Why we might see a rate hike sooner rather than later

Paul Vieira, Financial Post

OTTAWA — Stronger economic growth, propelled by a commodity boom and an improving U.S. job market, will prompt the Bank of Canada to begin rate hikes in July to a 2% level by the end of the year and 3.5% in late 2012, economists at BMO Capital Markets said Wednesday in releasing its updated outlook.

The investment bank’s economics team project first-quarter annualized growth of 4.4%, helping to power the Canadian economy to a 3% advance in 2011 — an improvement from the 2.7% gain BMO Capital Markets had forecast back in January. By year’s end, the country’s unemployment rate should drop to 7.4% from its present 7.8% level.

“The combination of low interests and high commodity prices are fuelling the domestic economy,” said Sal Guatieri, senior economist at BMO Capital Markets.

Consumer spending is expected to ease from 2010 levels, to 3%, but he said exports and a 12.8% surge in non-residential business investment would pick up the slack.

Canada also stands to benefit from an improving U.S. economy, poised to expand 3.2% in 2011, as the job market begins to turn around based on March data, he added. Monthly job gains in the 200,000-plus range could boost confidence among U.S. firms and households, translating into increased spending and investment.

Risks to the outlook include soaring oil prices, which could deliver a “serious blow” to the North American economy; Europe’s sovereign debt woes, with Portugal on the brink of an international bailout and concerns mount over Spain; and any further fallout from Japan’s earthquake and subsequent nuclear crisis.

The Bank of Canada, which issues its next rate decision on April 12, is likely to upgrade its outlook for 2011 based on the data that has emerged, Mr. Guatieri said. In its last outlook tabled in January, the central bank expected 2011 growth of 2.4%, with a first-quarter annualized advance of 2.4% — which is now well below estimates in the 4% and 5% range.

“The economy is growing much faster than the bank expected, implying less inflation-dampening slack,” Guatieri said, adding he expects the Bank of Canada to move up the timetable as to when the output gap — a measure of spare capacity — closes to mid-2012 from the previous call of the end of next year.

“The central bank will now likely move a little more aggressively on rates than planned.”

While Canada inflation remains muted, with the core rate at 0.9% as of February, Mr. Guatieri said BMO expects price increases to pick up steam in the months ahead. The central bank sets rates to achieve and maintain 2% inflation.

“We are at a low point on inflation,” he said. “The central bank can’t delay rate hikes indefinitely or it might face an inflation problem down the road.”

The European Central Bank is set to raise its benchmark rate on Thursday, even though sovereign debt worries have resurfaced, on inflation concerns. http://www.financialpost.com/news/features/might+rate+hike+sooner+rather+than+later/4568528/story.html

Canada’s big banks raising residential mortgage rates ahead of busy period

By The Canadian Press

TORONTO – Several of Canada’s big banks are raising most of their fixed-term mortgage rates ahead of the busy spring real estate market.

TD Canada Trust (TSX:TD) TD said the biggest increases will be for mortgages with terms of five to 10 years, which will all go up by 0.35 percentage points starting Tuesday.

The move was matched by CIBC (TSX:CM).

The Royal Bank (TSX:RY) raised its rates on mortgages for five and 10-year terms by 0.35 percentage points and its seven-year rate by 0.15 percentage points. The posted rate for five-year closed mortgages — one of the most popular types of loans for Canadian home owners — will rise to 5.69 per cent.

Scotiabank (TSX:BNS) raised its posted rate for a five-year closed mortgage by 0.4 percentage points to bring it to 5.69 per cent.

Fixed mortgage rates, which are closely tied to the bond market, tend to climb when traders shift investment activity to riskier equity assets from bonds, which are considered safer.http://ca.finance.yahoo.com/news/Canada-big-banks-raising-capress-671069751.html?x=0 

The Lure Of Living In B.C.

Real estate adviser Ozzie Jurock describes his passion for this province – and the reasons why he will always buy B.C. real estate.

First off, I just love B.C. B.C.’ers have learned to become a “black belt in life” – that truly balanced life.

Our environment is majestic (I am awed every time I ski), the climate is outstanding, and the views spectacular. There is a very special flavour here. Call it the crisp mountain air, the sweeping, wide-open spaces, the fresh ocean spray, balmy sunsets, golf in February and wine in September. This is the best place in the world to be, where you can enjoy that truly balanced life.

