16 Jul

Bank of Canada lowers overnight rate target to 1/2 per cent


Posted by: Cory Kline

Media Relations
613 782-8782
Ottawa, Ontario
15 July 2015

The Bank of Canada today announced that it is lowering its target for the overnight rate by one-quarter of one percentage point to 1/2 per cent. The Bank Rate is correspondingly 3/4 per cent and the deposit rate is 1/4 per cent. Total CPI inflation in Canada has been around 1 per cent in recent months, reflecting year-over-year price declines for consumer energy products. Core inflation has been close to 2 per cent, with disinflationary pressures from economic slack being offset by transitory effects of the past depreciation of the Canadian dollar and some sector-specific factors. Setting aside these transitory effects, the Bank judges that the underlying trend in inflation is about 1.5 to 1.7 per cent.

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13 Jul

Your Mortgage Penalty Was How Much??


Posted by: Cory Kline

Someone recently asked if I could describe the various penalties associated with breaking a mortgage prior to the maturity date.

Generally speaking, lenders usually use a 3 month interest penalty, or an Interest Rate Differential penalty (IRD). The penalty for breaking a fixed rate mortgage is usually the greater of 3 months interest, or the IRD (in some cases when it is very close to maturity, the 3 month interest penalty will be higher, but otherwise the IRD penalty is much higher than 3 months interest).

Variable rate mortgages usually use the 3 month interest penalty. Some variable mortgages offering lower rates, however, will use an IRD or, in some instances, are closed (you cannot break them) without a bona fide sale of the property. This is also the case for some niche fixed rate mortgage products.

It is in the IRD penalty where there can be vast differences from one lender to another.

The IRD penalty is based on 3 things:

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Your Mortgage Penalty Was How Much??
By: Daniel Lewczuk

If you, your family, or co-workers require guidance on current mortgage market trends, please call me, I am always available to help.
Cory Kline, AMP
Neighbourhood Dominion Lending Centres – Barrie Office
Cell / Text: 705-794-1283
Fax: 1-877-812-6190
Mortgage Agent, FSCO # M09001239
Brokerage FSCO Lic. # 11764
10 Jul

Canadian Jobs Data Weak As Expected


Posted by: Cory Kline

Canada lost 6400 jobs in June, with the unemployment rate stable at 6.8%.
Economists had expected a weak employment report for June on the heels of the larger-than-expected gain in May. Canadian employment fell by 6,400 last month as the biggest decline in part-time work in more than four years dwarfed gains in full-time positions.

The unemployment rate remained at 6.8 percent for the fifth month in a row. If you convert the Canadian jobless number to its U.S. equivalent, the rate would be 5.8 percent compared to 5.3 percent Stateside–the lowest level in the U.S.since April 2008.

This report follows on the heels of a consistent stream of weak Canadian data leading some to suggest a recession is in train. I’m not willing to make that call yet, but clearly the economy did not pick up in the second quarter contrary to what the Bank of Canada had expected.

Canada is underperforming the U.S. by a wide margin, battered by the rout in oil prices. Over the past year, the jobless rate has fallen by 0.8 percentage points in the U.S. compared to only a 0.2 percent drop in Canada. The labour force participation rate in Canada, however, exceeds the rate in the U.S. The American employment rate has fallen to it lowest level since October 1977 owing to a disturbing rise in discouraged workers who have given up looking for a job.

The Bank of Canada meets next week and is faced with a troubling reality–output has fallen for four consecutive months, business confidence and capital spending plans are down and the trade deficit is at its second-largest level on record. Contrary to the Bank’s expectation, non-oil exports have not offset the decline in oil exports despite the sharp decline in the Canadian dollar. That may well lead Stephen Poloz to cut Canadian overnight rates on July 15 for the second time this year.

He, however, is between the proverbial rock and a hard place. If he does cut rates, he will be harshly criticized for contributing to a further rise in household debt and to feeding a housing bubble in Vancouver and Toronto. If he doesn’t cut rates, he will take heat for his Pollyanna-like assertion that the economy is going to bounce back any time now.

Either way, monetary stimulus at this stage will not boost the sectors or regions in need of help. Unfortunately, monetary policy is the only game in town, however, as fiscal stimulus is off the table both for economic and political reasons. The Harper government is committed to balancing the budget, even in the face of a weakening economy, and the summer recess and October election preclude any fiscal changes probably until next year at the earliest. Nevertheless, public sector employment has risen by just over 2 percent in the past year compared to a 1 percent gain in the private sector.

We can take some solace in June’s decline in part-time and self-employment–an indication that some of these workers may be shifting to full-time jobs.

Regionally, Quebec was the biggest loser with a job loss of 33,300. Employment rose 15,000 in British Columbia and was little changed in Ontario. Alberta also saw little change in employment last month, having suffered a nearly full percentage point rise in its unemployment rate in the past year.  
Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres