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Posts tagged ‘affordability’

Bank Of Canada Slashes Key Interest Rate by 0.5%


April 22nd, 2008

In keeping with its mandate to keep inflation in Canada at the 2% target, the Bank of Canada todayBank Of Canada announced that it was lowering its overnight lending rate by 50 basis points (one-half per cent) to 3%. Citing deepening economic woes in the U.S., tightening credit conditions, and overall instability in the world economy, it’s hoped that this economic stimulus, along with strong domestic demand and high employment, will help keep Canada’s economy performing well.

The Bank forecasts that Canada’s economy will grow by 1.4% this year, 2.4% in 2009, and 3.3% in 2010 when the Bank also projects that inflation will reach the target 2%. The overnight rate has been lowered 150 basis points (1.5%) since December of last year.

The press release hinted that this may be the last of the rate cuts for a while – the timing of any further monetary stimulus will depend on global conditions and their effect on Canadian inflation.

This news is positive to anyone on a variable-rate mortgage, which is tied to the central bank rate. Fixed-rate mortgages are slower to come down, but should fall into line with the rate cut. With more and more choices on the market than in recent years, buyers are in a good position to extend their purchasing power and get into their perfect place.

The Bank’s next meeting to discuss interest rates is June 10, 2008.

Read the full Bank Of Canada press release here.

Tim Ayres

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Bank Of Canada Cuts Interest Rate – Mar 4, 2008


Key rate cut by 1/2 per cent

Citing deepening woes in the U.S. economy that could further affect the Canadian and world economies, the Bank of Canada has slashed its key overnight lending rate by one-half per cent to 3 1/2 per cent. The Bank says that further economic stimulus would likely be required in the near term to keep inflation at the target of two per cent per year over the medium term. This should result in a reduction in mortgage rates by financial institutions.

On another note, Canada’s economy performed pretty much as expected through the four quarters of 2007, finishing above its capacity for that year.

The Bank of Canada Press Release:

Bank of Canada lowers overnight rate target by 1/2 percentage point to 3 1/2 per cent

OTTAWA – The Bank of Canada today announced that it is lowering its target for the overnight rate by one-half of one percentage point to 3 1/2 per cent. The operating band for the overnight rate is correspondingly lowered, and the Bank Rate is now 3 3/4 per cent.

Information received since the January Monetary Policy Report Update (MPRU) indicates that economic growth in Canada through the four quarters of 2007 was broadly in line with expectations. Domestic demand has remained buoyant, as rising commodity prices and high employment have continued to support income growth. Canada’s net exports weakened further in the fourth quarter, reflecting the slowing U.S. economy and the impact of the past appreciation of the Canadian dollar. Overall, the Canadian economy remained above its production capacity at year-end. Core and total CPI inflation – at 1.4 per cent and 2.2 per cent, respectively, in January – have also been consistent with the Bank’s expectations.

At the same time, there are clear signs that the U.S. economy is likely to experience a deeper and more prolonged slowdown than had been projected in January. This stems from further weakening in the residential housing market, which is adversely affecting other sectors of the U.S. economy and contributing to further tightening in credit conditions. The deterioration in economic and financial conditions in the United States can be expected to have significant spillover effects on the global economy. These developments suggest that important downside risks to Canada’s economic outlook that were identified in the MPRU are materializing and, in some respects, intensifying.

The Bank now judges that the balance of risks around its January projection for inflation has clearly shifted to the downside, and, as a result, the Bank is lowering the target for the overnight rate. Further monetary stimulus is likely to be required in the near term to keep aggregate supply and demand in balance and to achieve the 2 per cent inflation target over the medium term.

The Bank will publish a new projection for the economy and inflation, including risks to the projection, in the Monetary Policy Report on 24 April 2008.

Information note:

The Bank of Canada’s next scheduled date for announcing the overnight rate target is 22 April 2008.

See all posts about interest rates here.