People come here from all parts of the world (inward migration is at a high), bringing their individuality, their experiences and their business know-how.

To work here is a privilege. To live here is a true blessing. To study here is a benefit. To worship here is a natural. In the whole world there is no place like it. It is paradise.

So no great surprise, therefore, I am still buying B.C. real estate and here is why I think this province will continue to be a great real estate investment.

1. Values grow where people go. When employment rises, occupancy of apartments, houses and offices rises – and employment in B.C. will continue to rise.

2. We live in the world’s most unreported inflation, which has driven real estate prices in Vancouver from $16,500 in 1965 to more than $1 million today.

I believe that inflation will return worldwide and all hard assets – including real estate – will continue to rise, not necessarily in a straight line, but they will rise.

3. The world is discovering us. As cash (printed out of thin air) swirls around the world, it is more and more look- ing for a safe haven and B.C offers just that. Add to that Vancouver’s 400,000-strong Asian population and downtown Vancouver and other prime areas will continue to be hot.

4. I believe that timing (cycles) and trend identification remains vitally important. Your entry point in any real estate – or any market – is very important. Don’t fight the trend.

5. A worldwide expectation that our dollar will continue to rise (my predic- tions are coming true) means a built-in return on investment. We have large capital inflows into bonds but also into real estate markets.

6. We are one of the few truly international cities where you can talk to Europe and Asia on the same day – during business hours.

7. Social stability, excellent health services, low crime rates, lowest provincial personal income tax in Canada. No general corporation capital tax, no employer payroll taxes, no franchise tax and no machinery sales tax. We have Canada’s highest overall education levels and highest life expectancy.

8. An innovative and skilled workforce, world-leading universities, rich abundant natural resources.

9. Vancouver is the most livable city in the world, according to the 2010 Livability ranking survey of 140 cities by the Economist Intelligence Unit. B.C. is home to other vibrant cities and welcoming communities with booming tech sectors, such as Victoria, Kelowna, Prince George – each with its own distinctive characteristics, charm and beauty.

I do not believe the Lower Mainland is in a bubble and that bubble has to pop, but I do believe that some areas are overbuilt and that some resorts have been hard-hit.

No doubt 2011 will see higher interest rates (lock in these lifetime lows) and a “sideways market,” but there are also a lot of opportunities – such as:

– Rental properties in a number of small towns that cash flow – e.g. Kamloops and Prince George, Nanaimo and Comox. (Price per property is so low that the owner’s mortgage is paid by the tenant.)

– Some areas in the Lower Mainland where condos are overbuilt (such as Surrey) are great value.

– I would buy (make an offer) on any waterfront, anywhere: river, lakes, ocean.

– Any business owner (or professional) should buy his or her own building. Most buildings make sense at today’s low interest rates. Lock in the rates on all commercial buildings for 10 years.

– Small apartment buildings are not as sweet as earlier last year, but deals can be still found in the Fraser Valley, in New West and on the Island.

Consider:

– Neighbourhood shopping centres.

– Mini-storage and trailer parks.

– Land (particularly farmland).

– Small investment/industrial market- type properties that have good returns.

– Recreational resort property.

– Okanagan if the deal is right, but particularly the undiscovered South.

– Vancouver Island – coastal areas.

My major point is that certain principles remain: No matter where or what you buy, you make the most money in real estate on the day you buy. Nevertheless, buy cautiously – don’t fall in love with the deal, because when investing – any investing – there is a new train (as in gravy) every 10 minutes. But with B.C. on your side, you can’t go wrong. WillingSellerWillingBuyer.com

Ozzie Jurock is a senior real estate adviser and author of the Real Estate Action

Experts best at brokering mortgage

 

 Denise Deveau, Postmedia News · Mar. 30, 2011 | Last Updated: Mar. 30, 2011 4:04 AM ET

With a busy spring market, I found this article of interest.

The delicate art of negotiation WillingSellerWillingBuyer.com

When Jody bought his condo, he beat out a competing offer that was $10,000 higher. How? A little strategic psychology and the WillingSellerWillingBuyer.com real estate system!

