The US stepped back from the brink of default on Tuesday, but congressional approval of a last-ditch deficit-cutting plan failed to dispel fears of a credit downgrade and future tax and spending feuds.

 President Barack Obama and lawmakers from across the political divide expressed relief over the hard-won compromise to raise the country’s borrowing authority after weeks of rancorous partisan battles.

Nevertheless, US stocks tumbled, turning negative for the year, as investors shifted their attention to the increasingly grim state of the US economy and the potential for a downgrade of America’s gold-plated debt rating.

That risk grew when one of the three major ratings agencies said it was affirming the US government’s AAA-rated sovereign debt but slapping it with a negative outlook.

Click here to read more from Reuters.

Turning the key in a lock that no landlord has access to, reading in a hammock in your own backyard and painting your dining room bright red – what could be more exciting than making the leap from renter to first-time homeowner?

Getting swept up in all the excitement is a wonderful feeling, but some first-time homeowners lose their heads and make mistakes that can jeopardize everything they’ve worked so hard to earn.

Don’t be one of those people – take a few moments to ponder the Globe and Mail’s Five smart steps every new homeowner should take that will help ensure that your first home becomes the place of luxury and financial freedom you’ve anticipated.

Yields crash = lower fixed mortgage rates coming. The five-year bond yield nose-dived 16 bps yesterday, crashing through “support” at 2%. It’s the biggest plunge in yields since March 2009.

Yields are hurtling lower in response to a slew of negatives, including:

• “Austerity measures” (spending cuts) built into Congress’ debt agreement. Those will drag on Canada’s economy
• Weaker economic data out of the US (like Monday’s brutal ISM number)
• Ongoing angst about the euro-debt dilemma

On a positive note, global investors are now finding Canadian treasuries far more appetizing – due, in part, to Canada’s AAA debt rating, budgetary prudence and stable currency. That has sparked a money rotation into Canada, adding to yesterday’s bond buying. (When investors bid up Canadian government bonds, our yields drop.)

Angela Calla, AMP

Dominion Lending Centres-Angela Calla

604-802-3983

acalla@dominionlending.ca

Host of The Mortgage Show Saturdays @ 7pm on CKNW AM980

The debt problems of the global financial system are your problems. So pay down your credit card, credit line and mortgage. Making your household balance sheet tidier has the fortunate spillover effect of saving our economy. 

From what? Just look at what’s happening in the US: The housing market is a disaster, weak consumer spending has crippled the economy, and politicians are grappling with how to fix things through a mix of government spending cuts and tax increases. 

 The Bank of Canada gave you another reason to get your debts in line last week, when it signalled, in its typically obscure way, that interest rates will rise in the foreseeable future. The bank did this by deleting the world “eventually” from a discussion of rate increases. 

 Rising rates will hit you in two stages. The first is instant – when the central bank raises its overnight rate, the major banks increase their prime lending rates by an identical amount. That, in turn, means higher interest charges for people with variable-rate mortgages, lines of credit and floating rate loans. 

Click here for more from the Globe and Mail.

With anticipated interest rate increases on the horizon, many homeowners are wondering whether to lock debt such as mortgages and secured lines of credit into a fixed-rate mortgage or stay variable. 

 Even some who are mortgage free are concerned with how rate increases will impact secured lines of credit, the financing of vacation homes and recreational property.

 First-time buyers may be particularly concerned with entering an expensive real estate market. As a first-time homebuyer, it’s essential to figure out what you can afford. A quick rule of thumb is that your household expenses should not add up to more than 40% of your pre-tax household income. Household expenses include mortgage payments, property taxes, condo fees, utility and heating costs, and any payments on other loans such as car loans, credit card debt and lines of credit.

 Probably the first step should be to get a copy of your credit history from Equifax Canada and TransUnion. As this is what lenders will look at, it’s important to review its accuracy.

Click here for the full Ottawa Citizen article.

Owning the roof over your head should still be a goal for most Canadians as paying rent is like paying someone else’s mortgage, experts say. 

The Bank of Canada gave its clearest signal last week that interest rates are set to rise, while a growing number of real estate watchers and some economists are forecasting property prices will decline.

Given such a scenario, some first-time buyers may be tempted to hold off on what’s likely to be one of the biggest purchases of their lives, though that may be a mistake.

Click here to read the full Money article.

If you’ve been thinking about investing in real estate, there are some important things to keep in mind when it comes to where you decide to invest, how best to position your mortgage and why it’s important not simply to seek the lowest available rate.

 As always, location is a key component to any real estate purchase. You want to see the official community plan, current re-zonings, and investment from developers and the city. These details will help you understand how many more buildings are being erected in the area, as this could affect the view or quality of living for a tenant.

Other considerations include what improvements are being made to the area (roads, bridges, entertainment facilities, etc), proximity to transit, malls, hospitals, schools and major roads, as well as strata bylaws (for rental restrictions).

Why the lowest rate may not always be the best

When it comes to mortgage rates, cheaper may not always be better – for both investment and personal residential purposes.

