Dean Garrett
Mortgage Professional
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For more than 9 years now I have been learning what is important to you. Then finding the best solution for you. Many of my clients were not sure if they needed to use my services as a Mortgage Professional, but once they experienced how this helped them with their Home Buying/Re-Financing project, they are happy they did. Mortgages are deceptively simple and endlessly complicated. You can only choose when you have a choice and have been fully informed. Many great Bank Specialists are providing service to their clients, but they can only offer their Banks solutions. As an independent professional, I work for you by informing you on all things mortgage, including who will be your Best Lender. My services are FREE (with OAC) to my clients. The lenders compensate my business to provide them a qualified Client.
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BLOG / NEWS Updates
The Bank of Canada: What it is, what it does
Sep 30, 2019
First National Financial LP
In an earlier commentary, we took a look at what central banks are and what they do. In this piece, we focus on the Bank of Canada.
Like other central banks around the world, the Bank of Canada has broad responsibility for managing the economic and financial welfare of the country.
The Bank of Canada was founded in 1934 and it is relatively young by central bank standards. In 1938 it became a Crown Corporation, which means it is owned by the federal government. The bank is governed by legislation in the Bank of Canada Act which says the bank exists to regulate credit and currency in the best interests of the economic life of the nation.
There are three main ways the Bank of Canada shows up in our daily lives.
Monetary Policy is designed to preserve the value of money. This is the part of the banks job that most people know about because it gets the most coverage in the media. The factor in monetary policy is managing inflation to keep it low, stable and predictable.
The banks main tool for managing inflation is interest rates. The bank sets its Policy Rate eight times a year. It is the rate large financial institutions are charged when they borrow money from the Bank of Canada, or each other, to settle their daily accounts. The Policy Rate is also known as the overnight rate.
Financial institutions base their interest rates on the Policy Rate. As it goes up or down so do the rates for business and consumer borrowing such as variable-rate mortgages, lines of credit and car loans. Raising interest rates makes borrowing and spending more expensive which slows down economic activity and inflation. Lowering rates does the opposite.
The Policy Rate can also influence the value of our dollar which affects the cost of Canadian goods and services on world markets. Higher interest rates tend to increase the value of the Canadian dollar, making Canadian goods more expensive which, again, slows economic activity and inflation.
So, you can see the bank is performing an economic balancing act.
The Bank of Canada is known as the bankers bank and it helps manage and regulate the countrys Financial System. The bank facilitates borrowing and investing for Canadas large financial institutions and it regulates those institutions. The bank controls how much they can lend out by setting standards for how the loans are secured and imposing cash reserve requirements.
The most obvious way the Bank of Canada enters our lives is through our Currency. The bank is responsible for designing, issuing and delivering banknotes (coins are the responsibility of the Royal Canadian Mint).
National house price index rises again in August
The national HPI has grown at a below-inflation rate of 0.6% over the last 12 months. However, the weakness is not regionally broad-based. The national HPI has been depressed by 12 consecutive months without a rise in Vancouvers index, which dropped a cumulative 6.6%. Other Western metropolitan areas (Victoria, Calgary, Edmonton, and Winnipeg) also contributed to slow the national HPI. At the opposite, annual growth has been decent in most of the regions located in the central and eastern part of the country. That being said, home sales in August were up 55% from March in Vancouver, where market conditions went from favorable to buyers to balanced. Over that period, home sales rose 19% in Calgary and 12% in Edmonton. These improvements, if sustained, will sooner or later help limit home-price deflation in this region.
The TeranetNational Bank Composite National House Price IndexTM increased 0.4% in August, a fourth gain in a row after an eight-month string without a rise.
On a monthly basis, the index rose in 8 of the 11 markets covered: Victoria (+0.2%), Calgary (+0.6%), Hamilton (0.7%), Winnipeg (0.7%), Toronto (+0.8%), Montreal (1.1%), Ottawa-Gatineau (1.7%) and Halifax (1.8%). The index was down in Vancouver (-0.8%), Quebec City (-0.4%) and Edmonton (-0.1%).
From August 2018 to August 2019, the Composite index rose 0.6%. Over the period, the HPI declined in Vancouver (-6.6%), Edmonton (-3.1%), Calgary (-2.3%). It was marginally up in Quebec City (0.1%), Victoria (0.7%) and Winnipeg (1.1%). It grew more convincingly in Toronto (+3.8%), Hamilton (+4.4%), Halifax (5.5%), Montreal (+5.7%) and Ottawa-Gatineau (+6.4%).
Source: National Bank, Marc Pinsonneault
CREA Updates Resale Housing Market Forecast
The Canadian Real Estate Association (CREA) has updated its forecast for home sales activity via the Multiple Listing Service (MLS) Systems of Canadian real estate boards and associations for the rest of 2019 and looking ahead to 2020.
Economic fundamentals underpinning housing activity remain strong outside of the Prairies and Newfoundland and Labrador. Population and employment growth have both remained supportive and the unemployment rate remains low. At the same time, expectations have become widespread that the Bank of Canada is unlikely to raise interest rates over the rest of the year and into next.
More importantly for home buyers and housing markets, longer-term mortgage rates have been declining. Among those that have declined is the Bank of Canadas benchmark five-year rate used by banks to qualify mortgage applicants.
Additionally, the Federal Government has recently launched its First-Time Home Buyer Incentive, a shared equity program in which the federal government finances a portion of a home purchase in exchange for an equity share of the homes value.
Of these factors supporting Canadian housing activity, the decline in mortgage rates is arguably the most important development since the release in June of CREAs most recent forecast. The decline in the benchmark five-year mortgage rate has marginally relaxed the B-20 mortgage stress-test, which has dampened housing activity more than other policy changes made in recent years.
Home sales have improved by more than expected in recent months and there are early signs that home price declines in the Lower Mainland of British Columbia and across the Prairies may be abating. Meanwhile, home prices are re-accelerating across Ontarios Greater Golden Horseshoe region.
Strong economic fundamentals, previously unexpected declines in mortgage interest rates and stronger than previously expected housing market trends in British Columbia and Ontario have resulted in CREA upwardly revising forecast home sales in 2019 and 2020. Nonetheless, the overall level of national sales activity this year and next is anticipated to remain below levels recorded prior to the implementation of the B-20 stress test.
National home sales are now projected to recover to 482,000 units in 2019, representing a 5% increase from the five-year low recorded in 2018. While this is an upward revision of 19,000 transactions compared to CREAs previous forecast (85% of which is due to upgraded British Columbia and Ontario forecasts), it represents a return of activity to its 10-year annual average. It also remains well below the annual record set in 2016, when almost 540,000 homes traded hands. Notwithstanding the upward revision, the forecast for 2019 on a per capita basis remains the second weakest since 2001.
