TSX -.27(Reuters)
• DOW -50.71
• Dollar -1.98c to 95.17 as the central bank announced it was leaving interest rates at 0.25 per cent - and will likely keep them that low until the middle of next year as it had earlier indicated.
• Oil -$.52 to $79.09US per barrel.
• Gold +$.50 to $1,057.80USD per ounce
• http://www.financialpost.com/markets/market-data/money-yields-can_us.html?tmp=yields-can_us
Carney wins round one with loonie, taking currency down two cents with one blow
By Julian Beltrame, The Canadian Press
OTTAWA - The Bank of Canada took the wind out of the loonie's sails Tuesday, driving down the currency nearly two cents against the U.S. dollar with a warning that it was prepared to stick to low interest rates for some time.
And although the central bank's words have had short-term impacts on the currency before, this time the effect may last longer, economists said.
In one of the gloomier reports in months, the central bank's governing council declared that a strong loonie threatens Canada's economic recovery, saying its recent rise more than offset all the encouraging indicators seen over the summer.
"(The) heightened volatility and persistent strength in the Canadian dollar are working to slow growth and subdue inflation pressures," the bank said. "The current strength in the dollar is expected, over time, to more than fully offset the favourable developments since July."
As expected, the central bank kept its policy interest rate moored at the historic low of 0.25 per cent, the level it's been at since the spring.
The affect of the bank's statement could be seen immediately. The currency fell a penny against the U.S. dollar within minutes of the announcement and kept going, at one time trading down 2.17 cents U.S.
It closed on slightly better footing, though still down 1.98 cents at 95.17 cents U.S.
Economists said the reason for the big drop was not so much what the bank said about the dollar - it had made similar warnings for months - but more because markets had expected it would soon follow the lead of Australia, which has begun to raise interest rates.
Canada's central bank put a stop to that speculation Tuesday when it downgraded economic growth prospects for this year and 2011.
The bank now estimates the Canadian economy will shrink by 2.4 per cent in 2009, not 2.3 per cent as it predicted last month. Next year's forecast was unchanged at three per cent growth, but the bank downgraded its forecast for 2011 growth by two-tenths of a point to 3.3 per cent.
As significantly, it set back a full quarter its expectation for when economic output and inflation can be expected to return to where it wants them, to the fall of 2011.
"This is a somewhat more modest recovery in Canada than the average of previous economic cycles," the bank said.
With inflation nowhere in the horizon, there appears little urgency for governor Mark Carney to back off his conditional commitment to keep the central bank's policy rate at the lower bound of 0.25 per cent until next July. The thinking may be that short-term interest rates will stay at the historic floor even longer, perhaps until the end of next year.
"The delay in returning back to its target rate on inflation would allow a longer period of keeping rates on hold," said CIBC chief economist Avery Shenfeld.
"Financial markets tend to get edgy sitting still, but Carney is a man in no hurry to act."
Royal Bank currency strategist Matthew Strauss said Carney's gambit will have long-lasting impacts on the dollar.
That doesn't mean the dollar won't rise again, since the main driver will be oil prices and other external forces. But, he said, the bank governor has taken some of the speculation out of the calculation and going forward expects the loonie will underperform compared with other commodity-weighted currencies, such as the Australian dollar.
"It will definitely have an effect," he said. "Now the market knows exactly where the Bank of Canada and the Government of Canada stands."
Scotiabank economists Derek Holt and Karen Cordes said the markets should have seen it coming.
They wrote in a note to clients that it's ill-advised to lump Canada in with Australia, saying there are "night-and-day differences in the Canadian economy's export exposures and currency sensitivities."
Canada fell into a recession similar to one it experienced in the early 1990s, with its recovery prospects closely tied to the weak U.S. economy. Australia, which is benefiting from returning strong growth in China, never fell into even a technical recession.
Carney believes the Canadian dollar will keep future growth even more sluggish than it thought a few months ago.
