Hello,

I hope all is well with you and your family. As expected the Bank of Canada announced yesterday that there would be no change in the overnight lending rate. As a result, all banks will keep their prime lending rate at 3% and thus your variable mortgage rate will remain unchanged. Governor Carney expressed continued concerns with Canadians taking on too much debt because of these historically low levels. The concern here is that once rates begin to rise (and that’s not happening any time soon) borrowers may have difficulty adjusting to the new higher payments. My personal belief here is that Canadian borrowers are much more prudent that the government is giving us credit for, especially where mortgages are concerned (see the default ratio in Canada is well below 1%). I believe the government should begin to focus on banks being allowed to charge up to 28% on credit card interest.

Europe continues to be a financial mess as over this past week several nations had their credit ratings downgraded. Unemployment levels are high, banks have tightened their purse strings and Greece is expected to default on their debt payments as early as March. All of this uncertainty will continue to contribute to historically low rates here in Canada. In the U.S the news seems to fluctuate on a daily basis from good to bad to neutral. The U.S economy appears to be making small strides in the right direction, however return to full capacity is nowhere in sight.

The Bank of Canada meets again in March and my update will follow shortly thereafter (no change is expected at that time as well).

NOTE: IF YOUR VARIABLE RATE IS 2.75% (PRIME LESS .25%) PLEASE CONTACT MY OFFICE NEXT WEEK TO DISCUSS.

Hello,

The Bank of Canada announced today that there would be no change in their overnight lending rate. As a result all major banks will keep their prime lending rate at 3.00% and thus your variable mortgage rate will remain unchanged.

More importantly, the Bank of Canada has stressed their concern for the global economic market. As I have made reference to in previous updates (despite the Bank of Canada’s rather bullish stance at times) the amount of uncertainty worldwide is unprecedented. First we have Greece, Portugal and Ireland requiring bailouts to avoid catastrophe. Now concerns arise about Italy and Spain. On top of that economic data coming out of the United States is far from encouraging. Canada, an export driven economy, not only has the challenge of finders buyers willing and able to pay for our exports but also has to deal with a strong dollar creating a competitive disadvantage. IF Canada were an island on its own, the Bank of Canada would have sufficient cause to increase rates, ensure that inflation remain within their 2% target and discourage Canadians from over leveraging themselves. However, we are not on an island, far from it in fact. Never before have economies been so linked (globally).

The world today has their eyes focused on our friends in Europe. Should a major European bank fail, the after affects would be devastating for equity markets world wide. Time will tell but for now, as always , this uncertainty will keep variable mortgage rates in Canada near all time lows. The next Bank of Canada rate announcement will take place on October 25^th and my update will follow shortly thereafter. Expect no change in rates once again. Your business is now and always will be greatly appreciated.

Take care.

Regards,
Peter Puzzo, AMP