Friday, January 27, 2012
Is record household debt a problem for home owners?
Continuous bad news about rising Canadian debt has been making headlines for the past few years – and now we’re hearing over and over again that mortgage debt has reached epic proportions.
Is all of this negativity accurate? We decided to find out by asking some credible sources.
The truth about household debt.
It is true: the overall household debt of Canadians is at a record of $1.5 trillion, growing from $147 billion in 1982. Two-thirds of the increase from 1982 - 2010 occurred from 1999 - 2010.
Why have we seen high mortgage debt?
Mortgage holders are also typically younger, who have bought their home within five years, and who carry higher mortgage debt than those who have been in their homes longer.
How does mortgage debt compare with other debt?
Annual Growth Rates of Canadians’ Debt
Excerpt from January 2012 Edition of Realtor Link, Volume 13, Number 01
Tuesday, October 25, 2011
Bank of Canada Interest Rate Announcement
As was universally anticipated, the Bank of Canada opted to hold its target overnight rate at 1 per cent this morning. Ongoing uncertainty in the Euro-zone continues to weigh heavily on the Bank's outlook. In its statement accompanying the interest rate decision, it was noted that the bank is now projecting a contained Euro-crisis, but also a brief recession in the Euro-area due to ongoing deleveraging and fiscal austerity. The Bank also expects continued weakness, but no recession, in the United States through the first half of 2012 before a resumption of stronger growth. Given various challenges in the global economy, the Bank of Canada trimmed its outlook for Canadian economic growth to 2.1 per cent in 2011, 1.9 per cent in 2012 and 2.9 per cent in 2013 which is in line with our own forecast. On inflation, the Bank now expects slack in the economy to persist longer than originally forecast, leading to a closing of the output gap at the end of 2013. This implies softer than expected inflation in coming quarters, with consumer price growth moderating before returning to the Bank's 2 per cent target by the end of 2013.
Overall, this morning's statement shows a very cautious Bank of Canada that is unlikely to make any significant movements on interest rates over the next two to three quarters. Further monetary tightening will be highly contingent on a brighter growth outlook in the United States and a credible solution to the Euro sovereign debt crisis. Therefore we expect the Bank of Canada to remain on the sidelines through the end of 2011 and the first half of 2012.
BCREA, Chief Economist
Thursday, July 29, 2010
Mortgage Rate Forecast
The Canadian economy grew at the exceptional pace of 6.1% in the first quarter of 2010, propelled by a booming housing market, strong consumer spending and the rebuilding of private sector inventories. Moreover, growth in the second quarter of 2010, while not expected to register the sizzling pace of the previous six months, should be a robust 3%-4%.
However there are signs that the economy, if not stalling out, may be slowing down. April’s monthly GDP print was disappointingly flat as consumers moved to the sidelines, sending retail sales lower by almost 2%.
Even if Canadian consumers are beginning to tire out, economic growth should be supported in coming months by projects initiated under the federal government’s infrastructure stimulus plan. This stimulus will provide a needed boost to the economy through the remainder of 2010, with projected impacts peaking in the third quarter, but will create a drag on growth in 2011 as the stimulus is withdrawn from government expenditure.
The strength of the Canadian economic recovery over the past six months is evidenced by the over 300,000 jobs created in the Canadian economy since the beginning of the year. While this exceptional rate of job creation stands in stark contrast to the gloomy employment situation of our southern neighbour, it also re-affirms the need for the Bank of Canada to begin withdrawing its emergency level of monetary stimulus by raising interest rates, particularly given the proximity of core inflation to its 2% target rate.
The withdrawal of monetary and fiscal stimulus from the Canadian economy in coming months will result in slower growth in both the second half of 2010 and into 2011. This growth slowdown may be further exacerbated by weaker than currently anticipated US and global economic growth as well as a higher Canadian dollar resulting from a rise in Canadian interest rates relative to the United States.
In all, slower economic growth and inflation that is within the Bank of Canada’s comfort zone should mean that, while interest rates are certain to rise, the pace of interest rate increases should be orderly and the level of interest rates will remain near historic lows through the remainder of the year.
By Cameron Muir, Chief Economist and Brendon Ogmundson, Economist, British Columbia Real Estate Association
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