Two indicators from Statistics Canada on Tuesday filled in the picture of an economy that is recovery, but not robustly.
The leading index of economic indicators rose 1.1 per cent in September, slightly less than the revised 1.2 per cent gain registered in August. And Canadian wholesalers took a hit in August as sales dropped 1.4 per cent.
The TD Bank said it now believes the Canadian economy likely contracted 0.2 per cent in August after a flat reading in July.
In September, the last time the bank pronounced on interest rates, Carney and the governing council had enthused that the recovery was going so well it was expecting to revise its July growth forecast that predicted 1.3 per-cent growth in the gross domestic product in the third quarter and three per cent in the fourth.
But that was when the bank expected the loonie to average 87 cents US through 2010.
Wednesday, October 21, 2009
Tuesday, October 20, 2009
Financial Update For Oct. 20, 2009
Why Canada's housing sector didn't collapse ….for each dollar lost in housing wealth, consumer spending pulls back up to 15 cents.
• TSX +33.63(Reuters) as further weakness in the U.S. dollar boosted commodity prices.
• DOW +96.28
• Dollar +.83c to 97.15 rising on firm commodity prices and ahead of the Bank of Canada's interest rate announcement on Tuesday
• Oil +$1.08 to $79.61US per barrel.
• Gold +$6.60 to $1,057.30USD per ounce
•
Why Canada's housing sector didn't collapse
Globe and Mail Update Published on Monday, Oct. 19, 2009
While it's tempting to think of a “housing correction” as a continent-wide phenomenon, National Bank
“The two have absolutely nothing in common,” senior economist Marc Pinsonneault wrote in an economic update Monday. “In Canada, the correction got under way much later and lasted nowhere as long.”
Mr. Pinsonneault said “prudent lending practices” in Canada prevented the housing market from falling as hard as its American counterpart, and pointed out that Canada's crisis was a side-effect of its recession rather than its cause.
Here are four ways the markets have differed:
Duration of slowdown
The Canadian market began to slide in October, 2008, while the American slump has lasted 2 1/2 years.
“People wishing to sell their homes either cut their asking price or quite simply took their property off the market,” he said of the Canadian market. “Lower interest rates, lower home prices
Price declines
According to Teranet, Canadian home prices fell 8.9 per cent from their August, 2008, highs to their recessionary lows eight months later. In the U.S., the S&P/Case Shiller index shows prices slid 33 per cent in 33 months.
Delinquency rates
Canadian banks have seen delinquency rates climb to 0.4 per cent, compared to the 0.65 per cent high reached in 1992. The number is far greater in the U.S., at 3.67 per cent.
Consumer spending
When home prices are under pressure, consumers tend to reel in the spending.
“According to Statistics Canada, from the end of Q3 2008 to mid-2009, the value of household real estate
In the U.S., the value of household real estate wealth dropped 18.2 per cent. The Federal Reserve estimates that for each dollar lost in housing wealth, consumer spending pulls back up to 15 cents.
Steve Ladurantaye
• TSX +33.63(Reuters) as further weakness in the U.S. dollar boosted commodity prices.
• DOW +96.28
• Dollar +.83c to 97.15 rising on firm commodity prices and ahead of the Bank of Canada's interest rate announcement on Tuesday
• Oil +$1.08 to $79.61US per barrel.
• Gold +$6.60 to $1,057.30USD per ounce
•
Why Canada's housing sector didn't collapse
Globe and Mail Update Published on Monday, Oct. 19, 2009
While it's tempting to think of a “housing correction” as a continent-wide phenomenon, National Bank
“The two have absolutely nothing in common,” senior economist Marc Pinsonneault wrote in an economic update Monday. “In Canada, the correction got under way much later and lasted nowhere as long.”
Mr. Pinsonneault said “prudent lending practices” in Canada prevented the housing market from falling as hard as its American counterpart, and pointed out that Canada's crisis was a side-effect of its recession rather than its cause.
