Mortgage outlook just in for all your mortgage queries!

HIGHLIGHTS OF THE WEEK

 

After having improved for three consecutive months, consumer confidence took a major hit in February as the Conference Board index fell to 46.0, from 56.5 in January. Households soured on their expectations and on their current situation, the index for which has been at rock-bottom levels for over a year.• New home sales fell sharply (-11.2% M/M) in January to a record-low of 309K units. The inventory of unsold new

homes shot up to 9.1 months, from 8.0 in December, which marked a third consecutive increase in inventories. The median price of a new home was down 2.4% on a year-ago basis.

• Existing home sales fell by 7.2% M/M in January, and the inventory of unsold homes rose from 7.2 months to 7.8 months, the highest inventory level since September 2009. The median existing home price was flat on a year-ago basis, after having been in the red for 28 consecutive months.

• The S&P/Case-Shiller index of existing home prices (monthly composite of 20 cities) rose by 0.3% M/M in December,

a seventh consecutive increase. On a year-ago basis, price were down 3.1%, but were gradually inching toward the break-even level over the course of 2009.

• Next week we expect to hear that Canadian real GDP grew 4% annualized in the fourth quarter of 2009, largely

 

driven by household spending and investment.

• The Bank of Canada is expected to keep the overnight rate at 0.25% at its next fixed rate announcement date, whilethe need to stay the course on the 2-year fiscal stimulus package announced last January will be a key theme in next Thursday’s Canadian federal budget.

With little economic news out this week, Canadian financial markets took their cue from international developments.In particular, ongoing concerns about sovereign

 

debt in Europe continued to send many investors fleeing to the safety of U.S. dollars and North American government securities. During the week, the Canadian dollar fell against the greenback to 94.8 US cents, the S&P TSX ended down slightly and the 10-year government bond fell 10 basis points, to 3.40%. 

 

Next week, the Canadian economic calendar heats up with Q4 GDP, a Bank of Canada rate announcement, and the Federal Budget. It is widely expected that real GDP

 

grew 4% annualized in the fourth quarter, largely driven by household spending and investment. While, economic growth is expected to be stronger than the Bank of Canada’s January 2010 estimate of 3.3% – and core inflation reached 2.0% in January – we are not expecting the Bank of Canada to sway from its conditional commitment to keep rates at 0.25% until July of 2010. For one, a significant amount of slack still exists in the Canadian economy. The growth of 4% is still slower than what you would typically expect postrecession, and has done little to help close the substantial output gap which was -3.7% in the quarter (up modestly from 4% in the third quarter). What’s more, there are good reasons to believe that the stronger-than-anticipated momentum at year end won’t lead the central bank to revise up its projection for a moderate 3% real GDP gain in 2010. Over the course of the last three months the resale housing market has shown signs of cooling, and by mid-2010 support from the housing market will fade. By extension the household sector will not be the same driving force it has been over the first three quarters of the economic recovery. Moreover, the explosion of growth in the U.S. in the last three months was largely driven by temporary factors such as an inventory restocking and fiscal stimulus spending programs. Lastly, the spike in core inflation to 2.0% in January was largely the result of a base year effect – prices fell significantly in January of 2009 –and will prove to be short-lived. Looking forward, a persistent output gap will keep inflation under wraps for 2010, and the Bank of Canada will be able to meet its commitment.

Next Thursday’s Federal Budget will reinforce the need to stay the course on the 2-year fiscal stimulus package announced last January. Still, with the economic recovery beginning to gain some traction, Finance Minister Flaherty is unlikely to unveil any significant new stimulus measures

 

– nor major surprises – as he begins to prepare the country for an era of restraint beginning in earnest in FY 11-12. In order to move towards a balanced budget from the likely projected level of about $45 billion (3% of GDP) in FY 10-11 over the next 4-5 years the government will focus on getting the path of spending growth down and – at least for now – tax hikes and reductions in transfers to individuals and provinces/territories are not on the table. With the government still in the planning stages on how most effectively to lower the profile of spending growth, it is unlikely to provide too many specifics in the March 4th budget. At about 35% of GDP on a Public Accounts basis, the Canada’s federal debt level pales in comparison to those recorded in other G-7 countries.

This is great information to look at from Diana Petramala, Economist.

Considering all this information and the fact that there is great opportunity to buy or refinance I can be reached any time.

VRM 1.85% —-3 Year Fixed 3.29%—-5 Year Fixed 3.55%

Jim Amitofski, Mortgage Broker/Owner

Toronto:416-431-6662 Durham:905-723-0527

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