Info your banks would prefer you didn’t know

What your Bank doesn’t want you to know

Monday, 28 February 2011 22:47
A list of some pertinent information your banks would prefer you didn’t know:

  • An extensive study recently conducted by the Bank of Canada (BoC) concluded that Canadians with the best mortgage rates tend to be those who use brokers. They found that brokers significantly lower “search costs” and one average reduce rates by 17.5 basis points. That represents $1,670 worth of savings on interest on a $200,000 mortgage over 5 years.
  • In another recent study by the Bank of Canada it was found that banks are slow to pass on cuts in interest rates onto their customers and of the 6 biggest banks in Canada “five of the six largest banks adjust rates upward more quickly when there are upward cost pressures than downward when costs fall”.
  • In a report done following the announcement of the Bank of Canada’s decision to lower amortization and to limit Canadians ability to refinance Moody’s concluded that these reforms would be “credit positive for Canada’s banking system and its bondholders.” The report goes on to forewarn that these new measures will most likely see an increase in unsecured lines of credit, a facet of banking which generates higher interest rates and therefore far greater profits for the banks.
  • A warning to our customers: TD and some other banks are now offering the opportunity to register the collateral in their property for an amount of up to 125% of the approved principal amount of the mortgage. While this may seem uncharacteristic altruistic on the banks part clients should be ware that taking such an action would most likely leave you unable to refinance your mortgage or shop your mortgage around with other lenders. This gives TD and the other banks an immense advantage when it comes to negotiating a refinance.

ALBERTA HOUSING MARKET MOST AFFORDABLE IN CANADA: RBC ECONOMICS

TORONTO, Feb. 24 /CNW/ – Alberta’s housing market officially became the most affordable in Canada in the fourth quarter of 2010, according to the latest Housing Trends and Affordability report released today by RBC.

Thanks to lower mortgage rates and further softening in home prices, RBC’s Affordability Measures for Alberta fell yet again in the fourth quarter, by 1.0 to 2.4 percentage points, extending their long strings of declines since late 2007.

“Alberta saw a notable downswing in demand for housing last spring and early summer, giving buyers the upper hand and pushing prices down,” said Robert Hogue, senior economist, RBC. “Alberta’s reign as the most affordable housing market may be short lived, however. Demand has shown more vigour in recent months, alongside a provincial economy that is gaining more traction, and Alberta’s market has become better balanced. We expect that this will stem price declines this year and erase a potential offset to the negative effect of a projected rise in interest rates on affordability.”

The RBC Housing Affordability Measures for Alberta, which capture the province’s proportion of pre-tax household income needed to service the costs of owning a home, eased across all housing categories in the fourth quarter. The measure for the benchmark detached bungalow moved down to 30.9 per cent (a drop of 2.4 percentage points from the previous quarter), the standard condominium to 20.3 per cent (down 1.0 percentage points) and the standard two-storey home to 34.4 per cent (down 2.2 percentage points).

The RBC report notes that gradual and steady improvements in Calgary’s housing demand have recently started to bolster market conditions as home resales increased appreciably since June which helped trim down the slack that kept buyers in the driver’s seat.

A return to more balanced market conditions in Calgary, however, did not succeed in reversing the tide in the fourth quarter of 2010 as home prices continued to weaken for the most part in the fourth quarter. Nonetheless, this contributed to further material improvement in affordability. The RBC Measures for Calgary again fell the most among Canada’s largest urban markets, declining by 0.9 to 3.1 percentage points.

“Affordability in the Calgary area is now the best in almost six years and this attractive level of affordability will support further increases in demand as the local economy picks up steam in the year ahead,” added Hogue.

Elsewhere in the country, a majority of provinces saw improvements in affordability in the fourth quarter. Only the standard two-storey benchmark became less affordable in Ontario and Quebec, as did the standard condominium apartment in Quebec and the Atlantic region.

The RBC Housing Affordability Measure, which has been compiled since 1985, is based on the costs of owning a detached bungalow, a reasonable property benchmark for the housing market in Canada. Alternative housing types are also presented including a standard two-storey home and a standard condominium. The higher the reading, the more costly it is to afford a home. For example, an affordability reading of 50 per cent means that homeownership costs, including mortgage payments, utilities and property taxes, take up 50 per cent of a typical household’s monthly pre-tax income.