Here are four ways the markets have differed:
Duration of slowdown
The Canadian market began to slide in October, 2008, while the American slump has lasted 2 1/2 years.
“People wishing to sell their homes either cut their asking price or quite simply took their property off the market,” he said of the Canadian market. “Lower interest rates, lower home prices
Price declines
According to Teranet, Canadian home prices fell 8.9 per cent from their August, 2008, highs to their recessionary lows eight months later. In the U.S., the S&P/Case Shiller index shows prices slid 33 per cent in 33 months.
Delinquency rates
Canadian banks have seen delinquency rates climb to 0.4 per cent, compared to the 0.65 per cent high reached in 1992. The number is far greater in the U.S., at 3.67 per cent.
Consumer spending
When home prices are under pressure, consumers tend to reel in the spending.
“According to Statistics Canada, from the end of Q3 2008 to mid-2009, the value of household real estate
In the U.S., the value of household real estate wealth dropped 18.2 per cent. The Federal Reserve estimates that for each dollar lost in housing wealth, consumer spending pulls back up to 15 cents.
Steve Ladurantaye
Monday, October 19, 2009
Financial Update For Oct. 19, 2009
TSX +.25(Reuters)
• DOW +67.03
• Dollar -.35c to 96.32
• Oil +$.95 to $78.53US per barrel.
• Gold +$.90 to $1,050.70USD per ounce
http://www.financialpost.com/markets/market-data/money-yields-can_us.html?tmp=yields-can_us
Give yourself some credit
Don't expect rubber-stamped mortgage approvals anymore
Helen Morris, National Post
Whether you are planning to move from an existing home or are stepping into the property market for the first time, and unless you have a substantial supply of cash, you will likely require a mortgage.
Interest rates may be at historic lows but with uncertain and changing market conditions, lenders want to be doubly sure that borrowers can repay a mortgage. This has led to lenders placing more stringent conditions upon borrowers and demanding more detailed and verifiable proof of income and ability to pay.
A borrower's income, expenses, credit history and down payment are all considered when assessing whether they qualify for a mortgage.
"Prior to eight months ago, for a standard salary individual, I could do the mortgage on a job letter," says Jeff Mayer, a mortgage agent with the Mayer Group, part of the mortgage brokerage firm Mortgage Intelligence. "Now you need a job letter ... then they want a pay stub...and a lot of times they'll ask for two paystubs, then they're going to want either a T-4 or a notice of assessment. The bank wants to make sure that you can afford the mortgage. It's tough love; they want to make sure that you're going to stay in your house."
If you work overtime it is essential to check with the lender if this income can be counted towards your mortgage qualification.
"In a lot of situations, with unemployment rising, there is not as much overtime," says Gary Siegle, a regional manager with the Invis mortgage brokerage firm. "Lenders are looking at that a little bit more carefully."
Because of increased default rates in some communities, some lenders will now only consider a base salary when evaluating a mortgage application.
If you have a stable job, a decent-sized deposit and a good credit score, putting in the hard work at the application stage can secure you a good deal.
"With prices having softened due to the recession, housing has never been more affordable," Mr. Siegle says. "It is a little more difficult to qualify when it comes to showing your income and proving different parts of [it], but it's also much easier to qualify on the numbers because house prices are down and mortgage rates are on sale, really."
However, mortgage qualification has become rather more testing for those with lower credit scores, smaller deposits or irregular income.
"Lower credit scores have become more difficult to get traditional financing for. You can still quite often get a mortgage but it's just going to cost more," Mr. Siegle says. "Those with very poor credit probably have much more difficulty today. If you've got bad credit and haven't been proven to be able to manage it, maybe you need to get things fixed up before you get a mortgage."
It has also become a lot tougher for self-employed individuals to get mortgage financing, Mr. Mayer says. Lenders are still allowing self-employed applicants to state their own income levels but the income stated must be deemed reasonable based on the size and type of business.
