields-can_us.html
Analysts advise choosing type of mortgage wisely
Ross Marowits The Canadian PressMar 09, 2009
MONTREAL
Bargain basement borrowing costs are prompting many Canadians to opt for fixed mortgages even though variable products continue to be a money-winning option for the foreseeable future, industry observers say.
Canadian Imperial Bank of Commerce's chief economist says variable rate mortgages should produce the greater benefit for the next two to 2.5 years, but be a wash over five years.
"If you're really risk-averse, jump on those fixed-term rates because they're extremely cheap,'' Benjamin Tal said.
"Going variable probably will give you good performance for the next two years or so and beyond that, we might see interest rates rising.''
Inflation could ultimately lead to higher interest rates, but likely not before 2011, he said.
Variable rates remain attractive even though banks last fall eliminated discounts and began charging premiums for those who signed up for them after the Bank of Canada lowered its interest rate.
The central bank went even further last week, cutting its trend-setting overnight rate another a half percentage point to 0.5 per cent. Banks followed by lowering their prime rate to 2.5 per cent.
Homeowners with variable rates, especially those with discounts reaching 90 basis points, should ignore temptations to lock in now, says Vince Gaetano, vice-president of Monstermortgage.ca.
The self-professed fan of variable mortgages said they give customers control, which is important in the current climate.
Gaetano said homeowners should use this window of low rates to pay down their mortgages.
Owners of rental properties, however, should stick to fixed-rate mortgages to balance steady income with stable interest expenses, he added.
Mortgage expert Moshe Milevsky of York University suspects many Canadians will opt for the security of fixed mortgages considering how low rates have dropped.
But he said the decision about what kind of mortgage to take should never be made in isolation of individual circumstances such as the amount of equity, value of the house, debts and risk aversion.
And in markets where real estate prices are falling, seeking a long-term rate may be more important than the type of rate.
"The last thing you want to do is have to renew your mortgage in a year from now and have the bank say: 'Let's assess what that house is really worth,"' he said in an interview.
Studies conducted by Milevsky have shown that variable rates have historically produced greater savings 88 per cent of the time.
"But in today's environment, you'd be hard-pressed to make a case to continue floating,'' he said, advocating a blend between fixed and floating rates.
Why it’s time to buy a house Experts say right now may be the best time in years to buy a home Friday, March 6, 2009 Julian Beltrame Canadian Press
OTTAWA - Jim Rawson says it's a great time to buy a house.
The regional manager of Invis mortgage brokerage firm in Toronto has been in the business since 1978 and has never seen interest rates, both variable and fixed, so low. Pair that with falling housing prices and it's a no-brainer.
"People have to have somewhere to live and whether you are paying for a mortgage or paying rent, you still have to be paying to live somewhere," Rawson explains.
But something is missing in the equation. As prices for most consumer goods, cars and homes decline - in some cases plunge - and the cost of borrowing falls, Canadians have been hesitant to buy.
The Bank of Canada did its part this week to lure consumers and businesses out of their fox hole, dropping the overnight rate down to an unheard of half per cent - virtually zero.
Canada's chartered banks lowered their prime rate to 2.5 per cent on Tuesday, shortly after the central bank moved, and by the end of the week were lowering other lending rates.
TD Canada Trust, for one, is reducing several of its posted fixed-term mortgage rates on Saturday. TD's biggest decrease was with its two-year mortgage, which falls to 5.0 per cent from 5.75 per cent.
Scotiabank went even further, lopping nearly two full percentage points off the advertised price for its 10-year mortgage, which fell to 5.25 per cent from 7.15 per cent, effective Friday.
By almost every measure, Canadians have slowed down borrowing and spending, most visibly in the auto sector, which saw sales volume crash by 28 per cent in February.
The Canadian housing market, for years a source of boundless growth, has come crashing to earth with sales, prices, and construction of new homes all down, in many cases by double-digits.
Consumers have also stopped discretionary purchases, as the 5.4 per cent contraction in retail sales in December - the largest in 15 years - shows.
"I think they're scared out there," says Bruce Cran of the Consumers' Association of Canada. "Consumers are tapped out and frightened of over-spending. They are going back to being savers."
Bank of Canada deputy governor Pierre Duguay may have a point in saying there is a danger of "irrational fear" taking hold, but there are also very real reasons to be concerned.
Canada lost 129,000 jobs in January, the third straight month of decline, and announcements of future layoffs are being posted almost daily. Everyone is predicting the Canadian economy has much further to fall after contracting 3.4 per cent in December.
There is also fact that the days of easy money are over. Chartered banks are being more choosy who they lend to and interest rates - low as they are - are higher than they might be given the central bank rate and non-existent inflation.
Variable rate mortgages, for example, formerly could be had below the banks' prime rate. The prime rates have fallen, along with the Bank of Canada's moves, but now banks' variable mortgage rates are well above prime.
