Canada’s economy creating more full-time, and better paying jobs=higher rates to come

General Angela Calla 10 May

By Julian Beltrame, The Canadian Press

OTTAWA – The Canadian economy is not only creating more jobs, it’s creating better jobs according to one of the country’s major banks.

CIBC’s latest employment quality index shows that 60 per cent of new jobs created over the past year would qualify as high-paying, quality jobs.

The bank says there’s been an increase in full-time and paid employment, as opposed to self-employment, over the past 12 months — helping push the employment quality index up 2.7 per cent.

The sharp improvement has come about because many of the 283,000 jobs created in the past year have been in relatively high-paying sectors, including manufacturing, finance, construction and the public service.

Previously, the new jobs created since the end of the recession in the summer of 2009 have tended to be part-time and in lower-paying service industries.

“This (quality) measure is roughly back to the pre-recession levels,” said economist Benjamin Tal. “This is a much better performance than a similar measure in the U.S., where the quality of employment index continues to soften despite some improvement in the pace of job creation.”

Canada’s employment record since the end of the recession has been among the strongest in the industrialized world with over 500,000 new jobs added since July 2009. That’s about 80,000 more than was lost during the 2008-2009 recession.

By contrast, the United States remains about six million jobs shy of its pre-crisis levels.

But despite the full rebound in the jobs market, the complaint had been that many of those new jobs were not of the same quality as the jobs that vanished. Some economists derided them as service industry McJobs, or part-time, or “forced self-employment” by those who create their own form of employment — usually lower paying — because they can’t find regular work.

Over the past 12 months, that trend has started to reverse. Almost all the new jobs have been in paid employment, not self-employment.

As well, growth in full-time jobs has outnumbered part-time by more than two-to-one, and well-paying jobs in manufacturing, construction, the financial sector and government have outnumbered low-paying jobs three-to-one.

The question is whether the new and better composition of job creation will continue. There is some evidence it might not, says Tal, noting of the 58,000 new jobs added last month, two-thirds were part-time.

“It’s clear that governments will not be hiring in the future and the housing market will not be as strong,” undercutting two of the sectors that have been producing high quality jobs, Tal explained.

However, the export sector, which tends to generate higher-paying jobs, is expected to be a leading engine of growth going forward and may be sufficiently robust to take up the slack.

The improvement in the quality of jobs has been good for the economy, the report states, since higher pay puts more money in the pockets of homeowners to spend on consumer goods.

“The impact of job creation on income growth and thus spending is currently more notable than it was in early 2010,” Tal said, which will put pressure on the Bank of Canada to hike interest rates in the second half of the year.

Canada’s economy also got a thumbs up Monday from the Organization for Economic Co-operation and Development, which forecast Canada would continue to be at the forefront of the global economic recovery.

In its May report on composite leading indicators, the OECD put Canada alongside China as countries with a “regained momentum in economic activity.”

Economies in the U.S., Germany and Russia are improving. Overall, the international think-tank says most European countries will experience a slower or stable expansion. Some, like Italy, Brazil and India are pointing to slower growth relative to their trends.

Vancouverites most willing to make joint purhcase of a condo

General Angela Calla 10 May

Condo Poll finds Vancouverites most willing to make joint purchase of a condo –

VANCOUVER, May 10 /CNW/ – The majority of Vancouverites who recently purchased or intend to purchase a condo say that if they had more money, they would prefer to buy a house instead.  The 2011 TD Canada Trust Condo Poll, which surveyed Canadians who are thinking of buying, or recently bought a condo, found that affordability of condos is a big attraction, especially in Vancouver (64% versus 46% nationally) and for respondents under 35-years-old (62% versus 46% for other age groups).  Vancouverites are more likely than those surveyed in other cities to say they would consider buying a condo with a friend to make purchasing more affordable. Condos seem to be viewed as a stepping stone into homeownership, with many planning to move in the not too distant future.  But, is this a good strategy?