Jody W  is one happy man. Just before the holidays this renter became the proud owner of his first condo. The amazing thing is that he nabbed it with a bid that was $10,000 less than the nearest competing offer. As a first-time home buyer, Jody chalks his win up to a great real estate agent who really understands the power of negotiation. Turns out there’s an art to buying property as well as a science. And as Jody discovered, using a little psychology when you’re sitting across the table from the seller can pay off with a winning bid that’s thousands less.

Know more than the other sideWhen you’re buying a house, knowledge is power. Ask any successful home buyer and they’ll tell you that the key to a successful negotiation is to walk into the room fully prepared. In particular, you should find out how close the property in question is to public transportation and major roads. Look at the taxes and neighbourhood crime rates. Consider the quality and proximity of schools, community centres and stores. All of these factors can have a big impact on how much a house is worth. ” Location should always be first on the list of determing values” says Boies.

Most importantly, though, get to know the sale price histories of similar homes in the area. That way, if you think the price of the home you want to buy is too high, you could point out, for instance, that an almost identical house down the street just sold for $20,000 less and it has a second bathroom. Use this to negotiate a lower price.

Don’t stop thereRob Boies, the creator of the WillingSellerWillingBuyer.com real estate system says the next step is to keep researching until you find out why a person is selling. He says the easiest way to get this is to casually ask the seller directly during an open house (don’t make it feel like an interrogation). If the seller isn’t accessible, do a little digging. “Ask neighbours or the local homeowner’s association/ strata,” Rob suggests. Explain that you’re interested in buying and you want to get a feel for the area. Once you’ve chatted for a bit, spring the question. “Nine out of 10 times you’ll find out the reason.” As a buyer, always use the services of an agent as the two agents can discuss certain motivating factors that can not be shared when the buyer has no agency and therefor the sellers agent is in a ” Limited Dual Agency”; Limited to the information he can give you regarding his sellers motivation, plus the buyers agent services are free! to you.

Once you have that information, you’ll have a big leg up in the negotiation. You can focus on what’s important to the sellers, and that gets you closer to a deal. If you know that the sellers have already bought a new house—conditional on the sale of the house that you’re looking at—you can push them harder on the price. On the other hand, if they’re just testing the waters, you might not want to haggle too much.

Chattel chatterWhat if you’ve done your research, made your offer, and there’s still a chasm between your offer and what the seller wants? Does that mean a deal can’t be reached? “Absolutely not,” says Boies. “Because in real estate, everything has value—which makes everything negotiable.” As a buyer, you can use personal items as a way to bridge the gap. For instance, if the seller won’t settle for less than $350,000 and you think the home is worth $340,000, then add your own incentive. Agree to the seller’s price, but only if they throw in some furniture, or bar fridge, or patio furniture, As a WillingSeller any item maybe included in the deal .

The key, says Boies, is not to get too attached to individual items, or you could sink the deal. For instance, while negotiating the purchase of a Vancouver home last year, Rob ran into a snag when the buyer and seller began to argue over the possession of a built-in cappuccino maker. “I couldn’t believe a $500 appliance threatened to derail the sale of a $1.5 million home.” The deal didn’t fall through immediately, but Rob is convinced that bad blood from the cappuccino tiff tainted the sale. The buyers eventually walked and the sellers couldn’t sell until months later—for $100,000 less than the original offer.

Focus on the deal, not the dollarOf all the advice on successful negotiating, probably the most important is that you’ve got to draw out the sellers’ motivation so you can make them feel like a winner. That’s what enabled Jody to get his condo, despite his lower bid.

Our agent knew the condo would sell quickly, so rather than faxing in the offer, he showed up in person, plus we utilized the “QuickStike” method which is a tool developed within the WillingSellerWillingBuyer.com system. By doing so, he was able to tease out the motivation behind the sale: the sellers had recently become proud new parents and needed more space. A quick phone call, and half an hour later Jody was sitting at the negotiating table. That’s when our realtor stopped trying to buy the condo—and began trying to sell the motivating factors within the deal.

The strategy worked. The sellers formed an emotional connection with the buyer, and they could picture him enjoying the condo they loved just as much as they had. In other words, both parties walked away feeling good, feeling like a winner. And that’s worth a lot more than you’d think.

