So much has happened.
The media covered the Bank of Canada rate drop pretty thoroughly and the rather interesting (read perhaps political) failure by the chief of the Bank to use the "R" word, recession. A pretty standard definition of this term is "a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters."
In the Bank's press release it said, "Real GDP is now projected to have contracted modestly in the first half of the year, resulting in higher excess capacity and additional downward pressure on inflation." I italicized the "first half of the year" to point out that this in fact equals 2 quarters.
There has been a great deal of news since then, here are a few items of note:
China's market's have people watching and guessing about what it all REALLY means, but the bottom line for Canada right NOW is they are buying fewer of our resources and it hurts our overall economy.
Harper has declared that if re-elected he will increase the First Time home buyer RSP withdrawal limit from $25,0000 to $35,000. This is great for people who make enough to have contributed this much to their RSPs and who can pay it back on top of the cost of home ownership over the next 15 years. So this helps a small percentage of well to do buyers.
The Bank of Canada still says high personal debt, whether student loans, mortgages, car loans, credit card, or other forms debt is the biggest threat to our long term economic success and yet BMO comes out with an article about "GOOD DEBT." Good debt in this case is student and home loans, Student debt is only good if t leads to better jobs and more income, so until that is proven it is hard say it is "good" because having a large student loan and working minimum wage for years on end is not good debt for many. I think people need to be smart about debt, and do their best to use it wisely, and what that looks like for each person is a bit different, but everyone should have a plan to get OUT of debt.
Real estate values are dropping in some parts of the country which can cause problems for some, but in the short term is fine of you are planning to stay in the home.
Harper government hints at toughening up some aspect of mortgage lending before the election was called, and banks are tightening their lending practices. After the election we will see what becomes of the mortgage market.
While I do not have all the data to hand, my sense is that there will continue to be bumps in the road, but that overall the economy will tick along with no big ups or downs, we have no room for big growth because we did not fall as far as the US, and while our economy is tied to many markets there are no real signs that anything crazy is happening on the upside that should lift us significantly higher. The global situation will force the Bank of Canada to keep rates low for the foreseeable future and this will entice people to increase their debt levels, since the costs will seem so low.
Housing prices in Toronto show no signs of slowing down and as favoured areas sky rocket people will find new pockets to gentrify. A key calculation for anyone thinking of buying is looking at rent, savings, investment return vs. cost of buying, mortgage levels and likely future value of the home. Then of course there are the intangibles like feelings and personal preferences.
I do not like loosing business, but I also do not want people to get in over their heads. Check is out and think about your best options.
http://www.theglobeandmail.com/globe-investor/personal-finance/mortgages/can-you-really-afford-that-mortgage-know-your-real-life-ratio/article17333137/
If your path takes you into the market or you want to use the equity in your home to add the extra space please let me help you get the right mortgage at a great rate.
After writing this of course we had a busy start to the week with major market shifts and a record low dollar. We will see what happens over the next while, but it looks like more Bank of Canada rate drops ahead.
All the best.