“Especially if you are planning a joint purchase with someone, be clear about your timeline and have a plan in place for the eventual sale of the condo,” advises Barry Rathburn, Manager, Residential Mortgages, TD Canada Trust. “Further, if you are only planning to own a condo for a few short years, calculate the costs that you will incur, such as condo fees, parking fees and moving expenses and work this into your budget.  Depending on how soon you plan to move, these costs could outweigh the equity you’ll build and receive from the eventual sale of your condo. I understand the attraction of owning a property, but in some cases it can make more financial sense to continue to rent while you save for a down payment on the home you really want.” Home Sweet Home – but for how long?

Half of Vancouver respondents expect to live in their condo for three years or less (18%) or four to six years (32%).  Across cities surveyed, the number planning for a short stay is highest amongst respondents under 35.  Nearly one-quarter (22%) of respondents in this age group said they don’t plan to spend more than three years in their condo and another 45% plan to move after four to six years.

Has the tightening of mortgage rules affected the condo market?

Forty-nine percent of Vancouverites said the recent amortization change to 30 years for new mortgages had a significant impact on their decision to choose a condo over other types of homes.

Somewhat alarmingly, the poll found that more than one-quarter (26%) of those intending to buy a condo in Vancouver were not aware of the recent changes to lending rules. “Homebuyers need to have some understanding of the mortgage laws.  If you plan to buy a home, you can possibly save yourself a lot of money in the long run by understanding your options and making well informed decisions about the type of mortgage you choose and the amount of your down payment based on what you can afford,” says Rathburn.  “Familiarize yourself with different mortgage options, so you can weigh the pros and cons of each before making a decision.  There are experts at the bank who can walk you through different mortgage options and help you find the right solution for you, including a variety of flexible mortgage payment features, which can give you the choice to manage your mortgage payments, which is something that you may need in the future.”

What do Vancouverites look for in a condo?

Vancouver residents named good building security as the most important feature to look for in a condominium (98%).  Keeping with the theme of affordability, low condo fees was the second most popular answer (96%).    Eighty-four percent of Vancouver respondents said they were not willing to pay more than $400 in condo fees monthly.  These figures remain consistent with findings from a similar poll conducted by TD Canada Trust in 2010. Other important features were attractive interior design features, available parking and an energy-efficient building (all 93%).

Condos popular with downsizing pre-retirees:

Nationally, those over 50 are attracted to condos because they fit into their plans to downsize their home.  Not surprisingly, when those over 50 move into a condo, 31% don’t plan to move again.  Since they plan to stay put, many over 50 are making their condos as comfortable as possible, with 53% planning to spend more than $10,000 on upgrades (compared to only 15% of those under 35).

“Moving to a smaller, less expensive home can free up money to allow pre-retirees to make some upgrades and enjoy a bit more luxury in their space,” says Rathburn.  “It’s especially important for those who are selling their home to downsize as part of their retirement strategy to make a budget for any upgrades and stick to it. You don’t want to get carried away and spend all the extra money you earned with the sale of your previous home.”

Approximately half of Vancouver respondents are planning to make upgrades to their condo right away (48%).  One-quarter of Vancouverites say they will spend less than $5,000 on these upgrades, 51% will spend between $5,000-$10,000, 18% will spend $10,001-$15,000 and 7% will spend more than $15,000.

About the 2011 TD Canada Trust Condo Poll From March 25 to April 11, results were collected from 806 people in Vancouver, Toronto, Calgary and Montreal, through a custom online survey by Environics Research Group.  Responses were collected from 204 Vancouver residents. Respondents had either bought a condo in the past 24 months, intend to buy a condo in the next 24 months, or considered a condo when shopping for a home.


Mortgage and Title Fraud Explained

General Angela Calla 4 May

In a time where identity theft and Ponzi schemes are plastered across the daily news, the last thing you want to worry about is yet another way to lose your hard-earned money.


But as a homeowner, you need to be aware of crimes on the rise known as mortgage fraud and real estate title fraud.