I’m never to busy to assist you or those you care about, call me anytime to achieve your real estate goals and dreams; Rob Boies 604 341 3009

Japanese disaster won’t plunge global economy back into recession: economists

By Sunny Freeman

TORONTO – Recent tragic events in Japan follow a string of global catastrophes that could slow economic recovery in the short term, but should not push either the Canadian or global economies back into recession, according to some of Canada’s top economists.

“Obviously horrible things have happened (in Japan) that will take some of the growth out of the economy for the next two quarters,” said Glen Hodgson, chief economist at the Conference Board of Canada.

“Then people need to rebuild infrastructure, rail and housing and that will actually improve growth in the next four to six quarters.”

Hodgson joined two major banks Thursday in projecting that the crisis at Japan’s Fukushima Dai-ichi nuclear plant and last week’s earthquake and tsunami will conspire with a number of other global events — including uprisings in the Middle East and Europe’s sovereign debt crisis — to decelerate the global economic recovery.

“They will have a negative impact … (but) we’re certainly not returning to recession in any place,” Hodgson said.

G7 countries, including Canada were set to meet in a teleconference Thursday night to discuss the economic impact of the disasters in Japan.

Bank of Montreal (TSX:BMO) economists said in a report that they had trimmed their forecast for global growth by a quarter point to 3.75 per cent as a result of recent events.

“Prior to Japan’s earthquake, we had been calling for global GDP growth this year of four per cent,” they wrote.

“Until we see how the (Japanese) nuclear crisis plays out, it’s next to impossible to properly assess the full economic impact, but a rough guess would be that events in Japan could cut this year’s GDP growth by nearly a percentage point.”

As a result, the bank doesn’t expect an increase in the Bank of Canada’s key overnight lending rate until at least this summer.

However, the effect on the Canadian economy will be minimal and short-lived as Canada stands to benefit from higher oil prices and Japan’s rebuilding process, Paul Taylor, chief investment officer at BMO Harris Private Banking, said during a conference call Thursday.

There will be a short-term impact on the financial sector— where Canadian insurer Manulife (TSX:MFC) has taken a beating due to its exposure in Japan — as well as uranium producers, as governments around the world begins to rethink the use of nuclear energy.

However, many Canadian businesses, including lumber producers and engineering and construction firms, will see an increase in business during the rebuilding phase, he added.

“The Canadian economic impact, we expect to be quite limited,” he said, adding that trade between Canada and Japan doesn’t compare with Canada-U.S. trade.

“For us, it’s only the secondary impact of Japan’s effect on U.S. economic activity that were focused on,” he said.

Meanwhile, his colleague, Jack Ablin, chief investment officer at U.S.-based subsidiary Harris Private Bank, said he was knocking down his U.S. growth forecast by a percentage point because of the crisis in Japan.

Japan’s earthquake and nuclear disasters will likely reduce manufacturing output for several months, potentially creating shortages that could disrupt North American producers, such as automakers, that rely on Japan for parts.

General Motors said Thursday that it was suspending production at its Shreveport assembly plant in Louisiana next week due to a parts shortage resulting from the crisis in Japan, but so far its Canadian plants are operating normally, a spokesman said.

CIBC also cut its growth forecast for the U.S. growth by a tenth of a point, to 2.7 per cent, mostly due to the negative impact of oil price hikes and government spending cutbacks.

Among other things, CIBC senior economist Peter Buchanan noted in a report that surging gasoline prices raise questions about whether U.S. consumer spending can continue its increasingly healthy pace.

However, Buchanan believes that oil would have to reach US$160 a barrel to derail the economic recovery, a scenario he does not see playing out. After plunging in recent days, crude jumped $3.44 to settle at US$101.42 a barrel Thursday on the New York Mercantile Exchange.

“Oil has risen dramatically before, only to crash back to earth, and there are still good reasons why history may repeat itself,” Buchanan said.

Inventories in industrial countries were adequate when the Middle Eastern political pot began bubbling and OPEC, while it likes firm prices, has no interest in recession-inducing ones that crush demand.

Since Canada is one of the world’s top dozen net exporters of oil and oil products, higher crude prices are a modest plus for the economy in the near term.