CANADIAN HOMEOWNERSHIP COSTS EASE FOR SECOND CONSECUTIVE QUARTER: RBC ECONOMICS

This is great news.

TORONTO, Feb. 24 /CNW/ – Canada’s housing affordability continued to improve in the fourth quarter of 2010, thanks in part to slight decreases in five-year fixed mortgage rates and minimal home price appreciation across the country, according to the latest Housing Trends and Affordability report released today by RBC Economics Research.

“Some of the stress that had been building in the housing market between 2009 and the first half of 2010 has been relieved, but tensions persist overall and the recent improvement in affordability is likely to be short-lived,” said Robert Hogue, senior economist, RBC. “We expect that the Bank of Canada will resume its rate hike campaign this spring and with borrowing costs set to climb further in the next two years, housing affordability will erode across the country. That said, we don’t expect this to derail the housing market because of rising household income and job creation from the sustained economic recovery.”

The RBC Housing Affordability Measure captures the proportion of pre-tax household income needed to service the costs of owning a specified category of home. During the fourth quarter of 2010, measures at the national level fell between 0.4 and 0.8 percentage points across the housing types tracked by RBC (a decrease represents an improvement in affordability).

The detached bungalow benchmark measure eased by 0.8 of a percentage point to 39.9 per cent, the standard condominium measure declined by 0.4 of a percentage point to 27.6 per cent and the standard two-storey home decreased 0.4 percentage points to 46.0 per cent.

“We expect affordability measures will rise gradually in the next three years or so while monetary policy is readjusted, but will land softly thereafter once interest rates stabilize at higher levels,” added Hogue. “This pattern would be consistent with moderate yet sustained stress on Canada’s housing market. Overall, the era of rapid home price appreciation of the past 10 years has likely run its course and we believe that Canada has entered a period of very modest increases.”

A majority of provinces saw improvements in affordability in the fourth quarter, most notably in Alberta where falling home prices once again contributed to lower the bar for affording a home. Only the standard two-storey benchmark became less affordable in Ontario and Quebec, as did the standard condominium apartment in Quebec and the Atlantic region.

RBC’s Housing Affordability Measure for a detached bungalow in Canada’s largest cities is as follows: Vancouver 68.7 per cent (down 0.4 percentage points from the last quarter), Toronto 46.8 per cent (down 0.5 percentage points), Montreal 41.3 per cent (down 0.4 percentage points), Ottawa 38.7 per cent (up 0.5 percentage points), Calgary 34.9 per cent (down 3.1 percentage points) and Edmonton 31.0 per cent (down 2.4 percentage points).

The RBC Housing Affordability Measure, which has been compiled since 1985, is based on the costs of owning a detached bungalow, a reasonable property benchmark for the housing market in Canada. Alternative housing types are also presented including a standard two-storey home and a standard condominium. The higher the reading, the more costly it is to afford a home. For example, an affordability reading of 50 per cent means that homeownership costs, including mortgage payments, utilities and property taxes, take up 50 per cent of a typical household’s monthly pre-tax income.

Highlights from across Canada:

  • British Columbia: Buying a home in B.C. became slightly more affordable in the fourth quarter of 2010, due primarily to a small drop in mortgage rates. After experiencing some declines in the previous quarter, home prices rose modestly for most housing categories; condominium apartments bucked the trend, however, and depreciated slightly. Prices were supported by a tightening in market conditions with home resales picking up smartly following substantial cooling in the spring and summer that saw sellers lose their edge in setting property values. Demand and supply in the province are judged to be quite balanced at this point. RBC’s Affordability Measures fell between 0.8 and 1.0 percentage points in the fourth quarter which came on the heels of much more substantial drops (1.7 to 4.8 percentage points) in the third quarter. Notwithstanding these declines, affordability remains poor and will weigh on housing demand going forward.
  • Alberta: Alberta officially became the most affordable provincial market in the country in the fourth quarter, according to the RBC Measures which fell once again by 1.0 to 2.4 percentage points, extending their declines since late-2007. In addition to the lower mortgage rates, the further depreciation of home prices contributed to lowering homeownership costs. Property values were negatively affected by a substantial downswing in demand in the spring and early summer, which put buyers in the drivers’ seat. The significant improvement in affordability is near the end of its line, however, as demand has shown more vigour in recent months – alongside a provincial economy that is gaining more traction – and the market has become better balanced. RBC expects that this will stem price declines this year, thereby removing a potential offset to the negative effect of projected rise in interest rates on affordability.