Mortgage fraud

The most common type of mortgage fraud involves a criminal obtaining a property, then increasing its value through a series of sales and resales involving the fraudster and someone working in cooperation with them. A mortgage is then secured for the property based on the inflated price.


Following are some red flags for mortgage fraud:


*             Someone offers you money to use your name and credit information to obtain a mortgage

*             You are encouraged to include false information on a mortgage application

*             You are asked to leave signature lines or other important areas of your mortgage application blank

*             The seller or investment advisor discourages you from seeing or inspecting the property you will be purchasing

*             The seller or developer rebates you money on closing, and you don’t disclose this to your lending institution


“Straw buyer” scheme

Another term for mortgage fraud is the “straw” or “dummy” homebuyer scheme. For instance, a renter does not have a good credit rating or is self-employed and cannot get a mortgage, or doesn’t have a sufficient down payment, so he or she cannot purchase a home. He/she or an associate approaches someone else with solid credit. This person is offered a sum of money (can be as much as $10,000) to go through the motions of buying a property on the other person’s behalf – acting as a straw buyer. The person with good credit lends their name and credit rating to the person who cannot be approved for a mortgage for his or her purchase of a home.


Other types of criminal activity often dovetail with mortgage fraud or title fraud. For example, people who run “grow ops” or meth labs may use these forms of fraud to “purchase” their properties.


                 Title fraud

Sadly, the only red flag for title fraud occurs when your mortgage mysteriously goes into default and the lender begins foreclosure proceedings. Even worse, as the homeowner, you are the one hurt by title fraud, rather than the lender, as is often the case with mortgage fraud.


Unlike with mortgage fraud, during title fraud, you haven’t been approached or offered anything – this is a form of identity theft.


Here’s what happens with title fraud: A criminal – using false identification to pose as you – registers forged documents transferring your property to his/her name, then registers a forced discharge of your existing mortgage and gets a new mortgage against your property. Then the fraudster makes off with the new home loan money without making mortgage payments. The bank thinks you are the one defaulting – and your economic downfall begins.


Following are ways you can protect yourself from title fraud:


*             Always view the property you are purchasing in person

*             Check listings in the community where the property is located – compare features, size and location to establish if the asking price seems reasonable

*             Make sure your representative is a licensed real estate agent

*             Beware of a real estate agent or mortgage broker who has a financial interest in the transaction

*             Ask for a copy of the land title or go to a registry office and request a historical title search

*             In the offer to purchase, include the option to have the property appraised by a designated or accredited appraiser

*             Insist on a home inspection to guard against buying a home that has been cosmetically renovated or formerly used as a grow house or meth lab

*             Ask to see receipts for recent renovations

*             When you make a deposit, ensure your money is protected by being held “in trust”

*             Consider the purchase of title insurance


It’s important to remember that if something doesn’t seem right, it usually isn’t – always follow your instincts when it comes to red flags during the home buying and mortgage processes.




First time hombuyers have more down payment options

General Angela Calla 4 May

With interest rates still sitting near historically low levels – with nowhere to go but up – now is an ideal time for first-time homebuyers to embark upon homeownership.


But if low interest rates still don’t tip the scales on your decision to enter the property market, perhaps the information below will.


Down payment

The main reason many renters feel they can’t afford to purchase a home has to do with saving for a down payment. But there are many solutions available today that can help first-time buyers with their down payments.


Many lenders will allow for a gifted or borrowed down payment. And of those lenders that will not provide this alternative, many offer cash-back options that can be used as a down payment.


Better yet, there are programs available from some financial institutions where they will offer a “free down payment” or a “flex down”. Of course, you will end up paying about 1% more in your interest rate, but the program will help you get in the homeownership door and start accumulating equity earlier. The only catch, however, is that you must remain with the original lender for the full initial five-year term or else you’ll have to pay the down payment back.


Under the RRSP Home Buyers’ Plan, first-time homebuyers can withdraw up to $25,000 from


                 their RRSPs for a down payment – tax- and interest-free.


