Posted by: Jason McLean
on May 31, 2012
Another week of uncertainty in Europe has kept the markets trading at relatively low levels. Increasing bond yields in Spain and Italy have increased concerns about these countries and Europe as a whole. Spain and Italy are the fourth and third largest economies in the euro zone, and therefore a much larger concern than the relatively small country of Greece. These potential problems have led to reduced expectations for economic growth around the globe, including Canada. Although Canada’s economy is relatively strong compared to many industrialized nations, no economy is an island in the global marketplace of today. Low inflation numbers in Europe and lower than expected growth for the US economy add to the argument that Canadian interest rates will likely remain low for the foreseeable future. The only potential for interest rate increases lays mostly with variable rates as European banking problems may lead to another credit crunch which will increase the cost of funds for our domestic lenders. Another credit crunch is not a foregone conclusion yet, but the possibility will lead to even more clients taking fixed rates of longer terms.
Most lenders have now reduced their 5 year terms significantly and there are now 5 year terms available at 3.09% for most Whistler properties. 10 year terms are available at 3.95% for non-restricted Whistler properties.
The Canadian dollar continued to slide to the lowest level in over four months and may fall further as investors rush take their money from Europe and buy up US dollar vehicles to park their assets.
Jason McLean BSc, AMP
jason@garibaldimortgage.com
Posted by: Jason McLean
on May 17, 2012
The economic and political woes of Greece continue to lead the headlines. Greek politicians were unable to cobble together enough seats for a coalition government so another election is scheduled for June. As it becomes more likely that Greece will leave the EU, many Greeks are withdrawing any savings held with Greek banks due to fear that Greece will return to the previous currency, the drachma. Such a conversion would probably be followed by an extreme devaluation of the drachma, and the Greek public is trying to avoid any chance of holding onto a losing currency. Current estimates show that such a devaluation would have to be in the 40% range for Greece to become competitive again.
This week saw some positive news from the US as inflation figures held steady while energy costs declined slightly which should alleviate some inflationary risk in the upcoming quarters. US consumer confidence is at a four year high, and this is extremely important since US consumer spending is one of the largest economic segments in the world.
In Canada, the Bank of Canada continues to exhibit concern that weak global economic conditions will lead to a few years of meager growth. The good news is that interest rates should hold stable for the next while. Meanwhile, the move to put CMHC under the regulatory thumb of the Office of the Superintendant of Financial Institutions may lead to tighter qualifying criteria across the board. Someone who qualifies for a mortgage today may find that they qualify for much less in a year from now, and that is assuming that the only change is the regulatory environment. These potential changes should encourage buyers, especially first timers, to act now if they want to enter the property market.
Jason McLean BSc, AMP
jason@garibaldimortgage.com
Posted by: Jason McLean
on May 10, 2012
After the weekend elections in Greece and France, the markets have reacted less than expected but they are still wary of potential future complications to the European Economic Union. The election in France did not have much of an effect on the markets as the new leader, Francois Hollande, is considered to have fairly reasonable economic policies. This may represent the end of the austerity movement to control the debt crisis but it seems that austerity driven economics was strangling any potential for economic growth.
The greater concern is the Greek government, or lack thereof, since no single party won enough seats to govern. A coalition would require a few political parties to compromise on some principles and that does not appear likely at this time. Greece appears headed towards another bailout or removal from the EEU. Although Greece’s problems have already been factored in by the markets, this new development has refocused attention on the larger potential problems in Spain and possibly Italy.
These events will add to the list of external forces that the Bank of Canada will have to consider when deciding to increase the Prime rate. If all other factors remain constant, the reoccurrence of the European debt problem should make the Bank of Canada wait longer than expected before increasing interest rates. Although some pundits predict a 0.25% Prime rate increase this September, current events make a rate increase unlikely to happen until early 2013.
Fixed rates remain tremendously low with 5 year fixed terms around 3.29% for most Whistler properties and 10 year terms at 3.95% for most unrestricted properties.
The Canadian dollar slipped to just below par as the markets reacted to the European elections. If the markets become convinced that the European debt crisis will return to previous crisis levels, the Canadian dollar could decrease significantly over the short term. Investors will flee most currencies to buy up the US dollar currency to avoid being caught with devaluing currencies. This fear driven flight to US dollars will cause the Canadian dollar to decrease over the short term. This will provide non-resident buyers with an excellent opportunity to purchase Canadian assets at a discount, assuming that the buyers already hold US cash. Long term prospects for the Canadian dollar remain strong.
Jason McLean BSc, AMP
jason@garibaldimortgage.com
Posted by: Jason McLean
on May 03, 2012
Record levels of unemployment in Europe may lead to election upsets in Greece and France this weekend. This has become a big concern for proponents of austerity in Europe since new leadership,
especially in France, will likely alter the current course of debt reduction that has been demanded by the larger European economies. It remains to be seen whether this will prove to be the next step on the slippery slope towards nations leaving the European Economic Union and the abandonment of the euro. If a major political party campaigns against austerity measures by stoking resentment towards other European nations, the next major election will surely see more parties leaning closer to policies that promote economic isolation and sovereign currencies.
In Canada, the GDP numbers for February showed a decline of 0.2% which should strengthen the case for the Bank of Canada to hold off on rate increases until the numbers improve. If the European elections result in new governments that back out of previous economic agreements, we will likely see additional concern over global economic growth. This will probably cause the Bank of Canada to hold off on rate increases until early 2013.
The Canadian dollar remains above par and has shown decent strength over the past few weeks. However, if the European election results scare the markets, we may see a decline as global investors rush to buy US currency vehicles as we did during the height of the European debt crisis.
Jason McLean BSc, AMP
jason@garibaldimortgage.com
Visit our blog 
Become our fan on Facebook 
Follow us on Twitter