ORES Real Estate Index For January 2011

COMMENT: This is a very cool index I found that compares most investments to real estate. It is interesting right now as gold is at an all time high, oil is back up and Canadian real estate has held most of its value and is coming back.

Wednesday, 16 February 2011 10:09
Brian Madigan LL.B.

Here is the “ORES REAL ESTATE INDEX” which tracks the average resale prices of single family homes and condominiums in the Greater Toronto Area (GTA). It also tracks certain benchmark comparisons such as the price of oil and gold, as well as the Consumer Price Index.

In addition, the stock market indices for Toronto, and the three largest US markets are also compared.

For ease of comparison, everything we look at is worth 100 points on the Index as of 1 January 2005. That time period compares favourably with the five year average used as a standard benchmark comparison in the mutual fund industry.

As of 31 January 2011, here is the Index representing average prices:

Real Estate

132.15…..GTA single family homes
130.87…..All condos in GTA
139.34…..Downtown Central Condos
122.53…..East condos
131.35…..West condos
124.97…..North condos

Other market comparisons

310.23…..gold (price per ounce)
206.98…..oil (price per barrel)
147.24…..TSX index
132.15…..ORES Index single family homes
111.59 …..CPI index
130.92…..NASDAQ index
113.37……Dow Jones index
108.88……S&P Index

Using the Index

Just a quick note on reading the information. Have a look at the ORES Index for Real Estate (single family homes). As of the end of January, the index stood at 132.15. That’s a 32.15% increase in 73 months. That means the increase is 0.404% monthly, or it could also be expressed as 5.28% annually. The performance here is shown without annual compounding for the sake of simplicity.

The other statistics are reported in a similar fashion for the ease of comparison.

Observations (on the Index)

As we use index, there are several notable comments:
• Commodity prices are just commodity prices
• There is no other “extra return” for commodities
• The same is true for the CPI
• The CPI is a benchmark to see whether you are keeping pace with inflation, that number is 111.59 (It has been modest and appears under control)
• For a realistic performance goal, you should aim for CPI plus 3.5% annually
• Stocks provide dividends in cash or extra stock. This return is additional to that shown in the stock market indices
• The stock market Indexes only measure the survivors. So, in 2009, both GM and Chrysler would have been dropped due to the bankruptcies
• If you held GM and Chrysler, you lost everything, but two new companies moved in to replace them in the Indexes
• Real estate offers a return in terms of occupancy. You can rent out the property and receive income, or occupy the property and enjoy it yourself
• Actually, I should have mentioned that if you held gold bullion, you could sit in a room, count it, and enjoy that experience too. I’m not quite sure how to measure that. You’ll have to ask King Midas or Goldfinger!

Comparative Observations Using the New Index
• Gold was the best performer, but reached its peak of 324.61 earlier In January
• Oil was the most volatile, (yes it dropped in half over our measurement period)
• Real estate was the most stable, with solid predictable returns at about 5.28% annually
• single family homes continue to show a better overall return than condos
• Our own stock market posted reasonable gains, and is now ahead of single family homes over the measurement period, however, don’t forget that the TSX is still well off its highs
• All three US stock market indicators now show positive numbers.
Conclusion

For steady, predictable, measured gains pick real estate. It’s a solid performer with lower risk (less volatility) and generally moving in a positive direction.

And remember, when it comes to real estate, it’s never “wiped out” completely, like GM or Chrysler stock. So, unless you’re sitting on the edge of a tsunami, you’ll still own something when the storm is over.

For a benchmark of success, there’s 1,000 years of history to point to a rate of return in real estate being about the equivalent of 5% per annum, simple interest (non-compounded). That means that real estate doubles in value every 20 years. There are a lot of companies (now bankrupt, including CanWest Global, and many US Banks) that would have been happy with that return.

‘Window closing’ on ultra-low mortgage rates

Tim Shufelt, Financial Post · Monday, Feb. 7, 2011

Amid the noise of volatile-but-improving economic indicators, mortgage rate hikes are likely to repeat like a chorus in the coming months.

Canadian banks are raising interest rates on mortgages, marking the beginning of a trend as they correlate with rising bond yields and expected monetary tightening.

That’s making a strong case for borrowers to lock into fixed rates before it’s too late, said Benjamin Tal, deputy chief economist with CIBC World Markets. “The window is closing.”

TD Canada Trust and CIBC both announced Monday hikes to their residential mortgage rates, the first increases since changes to the rules of borrowing were announced by the federal government last month. The other big banks where expected to follow the moves shortly.

Effective Feb. 8, the interest rate on the banks’ benchmark five-year closed fixed rate mortgage will increase 25 basis points to 5.44%. The country’s other major lenders are expected to soon follow suit.

Toronto mortgage broker Paula Roberts said rising borrowing costs will compel more of her clients to abandon ultra-low variable rates in favour of higher, fixed-rate mortgages.

That can be a tough decision for borrowers to accept higher payments, but not one that should strain a mortgagee’s finances, she said.

“If you can’t afford [your payments] … that’s a problem,” Ms. Roberts said. “That’s why the government has changed the rules.”

In two stages over the past year the federal government announced changes to the conditions of mortgage lending — shortening the maximum amortization from 35 years to 30 years and requiring borrowers to qualify for a fixed-rate plan, even if they are opting for a variable rate.

Many who only qualify under the old rules, however, will try to secure mortgages before the shorter maximum amortization periods come into effect next month, Ms. Roberts said.

“There are going to be a lot of people that will enter into their agreements by March 18.”

Much of the momentum in mortgage rates can be attributed to a bond selloff and rising yields across the board. That effect is partly a reflection of building global inflationary pressures as well as a global economy that is proving more robust than expected.

“In my opinion, the bond market will not be the place to be over the next six months, and if that’s the case, you will see mortgage rates continue to rise,” Mr. Tal said.

In addition, anticipation of increases to the Bank of Canada’s benchmark lending rates is building, also contributing to rising yields, which puts pressure on fixed-income mortgages.

If there was any lingering doubt that the Bank will soon raise rates, last week’s jobs report erased them. The report showed Canada added four times more jobs than expected in January.

“[It] creates a fairly powerful story for the Bank of Canada, which is clearly concerned on the domestic front,” said Camilla Sutton, chief currency strategist at the Bank of Nova Scotia. “I think there’s a material change.”

So do investors. The probability that the central bank will boost its key policy rate by May, as measured by overnight index swaps, jumped to almost 75% after the jobs data. http://www.financialpost.com/news/Window+closing+ultra+mortgage+rates/4239243/story.html#ixzz1DMwQzyWP

ALBERTA’S ECONOMY SET FOR STRONG GROWTH IN 2011 WITH BOOST FROM ENERGY SECTOR: RBC ECONOMICS

Comment – this is some of the data that was used in my MARKet Update / Buyers Report. Feel free to download it for free on my site here: http://markherman.ca/Rate2.ubr

ALBERTA’S ECONOMY SET FOR STRONG GROWTH IN 2011 WITH BOOST FROM ENERGY SECTOR: RBC ECONOMICS

TORONTO, Dec. 15 /CNW/ – Alberta’s economy continues to recover from its severe recession with real GDP set to grow 3.4 per cent in 2010 and then galloping to a solid 4.3 per cent in 2011, according to the latest Provincial Outlook report from RBC Economics. In 2011, RBC projects that Alberta’s economic growth will be second only to Saskatchewan, representing the fastest growth in the province since 2006.

Alberta’s strong forecast is owed to improvements in a number of areas, particularly the booming energy sector and increased job creation since spring which helped to bring down the stubbornly high unemployment rate.

“Improvements in the employment market helped reverse the net migration outflow to other provinces that earlier slowed population growth to the lowest rate in 15 years,” said Craig Wright, senior vice-president and chief economist, RBC. “These are the kinds of turnarounds that will spread the recovery more widely throughout Alberta’s economy next year.”

The RBC report notes Alberta’s employment sector is expected to lead the country with a rise of 2.3 per cent in 2011, up significantly from a scant 0.5 per cent in 2010. The anticipated increase represents the creation of 37,000 jobs and will usher in the highest total of new employment opportunities since 2007 which should ultimately contribute to a boost in population growth.

“With interest in developing Alberta’s oil sands growing ever higher, the gush of capital spending on megaprojects is expected to continue next year and beyond. This will pump tremendous activity into the provincial economy and act as a catalyst for both faster job growth and stronger migration from outside the province,” added Wright.

According to the RBC Economics Provincial Outlook, the impact of Alberta’s strengthening demographics will be especially positive for consumer spending in 2011 as retail sales are expected to soar to a rate of 5.6 per cent, higher than any other province. This, along with the 5.1 per cent increase in consumer spending expected this year, will go along way toward reversing the massive 8.4 per cent decline experienced in 2009.

Looking ahead to 2012, the rising tide of energy-related spending and the expanding of non-conventional oil production will continue to exert powerful lifting forces throughout the Alberta economy. RBC forecasts the province will sustain a solid pace of growth with GDP of 3.8 per cent which will keep the province near the top of Canada’s growth rankings.

The RBC Economics Provincial Outlook assesses the provinces according to economic growth, employment growth, unemployment rates, retail sales, housing stars and consumer price indexes.

Canadians Better Off, Even If They Don’t Feel It

Comment – Politics aside, we are coming off of the worst economic recession of our lifetimes. Numbers below show us back to where we were before the recession started. Governments debt loads are supposed to be high, government spending was supposed to kick in to keep us going – and it did.

Canadians Better Off, Even If They Don’t Feel It

John Ivison, National Post ·

Jan. 23 marks the fifth anniversary of Stephen Harper’s 2006 election victory and in early February, he will pass Lester B. Pearson’s time in office to become Canada’s 11th longest-serving prime minister. As Mr. Harper told Postmedia News this week, it has been a roller-coaster ride: “Some days it feels like five months, and other days it seems like 50 years.”

The five-year milestone has presented the Liberal leader, Michael Ignatieff, with his latest electoral gambit — to ask middle-class Canadian families whether they are better off after half a decade of the Harper government?

In fact, by almost every pocketbook metric, Canadian families are better off than they were five years ago –even if they don’t feel it.

The new strategy emerged from research carried out by the Liberals’ pollster, Michael Marzolini, as part of his firm Pollara’s annual nationwide poll of Canadians’ personal financial expectations. He found a new sense of caution and retrenchment, after optimistic expectations for 2010 were not met.

According to the Pollara poll, middle-class Canadians feel themselves under siege, with four in 10 claiming their incomes are failing to keep pace with the cost of living. They are anxious about their retirement, family debt and the value of their investments. Many Canadians believe every step forward they make is being hampered by assaults on their incomes such as new taxes and user fees. Ominously for the government, they appear less than impressed about claims Canada is doing better than its international competitors — the economy may be improving but they feel their own situation is not.

Mr. Ignatieff has leapt on the survey’s findings on his current 20-event, 11-ridings winter tour, making the claim that Canadians are worse off and the economy is weaker.

He is gambling that voters look at their own situation and calculate whether they have done well over the past five years. If the answer is yes, they will vote for the party they voted for before but, if not, he hopes they can be persuaded to switch.

Mr. Ignatieff’s central contention is that Canadians’ standard of living — as measured by GDP per person–has fallen 1.3% since the Harper government came to power.

The only problem with this for the Liberal leader is that it isn’t true — real GDP per capita did fall between 2005 and 2009, the trough of the recession, but has since recovered. If you annualize the first three quarters of 2010, the numbers show real GDP per capita is up

0.2% over the 2005 figure.

Other indicators are similarly positive.

Average hourly wages have outpaced inflation, especially for men, who now earn $4 an hour more than they did at the end of 2005.

The fiscal and monetary response to the recession has created one very real problem identified by Mr. Ignatieff — an extremely high level of indebtedness. Encouraged by cheap interest rates, Canadians now owe $1.50 for every dollar of disposable income, up from $1.08 in 2006.

Yet, national net worth per capita, which measures the health of assets like homes and investments, stood at a record high of $179,000 in the third quarter of 2010, up from $155,000 five years ago. Even at the bottom end of the socioeconomic ladder, the number of children living in low-income families fell by 250,000 between 2003 and 2008.

Retirement income is another leading concern raised by the Liberals but many more Canadians are now members of registered retirement plans than in 2005.

And the feeling that the tax burden is growing is also illusory, at least according to the Fraser Institute’s Tax Freedom Day, the day on which the average Canadian family has earned enough money to pay all taxes imposed on them by three layers of government. It advanced to June 5 in 2010, from June 23 in 2005.

These bald statistics don’t tell the whole story, of course. In the intervening years, there was a painful recession that saw unemployment spike at 8.7% in August 2009 (it is now sitting at 7.6%, still higher than the 6.8% in 2005).

Canadians remain anxious. According to Mr. Marzolini’s research, two-thirds of the population thinks we’re still in recession.

Yet, crucially, voters do not seem to blame the federal government, perhaps accepting that, if things are not noticeably better than they were five years ago, they could have been immeasurably worse.

Non-Conservatives can claim with some justification that the Harper government’s record of achievement is pretty penny ante when compared with other five-year-old administrations.

But the picture improves when you consider what didn’t happen. Mr. Harper is an incrementalist who agrees with Canada’s longest-serving prime minister, William Lyon Mackenzie King, that “it’s what we prevent, rather than what we do, that counts in government.”

The pressures of power have forced Mr. Harper, by his own admission, to make compromises he never thought he would have to make. “We spent the first three years of our government in a situation where people were saying, ‘Why don’t you take more risks? Why don’t you make more grandiose commitments? Why don’t you have a bigger more ambitious agenda on anything?’ And then all of a sudden, we’re spending the next two years dealing with a crash in the global economy and trying to operate a situation where we’re trying to protect what everybody has. So things just change constantly and you do have to be adaptable,” he told Postmedia’s Mark Kennedy this week.

There appears to be some appreciation that the Conservatives have provided solid, if stolid, government through the recession.

An Ipsos Reid poll before Christmas suggested six in 10 Canadians believe the political process is operating well and there is no need for an election. They may not vote Conservative, but they are not so disgruntled they are demanding change — at least not to the extent they have coalesced around Mr. Ignatieff or any of the other opposition leaders. This bodes well for Mr. Harper, sincegovernmentstraditionally find themselves in real trouble when the time-for-change number rises above 60%.

“Every election comes down to that — continuity or change,” said Darrell Bricker, president of Ipsos Public Affairs. “Mr. Ignatieff is trying to increase the desire for change that is a pre-condition [for a Liberal government]. But Canadians are not overwhelmingly concerned about the economy and even if they become more concerned, his opponent is leading him on the issue by 20 points.”

The Liberals insist that stress about the future has created enough volatility to give them a fighting chance. “Perceived reality is often a self-fulfilling prophesy,” said Mr. Marzolini, the Liberal pollster, as he unveiled his New Year’s poll to the Economic Club of Canada.

Mr. Ignatieff had best hope so, otherwise Mr. Harper will pass both R.B. Bennett (five years and 77 days) and John Diefenbaker (five years and 305 days) to become Canada’s ninth-longest serving prime minister before the end of this year.

Intra-provincial migration at 20-year high

Comment: This is exactly what started the boom in Calgary in 2006 when 25,000 people moved into town from all over Canada. This should drive the rental market vacancy rate down and increase rental prices. Then it will be more affordable to buy and the slack in the market will slowly get taken up; supporting home prices.

Good news for everyone in the housing industry and for home owners.

—- Nicolas Van Praet, Financial Post · Thursday, Jan. 27, 2011

MONTREAL — The number of Canadians moving to another province has punched to a high not seen in 20 years as people pack up in search of better jobs and salaries elsewhere.

Roughly 337,000 Canadians were on the move in 2010, says a report on interprovincial migration published Thursday by TD Economics. That’s 45,000 more than the year before and the most since the late 1980s. It also represents the largest share of the overall population since 1998.

“It’s a good sign in the sense that whenever you see that kind of movement, it’s an expression of a labour market that’s healing after a pretty severe recession,” said TD senior economist Pascal Gauthier, who wrote the study. “People are either returning home or moving to areas that didn’t have employment before. For those that are already employed, they’re finding potentially better prospects.”

Interprovincial migration matters because when there is a net movement of people to higher-employment and higher-productivity areas, that generates net economic output gains on a national basis. It’s also crucial for businesses because people often make big-ticket purchases when they move, which can have a significant impact on local housing and retail markets.

Canada’s situation lies in stark contrast with the United States, where census data show long-distance moves across states fell last year to the lowest level since the government began tracking them in 1948. Americans used to be a nation of big movers, with as many as one in five relocating for work every year in the 1950s. Now, experts are debating why they’ve become a nation of “hunkered-down homebodies,” as the New York Times put it.

Richard Florida, director of the Martin Prosperity Institute at the University of Toronto, says the United States is experiencing a new kind of class divide now between “mobile” people who have the resources and flexibility to pursue economic opportunity, and “stuck” citizens who are tied to places with weaker economies.