And if there’s a couple making a home purchase together, they can each withdraw up to $25,000 from their RRSPs.


Making an informed decision

There’s an endless amount of information available to prospective homeowners – through the Internet, friends, family members and anyone willing to voice their opinion on a given subject. What you need, therefore, is education and coaching as opposed to being bombarded with more information.


That’s why it’s important to speak to me – a mortgage professional – in order to get a pre-approval prior to setting out home shopping. This will help set your mind at ease, because many first-time buyers are overwhelmed by the financing and buying processes, and often don’t know what it truly costs to purchase a home. I can provide you with real examples that can go a long way in showing you what it really costs to buy a home in your area versus what you’re currently paying in rent.


You may be pleasantly surprised by how manageable it is to start building equity in your own property as opposed to helping pay someone else’s mortgage each month!


As always, if you have any questions about down payment options or your mortgage in general, I’m here to help!


Coming Soon-Higher Interest Rates

General Angela Calla 2 May

Higher Canadian rates, sooner. That’s what the markets figured out this week and that’s what is powering the Canadian dollar. Sometimes when you see a big market reaction you know it’s probably an over-reaction and you can ignore it – but not this time.

Let’s start with a little tutorial (no, please keep reading, it will be brief) and then we’ll talk about why this week’s economic data changes everything, more or less.

The Bank of Canada sets the benchmark overnight rate (the rate at which banks lend to each other). That in turn affects market interest rates on everything from mortgages through to business loans. At present, the overnight rate is at 1 percent, following three hikes of 25 basis points each last year.

The tutorial is on the ‘output gap’ which is one of the major tools that the Bank of Canada looks at to set monetary policy. Here goes.

The ‘output gap’ refers to the difference between the actual output of the economy and the potential output. Potential output basically refers to the maximum that could be produced if all inputs (like the labour force, technology, capital, factory space and all that) were used to the fullest extent that they can be without triggering inflation.  That last little bit is key: when the bank says ‘potential’ they don’t mean full potential, they mean ‘potential without forcing prices higher’. It is a similar concept to what economists mean when they say ‘full employment’. In that case it does not mean everyone working, it means everyone working that can be working without wages being forced higher.

The Bank of Canada monitors the output gap as best they can, first by estimating what potential output is in any period of time, then estimating how close to potential the economy looks to be. A positive output gap means the economy is operating above potential, and that inflation is a risk. A negative gap means there is excess supply (for example, too many unemployed workers) and that inflation is not a risk, or at the extreme, that deflation is possible.

The Bank of Canada adjusts policy to try to get keep things in balance and the output gap closed – sort of a ‘not too hot, not too cold’ thing. Based on their most recent calculations, their latest estimate (which was contained in last week’s Monetary Policy Review) was that the output gap would close by the middle of 2012.

Everybody still with me? Good. Here’s the thing: as well as looking at the output gap itself, the Bank also looks at a bunch of economic indicators to see how close to capacity the Canadian economy is running. Things like industrial production, the unemployment rate, unfilled manufacturing orders – and inflation.

That last one is probably the most important, and it is the one that seems to be running most out of sync with where the Bank of Canada thought it would be. In the Monetary Policy Report, the Bank said that the overall inflation rate (which they target to be 1 to 3 percent) would peak at 3 percent in the second quarter. This week, we got the March inflation report, and we find out that the inflation rate was 3.3 percent as of March –  which is decisively in the first quarter. Ouch.

So what does this mean? It means something has to change to keep the Canadian economy from overheating. That something is likely to be Canadian interest rates, and when I say ‘change’ I mean ‘go higher’.

If rates do not go higher, then the output gap is at risk of going into positive territory, which means inflation takes off even more. No way is the Bank of Canada going to let that happen.

There are other things to take into account too – the spiky Canadian dollar is an important one – but it does not take away from the big picture.

Big picture? A rate hike by July, and maybe more to come after that. And yes, watch the loonie soar in the meantime