Individuals have also cut back on borrowing, hence spending. TD Bank chief executive Ed Clark said this week that overall demand for loans is coming down.
Under normal times, economists would say that is a good thing. Rampant buying, particularly in the United States, was a major contributor to the financial sector meltdown that brought the world low.
Americans have now pulled back big time making matters worse, even though the Federal Reserve rate at 0.25 per cent is lower than the Bank of Canada's. The U.S. once lamentable savings rate has shot from just above one per cent to five per cent in a matter of months.
The amount of debt Canadians held as a ratio of their income increased last year to 136 per cent from 130 per cent. What kept them solvent is that low interest rates made the cost of servicing that mounting debt at affordable levels.
That is as long as jobs, incomes and the economy were advancing. In a recent CIBC World Markets report, economist Benjamin Tal showed the squeeze was underway.
Canadians assets fell by $160 billion in the third quarter, he noted, adding that with house and equity values falling, Canadians would likely be another $180 billion poorer in the fourth quarter. Values haven't gotten better since.
As well, debt is rising and consumer bankruptcies are jumping - 13.5 per cent last year with expectations they could hit 30 per cent growth this year. Mortgage arrears are also on an upward path, rising from a record low of 0.24 per cent to the current 0.33 per cent, the highest in six years.
But the big number, says Tal, is the number of Canadians who have lost their job and the much bigger number that are for the first time in many years afraid of losing their job.
"The issue is confidence," he said. "People talk about the unemployment rate going to eight and nine per cent, but the focus should be on the 91 per cent of people who are employed and are concerned about their jobs."
Tal and most economists believe that Canadians will start spending again because they no longer can put off purchases. But he doesn't believe they will spend with the reckless abandon of the recent past.
"After the crisis is over, consumer spending will be stronger but not like it used to be because it was artificially strong before, using borrowed money," Tal said.
Rawson believes that time is coming soon, at least in the housing market.
Applications for mortgages in his Toronto office have doubled since December, Rawson says, with many in the pre-approved market. That usually involves first-time prospective buyers making sure all their ducks are lined up before taking the plunge.
"These are people who haven't bought yet but they will buy in the future," he says.
· DOW -79.89 Billionaire Warren Buffett said all 535 members of Congress should stop partisan bickering about solutions and support President Barack Obama. What is required is a commander in chief that's looked at like a commander in chief in a time of economic war,''
· Dollar -.45c to 76.98USD.
· Oil +$1.55 to $47.07US per barrel.
· Gold -24.40 to $917.70 USD per ounce The drop in gold prices knocked the TSX's broader materials sector -- home to many of the country's top gold miners -- down by 0.98%
· Canadian 5 yr bond yields +.01bps to 1.86
· http://www.financialpost.com/markets/market_data/money-yields-can_us.html
Analysts advise choosing type of mortgage wisely
Ross Marowits The Canadian PressMar 09, 2009
MONTREAL
Bargain basement borrowing costs are prompting many Canadians to opt for fixed mortgages even though variable products continue to be a money-winning option for the foreseeable future, industry observers say.
Canadian Imperial Bank of Commerce's chief economist says variable rate mortgages should produce the greater benefit for the next two to 2.5 years, but be a wash over five years.
"If you're really risk-averse, jump on those fixed-term rates because they're extremely cheap,'' Benjamin Tal said.
"Going variable probably will give you good performance for the next two years or so and beyond that, we might see interest rates rising.''
Inflation could ultimately lead to higher interest rates, but likely not before 2011, he said.
Variable rates remain attractive even though banks last fall eliminated discounts and began charging premiums for those who signed up for them after the Bank of Canada lowered its interest rate.
The central bank went even further last week, cutting its trend-setting overnight rate another a half percentage point to 0.5 per cent. Banks followed by lowering their prime rate to 2.5 per cent.
Homeowners with variable rates, especially those with discounts reaching 90 basis points, should ignore temptations to lock in now, says Vince Gaetano, vice-president of Monstermortgage.ca.
The self-professed fan of variable mortgages said they give customers control, which is important in the current climate.
Gaetano said homeowners should use this window of low rates to pay down their mortgages.
Owners of rental properties, however, should stick to fixed-rate mortgages to balance steady income with stable interest expenses, he added.
Mortgage expert Moshe Milevsky of York University suspects many Canadians will opt for the security of fixed mortgages considering how low rates have dropped.
But he said the decision about what kind of mortgage to take should never be made in isolation of individual circumstances such as the amount of equity, value of the house, debts and risk aversion.
And in markets where real estate prices are falling, seeking a long-term rate may be more important than the type of rate.
"The last thing you want to do is have to renew your mortgage in a year from now and have the bank say: 'Let's assess what that house is really worth,"' he said in an interview.
Studies conducted by Milevsky have shown that variable rates have historically produced greater savings 88 per cent of the time.
"But in today's environment, you'd be hard-pressed to make a case to continue floating,'' he said, advocating a blend between fixed and floating rates.
Why it’s time to buy a house Experts say right now may be the best time in years to buy a home Friday, March 6, 2009 Julian Beltrame Canadian Press
OTTAWA - Jim Rawson says it's a great time to buy a house.
The regional manager of Invis mortgage brokerage firm in Toronto has been in the business since 1978 and has never seen interest rates, both variable and fixed, so low. Pair that with falling housing prices and it's a no-brainer.
"People have to have somewhere to live and whether you are paying for a mortgage or paying rent, you still have to be paying to live somewhere," Rawson explains.
But something is missing in the equation. As prices for most consumer goods, cars and homes decline - in some cases plunge - and the cost of borrowing falls, Canadians have been hesitant to buy.
The Bank of Canada did its part this week to lure consumers and businesses out of their fox hole, dropping the overnight rate down to an unheard of half per cent - virtually zero.
Canada's chartered banks lowered their prime rate to 2.5 per cent on Tuesday, shortly after the central bank moved, and by the end of the week were lowering other lending rates.
TD Canada Trust, for one, is reducing several of its posted fixed-term mortgage rates on Saturday. TD's biggest decrease was with its two-year mortgage, which falls to 5.0 per cent from 5.75 per cent.
Scotiabank went even further, lopping nearly two full percentage points off the advertised price for its 10-year mortgage, which fell to 5.25 per cent from 7.15 per cent, effective Friday.
By almost every measure, Canadians have slowed down borrowing and spending, most visibly in the auto sector, which saw sales volume crash by 28 per cent in February.
The Canadian housing market, for years a source of boundless growth, has come crashing to earth with sales, prices, and construction of new homes all down, in many cases by double-digits.
Consumers have also stopped discretionary purchases, as the 5.4 per cent contraction in retail sales in December - the largest in 15 years - shows.
"I think they're scared out there," says Bruce Cran of the Consumers' Association of Canada. "Consumers are tapped out and frightened of over-spending. They are going back to being savers."
Bank of Canada deputy governor Pierre Duguay may have a point in saying there is a danger of "irrational fear" taking hold, but there are also very real reasons to be concerned.
Canada lost 129,000 jobs in January, the third straight month of decline, and announcements of future layoffs are being posted almost daily. Everyone is predicting the Canadian economy has much further to fall after contracting 3.4 per cent in December.
There is also fact that the days of easy money are over. Chartered banks are being more choosy who they lend to and interest rates - low as they are - are higher than they might be given the central bank rate and non-existent inflation.
Variable rate mortgages, for example, formerly could be had below the banks' prime rate. The prime rates have fallen, along with the Bank of Canada's moves, but now banks' variable mortgage rates are well above prime.
Individuals have also cut back on borrowing, hence spending. TD Bank chief executive Ed Clark said this week that overall demand for loans is coming down.
Under normal times, economists would say that is a good thing. Rampant buying, particularly in the United States, was a major contributor to the financial sector meltdown that brought the world low.
Americans have now pulled back big time making matters worse, even though the Federal Reserve rate at 0.25 per cent is lower than the Bank of Canada's. The U.S. once lamentable savings rate has shot from just above one per cent to five per cent in a matter of months.
The amount of debt Canadians held as a ratio of their income increased last year to 136 per cent from 130 per cent. What kept them solvent is that low interest rates made the cost of servicing that mounting debt at affordable levels.
That is as long as jobs, incomes and the economy were advancing. In a recent CIBC World Markets report, economist Benjamin Tal showed the squeeze was underway.
Canadians assets fell by $160 billion in the third quarter, he noted, adding that with house and equity values falling, Canadians would likely be another $180 billion poorer in the fourth quarter. Values haven't gotten better since.
As well, debt is rising and consumer bankruptcies are jumping - 13.5 per cent last year with expectations they could hit 30 per cent growth this year. Mortgage arrears are also on an upward path, rising from a record low of 0.24 per cent to the current 0.33 per cent, the highest in six years.
But the big number, says Tal, is the number of Canadians who have lost their job and the much bigger number that are for the first time in many years afraid of losing their job.
"The issue is confidence," he said. "People talk about the unemployment rate going to eight and nine per cent, but the focus should be on the 91 per cent of people who are employed and are concerned about their jobs."
Tal and most economists believe that Canadians will start spending again because they no longer can put off purchases. But he doesn't believe they will spend with the reckless abandon of the recent past.
"After the crisis is over, consumer spending will be stronger but not like it used to be because it was artificially strong before, using borrowed money," Tal said.
Rawson believes that time is coming soon, at least in the housing market.
Applications for mortgages in his Toronto office have doubled since December, Rawson says, with many in the pre-approved market. That usually involves first-time prospective buyers making sure all their ducks are lined up before taking the plunge.
"These are people who haven't bought yet but they will buy in the future," he says.
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