The following are a collection of highlights from last weeks top Canadian News stories pertaining to our mortgage industry. [News highlights selected and edited by Dominion Lending Centres Head Office Team]
The Bank of Canada chopped its key interest rate by another half percentage point to its lowest level ever yesterday, and warned that the Canadian economy will contract by 1.2% this year.
The central bank’s target for the overnight lending rate now stands at 1% – lower than in 1958, when the most-watched policy rate was 1.12%.
“The outlook for the global economy has deteriorated since the bank’s December interest rate announcement, with the intensifying financial crisis spilling over into real economic activity,” the bank said in a statement. – Globe and Mail
“While the economy is likely to look a lot worse in 2009 than it did in 2008, the dramatic decline staged by the stock market last year is unlikely to be repeated this year,” says Scotia Economics. And despite the 50 basis points drop in prime yesterday – bringing it to 3% – Scotia Economics has already reiterated its stance that the Bank will be forced to cut another 50 basis points in March.
Consumers pinched by the credit crunch are getting some relief as lenders lower their rates on both fixed and variable mortgages.
Lenders including RBC, BMO, Scotiabank, TD Canada Trust and CIBC sliced mortgage rates shortly after the Bank of Canada cut its key lending rate.
The banks quickly followed suit, passing on the full central bank cut. Previously, the banks had failed to pass on the full benefit of rate cuts made by the central bank late last year to consumers.
Their quick move to follow the Bank of Canada yesterday could be a sign of pressure from the government and customers, and also that borrowing costs may be easing a bit. – Globe and Mail
The 17-month agony of the Canadian non-bank ABCP market has ended, with the implementation of a court-administered restructuring of $32 billion worth of notes. – Globe and Mail
The government bought $8 billion of mortgages from banks last week as part of a program to buy as much as $75 billion of the securities and ensure that higher borrowing costs don’t crimp lending.
CMHC announced the purchase last week on its website. The transaction is aimed at helping banks fund new loans to consumers and businesses.
The $8 billion agreement is for five years and the government will earn an average yield of 2.62% – greater than its cost of borrowing money for five years. This latest instalment brings the total amount the government has purchased to $33 billion. – Bloomberg.com
The Canadian economy should emerge from recession during the second half of the year as stimulus measures take effect, setting the stage for interest rate hikes in a year, a Reuters poll showed today.
The quarterly economic survey of 20 economists was conducted in the days before the Bank of Canada made an expected rate cut of a half-percentage point. – Financial Post
CREA is asking Ottawa to raise the limit on RRSP withdrawals by first-time homebuyers by $5,000 – to $25,000 – and extend the program to anyone buying a home. – Globe and Mail
A new poll suggests most Canadians want the government to avoid major tax and spending initiatives, and instead focus on keeping inflation and interest rates low.
The Canadian Press Harris-Decima survey asked what the best approach for the economy would be as the federal government prepares a budget for January 27th: tax cuts; investment in infrastructure; or working to keep interest rates and inflation down?
Overall, 43% preferred the last option. That choice would put most of the onus on the Bank of Canada. Of course, lower interest rates also tend to feed inflation by encouraging spending. – Chronicle Herald
The federal government has pumped $350 million into the Business Development Bank of Canada (BDC) to allow the bank to offer $1.5 billion in new financing to help small- and medium-sized business, Industry Minister Tony Clement said Monday.
“Current market developments have resulted in increased demand for BDC financing and services, and the government has taken this action to enable the BDC to help counter the effects of the credit crunch,” Clement said. – Globe and Mail
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