But beyond four to five quarters, the drag on the economies of its major trading partners means the bad more than cancels the good, and the level of GDP is actually lower than it would otherwise have been.

While Canada is not immune to issues facing the global economy, the report forecasts real GDP growth of four per cent for the country in the first quarter of 2011 and Buchanan expects the Bank of Canada to hike its trend-setting overnight rate as early as May. http://ca.news.yahoo.com/canadian-gdp-grow-pace-four-per-cent-first-20110317-061726-639.html

Important bank announcement coming!

One of the major banks announced that as of March 16^th they’re going to make it easier for  people who rely on alternative courses of income to get approved for a mortgage.

This shows us that the banks are feeling more confident in Canadian consumers and seeing that the channels they’re getting business from (ie, mortgage brokers) are doing the due diligence required to ensure these borrowers are of the quality the banks expect.

We expect other banks to follow suit throughout the week.

One thing that will never change is this will be a yo-yo that will continue for decades, but for now it will give the leading lenders a competitive advantage, and maybe some room to promote further change. As always, borrower beware.  

The pendulum has swung to each side over the past three years and keeping on top of it makes all the difference in a borrower’s financial freedom.

As always, if you have any questions, I’m here to help!

Angela Calla, AMP

Dominion Lending Centres-Angela Calla

604-802-3983

acalla@dominionlending.ca

http://www.globaltvbc.com/video/index.html?releasePID=QNa6QANW1CD6cWgDiPWWFh4cG2txGvOo

Enjoy the segment, it’s approx 2 minutes

Angela

OTTAWA – Canada’s economy was surprisingly hot at the end of last year, setting the stage for another fast start in 2011 that bodes well for jobs and other economic indicators.

The economy grew a better than expected 3.3 per cent in the last quarter of 2010, a full point stronger than the Bank of Canada had predicted a little over a month ago and faster than the 2.8 per cent advance posted south of the border.

Adding to the good news, Statistics Canada revised upwards the results of the third quarter to 1.8 per cent from one per cent, enabling the country to finish the year with an overall 3.1 per cent increase in gross domestic product.

And December’s also better than expected 0.5 per cent spurt provided a strong hand-off to Q1 performance this year, economists noted.

“On balance, this report stands up to careful scrutiny in signalling greater than expected breadth of growth in the Canadian economy,” said Derek Holt, vice-president of economics with Scotia Capital.

There were three main ingredients to the strong quarter. Exports surged 17 per cent annualized, helping bring along manufacturing, which surprised on the upside, and consumer spending, which jumped 4.9 per cent.

Bank of Montreal economist Douglas Porter said the strong hand-off points to the first quarter of this year coming in even better, at around 3.5 per cent.

Porter and his forecasting group have now joined the Royal Bank and Merrill Lynch in projecting three-plus growth for all of 2011, well above the Bank of Canada’s 2.4 call.

That might get Bank of Canada governor Mark Carney, whose forecasts now appear overly dour, thinking about interest rate hikes sooner rather than later.

“We had been looking for the bank to wait until their July meeting before restarting the rate-hike process … but if there is a surprise to our rate call, it now looks like the bank would go earlier, rather than wait longer,” Porter said.

The flashing red light confronting Carney is that any rate increases while the U.S. Federal Reserves stays on the sidelines will likely light a fire under the already hot loonie. And that could snuff out the strongest performer in the economy — exports to countries with falling currencies like the United States.

The dollar has traded over par with the greenback for weeks and got another boost by the GDP result Monday, gaining about half a cent to 102.63 US cents in mid-morning trading.

Carney’s reaction to the strong numbers will be known Tuesday morning when he will deliver a short analysis along with his decision on interest rates.

Economists and the markets expect the central bank to keep its trendsetting overnight rate at one per cent, where it has been since last September.

The data was also good news for the federal government as nominal growth — which is most directly tied to tax revenues, particularly on the corporate side — jumped by 7.2 per cent on the wealth effects of high commodity prices.

Pre-tax corporate profits came in at a stratospheric 41 per cent annualized, and even wages and salaries were a strong 5.7 per cent.

But there were downside surprises in the GDP report as well. Inventory buildup fell, not usual during a recovery, and business investment in new machinery and equipment was basically flat, although the previous three quarters had been strong.