Category Archives: debt

Canadian dollar rises on rate hike expectation

Poloz is hinting that rate hikes are coming and thats pushing the Canadian dollar up a bit:

The Canadian dollar climbed to a four-month high of 76.44 cents US after Poloz’s comments, which fed speculation about a rate increase as early as its next scheduled announcement in two weeks. The boost lifted the loonie from an average price of 75.83 cents US on Tuesday.

If the central bank increases its key rate, the big Canadian banks are expected to raise their prime rates, driving up the cost of variable rate mortgages, other loans and lines of credit tied to the benchmark rate.

Poloz credited the two rate cuts introduced by the bank in 2015 for helping the economy counteract the effects of the oil-price slump, which began in late 2014. The reductions also helped increase the speed of the adjustment, Poloz added.

“It does look as though those cuts have done their job,” said Poloz, who was in Portugal on Wednesday to participate in a forum hosted by the European Central Bank.

“But we’re just approaching a new interest rate decision so I don’t want to prejudge. But certainly we need to be at least considering that whole situation now that the capacity, excess capacity, is being used up steadily.”

Read the full article over at the Financial Post.

BC Liberals successfully pump up condo prices

Here’s a surprise – it turns out if you hand out $13 Million in loans to the general population to buy a product, the price of that product rises.

In this case the product is condos and the $13M comes courtesy of taxpayers and the BC liberal governments ‘BC Home Owner Mortgage and Equity Partnership’ program.

As it turns out though, not everyone things this is the smartest thing in the world. UBC economist Tom Davidoff sounds downright unenthusiastic:

The BC Liberals announced the program back in December, arguing it would help young families crack into the red-hot housing market.

But critics warned that financially stretched buyers would take on risk by essentially starting a second mortgage and that the infusion of cash could drive prices up.

Davidoff said that second case appears to be playing out, with people using the program now accounting for about five to 10 per cent of condo purchases.

“When there’s too many people chasing too few houses, pushing more people to get in on the action just seems like a really dumb idea.”

Condo sales have been driving the Metro Vancouver real estate market in recent months, and the average unit price now sits at about $655,000.

For the month of May, the Real Estate Board of Greater Vancouver found 95 per cent of all condos listed had sold, with prices up more than 17 per cent year over year.

Read the full article over at global news.

Canada to crack down on real estate transaction tax cheats

Looking to cheat on your real estate transaction taxes? Bad news, the CRA has decided it doesn’t want you to and is coming after real estate tax cheats.

From April 2015 to March 2017, the CRA audits of real estate transactions resulted in more than $329.4 million in assessed income that had not been reported. During this time, the CRA applied over $17 million in penalties, primarily associated with Canada’s two major real estate markets in Toronto and Vancouver.

Canadians work hard for their money and the Government of Canada recognizes that many families count their principal residence as both their home and most valued asset.‎ The CRA will continue to strengthen relationships with key partners such as provinces, territories, and municipalities to further expand, obtain, and exchange information on real estate transactions, thereby enhancing the CRA’s ability to combat tax evasion and avoidance.

17 million in penalties? That’s almost enough to buy a fixer-upper on the north shore!

Low interest rates have done their job.

Southseacompany pointed out this article where Bank of Canada governor Stephen Poloz is reported to have said that low interest rates have done their job.

So what exactly was the job of low interest rates?

Three years ago the BOC was issuing warnings that real estate in Canada was as much as 30% overvalued in some markets and posed a threat to the financial system.

How’s that concern looking these days ?

Bank of Canada concerned about debt and housing market

The Bank of Canada is still worried about housing debt levels in Canada and joins the OECD in expressing that concern:

The two biggest concerns on the bank’s radar are also intertwined. It said the growth in mortgage lending in Toronto and Vancouver has largely fuelled an increase in Canada’s overall household indebtedness since the bank’s last review six months ago.

“Highly indebted households have less flexibility to deal with sudden changes in their income,” said the bank.

“As the number of these households grows, it is more likely that adverse economic shocks to households would significantly affect the economy and the financial system.”

The document was released as concerns about the Canadian real estate market — domestically and from abroad — continue to pile up.

Read the full article over at the Financial Post.