He argues the U.S. housing crisis is a big factor slowing mobility down. When the housing bubble popped, it left millions of Americans unable to sell their homes. “It’s bitterly ironic that housing, for so many Americans, has gone from being a cornerstone of their American dream to being a burden,” he wrote in a recent opinion piece.

Mr. Gauthier agrees that the housing crash is partly to blame for keeping Americans put. “There’s such a glut of supply that it’s just difficult to sell your house. In Canada, that’s not been an issue.”

In Canada, the biggest impediment to the free flow of labour between provinces and territories remains regulation as occupational requirements fall under provincial jurisdiction.

Workers in regulated professions and skilled trades, such as teachers and engineers, still face major barriers trying to work in provinces other than their own. Solving that problem will be key ahead of the looming labour force crunch, Mr. Gauthier argues.

Alberta, B.C. and Saskatchewan have seen the strongest net inflow of people of all provinces for the past three years and that will not change in the short term, the TD report forecasts. The three jurisdictions are working to implement a newly signed trade and labour mobility agreement between them that could eventually see seamless movement of workers between their borders.

TD says Ontario and Quebec will continue to lose residents to other provinces on a net basis, but the bleeding will be at a slower pace than in previous years. It says Manitoba and Prince Edward Island will be the only provinces still shedding a significant share of residents through the end of 2012.

In Manitoba’s case, it’s not that there aren’t any jobs. The province’s unemployment rate has been consistently lower than that of the rest of Canada since the 1990s. It’s that people are being lured by the prospect of higher-paying jobs in neighbouring provinces.

Top 10 Effects Of The New Mortgage Rules

top-ten-mortgage-rule-effectsWe may not go 10 for 10, but crystal ball-gazing is fun nonetheless.

In this humble of spirits, we present ten trends to watch out for in 2011, courtesy of Flaherty & Co.’s new mortgage regime:

  1. Lower purchase and refinance demand will depress mortgage volumes, sparking greater rate competition as lenders battle for less business
  2. A small portion of home buyers will sprint to buy homes with a 35-year amortization before March 18, followed by downward pressure on home prices after March 18 as the amortization reduction removes market liquidity
  3. Negative personal consumption and wealth will result thanks to equity take-out restrictions, rising rates and softening home prices
  4. Unsecured debt usage will increase as homeowners are restricted from accessing as much of their equity, leading to even greater bank profits in unsecured lending
  5. Default rates will see no material improvement
  6. No significant improvement will occur in the number of risky borrowers, due to no change in TDS limits or Beacon score requirements
  7. HELOC rate discounts will be less frequent as some non-bank offerings disappear and HELOC funding costs inch higher
  8. Banks will pick up mortgage market share
  9. More private lenders will offer high-interest uninsured 2nd mortgages to 90% LTV
  10. If amortization restrictions accelerate falling home prices, we’ll see somewhat greater default risk and more negative equity situations among low-equity homeowners

Canada Prime Stays at

Consumer Prime is at 3%. At it will stay the same as well. Nice break for us after the gov’t changes the mortgage rules the day before.

As most predicted it would, the Bank of Canada announced today it is maintaining its target for the overnight rate at one per cent.

“The global economic recovery is proceeding at a somewhat faster pace than anticipated, although risks remain elevated,” said the Bank of its decision to leave borrowing costs at one per cent for the third time in a row.
The Bank cited concerns with the pace of the European recovery due to sovereign debt as well the continued strength of the Canadian dollar and poor productivity performance.
”The recovery in Canada is proceeding broadly as anticipated, with a period of more modest growth and the beginning of the expected rebalancing of demand,” said the Bank in a statement. “However, the cumulative effects of the persistent strength in the Canadian dollar and Canada’s poor relative productivity performance are restraining this recovery in net exports and contributing to a widening of Canada’s current account deficit to a 20-year high.”
Overall, the Bank projects the economy will expand by 2.4 per cent in 2011 and 2.8 per cent in 2012 – a slightly firmer profile than had been anticipated in the October MPR. With a little more excess supply in the near term, the Bank continues to expect that the economy will return to full capacity by the end of 2012.
“Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate at 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the 2 per cent inflation target in an environment of significant excess supply in Canada. Any further reduction in monetary policy stimulus would need to be carefully considered.”