When it comes to the type of mortgage you select – fixed or variable – some lenders do offer the ability to have your broker assist you with lock-in to ensure the best rate. For rental properties, however, some lenders restrict the products they allow.

Longer amortization is better when building a real estate portfolio for future qualifying purposes, so you don’t have to redo your other mortgages at a later date for an added expense. If paying your mortgage(s) off faster is important to you, ensure you use prepayment privileges. Also remember that the interest you pay on rental properties is 100% tax deductable.

Various mortgage terms, such as a lower down payment, larger rental offset ability, mortgage structure (saver mortgage where your principal portion is re-advanceable to assist you with down payments for future purchases) are also important considerations.

For rental offsets, keep in mind that different lenders allow different offsets, which will affect you when you’re looking to add to your portfolio.

Accredited Mortgage Professional (AMPs) look for the overall best long-term mortgage solution for each client. In today’s market, the lowest rate is not the best option for many borrowers and often costs them more in the long run. Having a proactive AMP is the solution to a borrower saving the most amount of money on their mortgages, as lenders are often not focused on proactive solutions because these options aren’t as profitable for the banks’ shareholders.

Tune into The Mortgage Show Saturdays at 7pm on CKNW with Angela Calla to learn more important tips on your mortgage.

TORONTO (Reuters) – The Canadian dollar looks set to extend a rally that’s taken it to 3-1/2 year highs against the U.S. dollar this week, as more hawkish Bank of Canada comments lifted the currency and global investors pushed into the safety of Canadian assets.

Given the central bank’s clear signal it would likely resume interest rate hikes later this year, analysts said the currency might even revisit its modern-day high. It reached C$0.9059 to the U.S. dollar, or US$1.1039, in November 2007, according to Thomson Reuters dealing data.

“Yes, Canada could hit post-Civil War highs once again,” said Michael Woolfolk, a senior currency strategist at BNY Mellon in New York.

“(Hitting the high) would not be altogether unwarranted if Canada begins raising interest rates again. It’s certainly not in our forecasts, but it’s a nontrivial possibility of hitting C$0.90 within the next 12 months.”

Based on available data, the Canadian dollar was at an all-time high of C$0.36 to the U.S. dollar, or $2.78 in 1864.

A survey on Wednesday of Canadian primary dealers found most expect a rate hike in September or October, perhaps as much as a year before the U.S. Federal Reserve starts raising interest rates.

“Against a background of firm commodity prices and continued global diversification flows to the relatively safe harbor of Canadian bonds, we look for the loonie to stay close to around US$1.05 even by the early part of 2012, before Fed rate hikes start to kick in,” said Douglas Porter, deputy chief economist at BMO Capital Markets in a note.

DRIVING FORCES

The currency began rallying on Tuesday after the Bank of Canada signaled it was closer to resuming rate hikes. Governor Mark Carney indicated that the central bank’s focus was on inflation and not the Canadian dollar, despite concerns that a strong dollar could hurt the economy.

But other G10 currencies are still outperforming the Canadian dollar, with part of its strength coming from U.S. dollar weakness, and general strength from the bloc of Australian, New Zealand and Canadian dollars.

A release of draft conclusions from a euro zone meeting on Thursday to tackle contagion from Greece’s debt woes helped push the Canadian dollar to a 3-1/2 year high of C$0.9425 to the U.S. dollar, or $1.0610, its highest since November 2007.

“That was viewed very constructively by the market and lifted the euro up. It also helped bolster risk appetite, which undermined the U.S. dollar,” said Woolfolk.

Canada, with its relatively robust economy, stable debt market and internationally recognized sound banks, has become particularly appealing to investors as the U.S. and European debt crises send investors elsewhere.

“As uncertainty in Europe continues to rise and problems in the U.S. remain at the forefront, there is likely increased appetite to diversify holdings away from both USD and EUR based assets,” Scotia Capital chief currency strategist Camilla Sutton said in a research note.

“Small open economies, with strong sovereign positions and flexible FX regimes, like CAD, are in demand. We expect this is a long-term trend…that will help support CAD into year-end.”

RISKY BUSINESS?

Currency analysts polled by Reuters said this month they expected global risks to drag the Canadian dollar down against a stronger U.S. dollar, with parity a possibility within the next 12 months.

Marc Chandler, global head of currency strategy at Brown Brothers Harriman, said a stronger Canadian dollar will hurt non-commodity aspects of the economy, such as manufacturing.

“The Bank of Canada will get more concerned about … the higher currency and may dampen expectations of a rate hike,” Chandler said.

“The exports are heavily weighted toward commodities, but part of the country doesn’t produce commodities, they’re consumers of commodities. They get hurt, so it leads to this bifurcation of the economy, which makes it all the more difficult to conduct monetary policy and has political ramifications.”

Woolfolk disagreed.

“We think conditions warrant higher interest rates in Canada, but (the central bank) is likely holding back because of the obvious positive it would have for the currency,” he said.

http://ca.finance.yahoo.com/news/Analysis-Dollar-striking-reuters-903092895.html