Tim Ayres

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Bank Of Canada Cuts Interest Rate – Jan 22, 2008

As expected, Bank of Canada cuts the key lending rate by 1/4 per cent.

The Bank of Canada this morning announced its expected 1/4% cut in Canada’s mortgage-rate Money-money-money-monnnnnaaaaay!setting overnight lending rate. The anticipated move is made to ensure that the Canadian economy continues to grow, despite continuing struggles in the world economy dealing with the fallout of the credit crisis brought on by the housing meltdown in the United States. Borrowers in Canada can expect their lending institutions to lower their mortgage rates in the coming weeks, and variable rate mortgages should decrease as well.

There was a highly-sensationalized story reported last week that the major banks may not follow the Bank Of Canada’s monetary policy and would instead keep rates where they are, thereby increasing profitability in the wake of tightening credit availability. This is unlikely, and was denied by the major banks the following day. All it would take would be one institution to offer the lower rate, and competition being what it is, the other banks would be forced into line.

This is good news for homeowners and potential buyers. The outlook for inflation is below the 2% target rate, and is expected to stay this way until the end of 2009. The increased competition in retail sales brought on by price cuts due to the high Canadian dollar has slowed inflation to the point where it will be below 1.5% by mid year. To stimulate aggregate demand (overall spending in the economy) to return inflation to the target 2%, the Bank will likely continue to adjust downward the interest rate over the coming year.

With housing price growth expected to cool this year, and interest rates remaining stable or lowering, the erosion of housing affordability we have witnessed over the past few years should slow somewhat.

The full Bank of Canada news release can be found here.

The US Federal Reserve, in charge of setting monetary policy for our southern cousins, has meanwhile slashed rates 3/4%, the biggest cut in 23 years in an effort to ward off the threat of a U.S. recession.

Tim Ayres

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Victoria BC Real Estate Board MLS® Statistics – October 2007

I don’t think you’d find a real estate professional in the Victoria area who’d tell you they expected 2007 to outperform 2006. Everyone said the market was plateauing, that we should expect properties to sit on the market for months, and see price reductions left, right and center. The doomsday prophets predicted the credit problems in the United States would cause the so-called bubble to burst, and that sellers would be scrambling to offload their burdens. But, as the MLS® statistics show month after month, the market continues to surprise us. Here is the latest MLS® statistics report from the Victoria Real Estate Board.

Real Estate Sales Soar in October

November 1, 2007

Sales of homes and other properties in the Greater Victoria area soared 20 percent in October compared to the same month a year ago. There were 708 sales through the Victoria Real Estate Board’s Multiple Listing Service® (MLS®) in October, up from the 590 sales in the same month a year ago. There were 632 sales in September of this year. Meantime, prices for single family homes moderated somewhat while prices for condominiums and townhomes showed little change.

Victoria Real Estate Board President, Bev McIvor, says the strong sales and stable prices show continued consumer confidence in the market. “Sales last month were the highest for October since 2003 and so far this year sales are running nearly 13 per cent higher than the first 10 months of 2006.” McIvor added that it’s normal for overall prices to fluctuate on a month-to-month basis depending on the properties that sell in a given month. “While the average price of single family homes moderated slightly last month, the overall average price so far this year is over seven percent higher than at the end of last year.”

The average price of single family homes sold in October was $556,222; the six-month average for single family homes was $570,454. The median price was considerably lower at $495,000. The average price of all condominiums sold in October was $343,334; the average for the last six months was $321,993. The median was again lower at $291,000. The average price of all townhomes sold last month was $407,031; the six month average was $404,163. The median price was $369,950.

MLS® sales last month included 375 single family homes, 196 condominiums, 79 townhomes and 22 manufactured homes.

There were 3,311 properties listed for sale on the MLS® system at the end of last month, down slightly from the 3,426 properties in the same month a year ago.

Summary Report and Graphs

Monthly Sales Summary
Average Selling Price Graphs
Active Listings, New Listings and Sales Graphs

-Tim Ayres