Many lenders, Mr. Siegle says, are demanding extensive documentary evidence from self-employed applicants and even then, lenders can refuse to provide a mortgage if they believe that disparities between taxable and real income are not reasonable.
It is not just borrowers buying their own homes who are facing tougher lending criteria.
For buyers of rental properties, Mr. Siegle says, lenders have become less generous when calculating how much rental income can be used to qualify a mortgage. Conventional lenders used to include up to 80% of the rental income when calculating how much homebuyers could borrow. However, due to a higher risk of default, now he says some lenders are including only 50% to 70% of the rental income.
Close
• DOW +67.03
• Dollar -.35c to 96.32
• Oil +$.95 to $78.53US per barrel.
• Gold +$.90 to $1,050.70USD per ounce
http://www.financialpost.com/markets/market-data/money-yields-can_us.html?tmp=yields-can_us
Give yourself some credit
Don't expect rubber-stamped mortgage approvals anymore
Helen Morris, National Post
Whether you are planning to move from an existing home or are stepping into the property market for the first time, and unless you have a substantial supply of cash, you will likely require a mortgage.
Interest rates may be at historic lows but with uncertain and changing market conditions, lenders want to be doubly sure that borrowers can repay a mortgage. This has led to lenders placing more stringent conditions upon borrowers and demanding more detailed and verifiable proof of income and ability to pay.
A borrower's income, expenses, credit history and down payment are all considered when assessing whether they qualify for a mortgage.
"Prior to eight months ago, for a standard salary individual, I could do the mortgage on a job letter," says Jeff Mayer, a mortgage agent with the Mayer Group, part of the mortgage brokerage firm Mortgage Intelligence. "Now you need a job letter ... then they want a pay stub...and a lot of times they'll ask for two paystubs, then they're going to want either a T-4 or a notice of assessment. The bank wants to make sure that you can afford the mortgage. It's tough love; they want to make sure that you're going to stay in your house."
If you work overtime it is essential to check with the lender if this income can be counted towards your mortgage qualification.
"In a lot of situations, with unemployment rising, there is not as much overtime," says Gary Siegle, a regional manager with the Invis mortgage brokerage firm. "Lenders are looking at that a little bit more carefully."
Because of increased default rates in some communities, some lenders will now only consider a base salary when evaluating a mortgage application.
If you have a stable job, a decent-sized deposit and a good credit score, putting in the hard work at the application stage can secure you a good deal.
"With prices having softened due to the recession, housing has never been more affordable," Mr. Siegle says. "It is a little more difficult to qualify when it comes to showing your income and proving different parts of [it], but it's also much easier to qualify on the numbers because house prices are down and mortgage rates are on sale, really."
However, mortgage qualification has become rather more testing for those with lower credit scores, smaller deposits or irregular income.
"Lower credit scores have become more difficult to get traditional financing for. You can still quite often get a mortgage but it's just going to cost more," Mr. Siegle says. "Those with very poor credit probably have much more difficulty today. If you've got bad credit and haven't been proven to be able to manage it, maybe you need to get things fixed up before you get a mortgage."
It has also become a lot tougher for self-employed individuals to get mortgage financing, Mr. Mayer says. Lenders are still allowing self-employed applicants to state their own income levels but the income stated must be deemed reasonable based on the size and type of business.
Many lenders, Mr. Siegle says, are demanding extensive documentary evidence from self-employed applicants and even then, lenders can refuse to provide a mortgage if they believe that disparities between taxable and real income are not reasonable.
It is not just borrowers buying their own homes who are facing tougher lending criteria.
For buyers of rental properties, Mr. Siegle says, lenders have become less generous when calculating how much rental income can be used to qualify a mortgage. Conventional lenders used to include up to 80% of the rental income when calculating how much homebuyers could borrow. However, due to a higher risk of default, now he says some lenders are including only 50% to 70% of the rental income.
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