“The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1 per cent. The Bank Rate is correspondingly 1.25 per cent and the deposit rate is 0.75 per cent.” …
“…very favourable financing conditions are expected to buttress consumer spending and housing activity. Household expenditures are expected to remain high relative to GDP and the ratio of household debt to income is projected to rise further.”
- from ‘Bank of Canada maintains overnight rate target at 1 per cent’, Bank of Canada press release, 17 Jan 2012
Get that?
The Bank of Canada is expecting the Canadian consumer to support the economy and the housing market by going even further into debt, while at the same time they have been warning Canadians of the dangers of excessive debt.
- vreaa
—-
Further in a similar vein of hypocrisy:
“Both the Finance Minister and Bank of Canada Governor Mark Carney have been urging consumers to get a handle on their debts, the bulk of them in mortgages, and not allow low interest rates to entice them into taking on more credit than they can handle.” …
“We have been cautioning Canadians for some time that they need to be prepared to have higher interest rates in the future and be aware of the affordability issue that that may create for some Canadians, not to assume that mortgage interest rates will remain low for a long period of time,” Mr. Flaherty said Tuesday. “So we all have to be cautious in our financial planning.”
- from ‘Flaherty keeping wary eye on housing market’, G&M, 17 Jan 2012
From the comments section at the G&M:
“Is Flaherty not the man who gave Canadians the 40 year house Mortgage?” – ososo
“Flaherty keeping wary eye on housing market? That’s like having Dr. Kevorkian keeping an eye on my 85 year old mother.” – Peter Pan
…”by going even further into debt”…
And as we all know, as policies go, that’s certainly been a raging success. Oh wait… maybe not.
[G&M] – Canada’s cities score poorly on economic rankings
“The Brookings Institution’s latest scoring of the economic performance of the world’s largest metropolitan areas is a remarkable snapshot of a fast-changing world. And Canada is getting left behind.”…
http://tinyurl.com/768frlx
I’ve tried to make the point several times that low interest rates are now part of the problem. I’m always told that the economy is too weak to sustain even small increases. To me, this means we have to bite the bullet now, or pay a higher price later. Just as we did in the early 1990s, when rates went up during a recession. Yes it was painful, but the longer we wait, the more painful it will be. Keeping them low and keeping fingers crossed, hoping at some point we can start raising them again before it is too late, is not very bold or forward-thinking monetary policy IMO.
“The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1 per cent.”
Of course it is. Why bother annoucing something so predictable? Go Bank of Canada, keep this housing bubble alive!
Unemployment is high, and core inflation is right on target. The Bank’s mandated mission in these circumstances is loose monetary policy. Blame Flaherty.
To be clear, the Bank of Canada does not have a dual mandate, it is entirely interested in inflation in the medium term. Unemployment sets how accommodative monetary policy must be to some degree but the Bank will proceed on its inflation-targeting course regardless the employment situation.
add. of course, inflation measures are gimmicked. good for maybe the appearance of piety. effectively, it’s a wtf we think we can doublespeak you into letting us do mandate.
Loose monetary policy won’t work anymore – nobody wants to invest that free money into anything that will bring about greater productivity, prosperity, etc.
The bank of Canada mandate is very clear: “The Bank of Canada’s mandate is to conduct monetary policy in a way that promotes the economic and financial well-being of Canadians. The Bank does this by regulating money and credit in the economy so as to preserve the value (purchasing power) of the nation’s currency” http://www.bankofcanada.ca/about/backgrounders/monetary-policy/
#epicfailure
Core inflation is a joke. Housing prices increasing 300% over ten years is pretty real inflation.
you households should knuckle down, work harder, save more so that your sovereign and its cronies can continue ‘borrowing’ for free. i.e. borrow and eventually default. less blog, more work – right, fred?
don’t expect carney to grow a few at raise rates voluntarily, per garth. but in the end, it won’t work still. see what’s happening in europe. a wave of that will work its way through all the overleveraged 1st world economies.
correct on the mixed messages from Flaherty/BOC
don’t borrow money from one side of their mouths, “free” money out of the other side
Having run out of real options OR a lack of will on the part of politicians OR ignorance as to what to do to turn things around, the new strategy world wide is: talk your way out of economic crisis. It’s the slow drip drip drip of bad news, accompanied by false good news that’s now keeping everything from coming apart at the seams.
the market may have its shortcomings but so do political solutions, and we’re rediscovering why they are worse. the ship has gone so far off course that the political apparatus cannot even comprehend it, to say nothing of steps to resolution. that is what you are seeing in europe. the leadership has no clue – they can’t understand why they can’t borrow anymore, why the market for their credit issuance has dried up. next, they’re going to try printing, because surely that will fix it.
ship analogy entirely unintentional but let’s indulge it. the costa cruise ship disaster is somewhat microcosmic. play fast and loose for long enough with course deviations, passengers and crew perceive no risk, are completely unprepared, nothing bad ever happens – we don’t need safety drills, corporate culture that puts the irresponsible in charge, valuing appearance over substance. this wasn’t a one-off. it was an accident waiting to happen.
I know we cough and spit at Flaherty for refusing to act but the government works in weird and mysterious ways. It could be they have already acted.
Even inaction aside, credit conditions are not as favourable as they were a year ago at the short end. Risk spreads have been pushed out, at least temporarily as Yerp passes a kidney stone, and that will tend to dampen things a bit.
I fully expect mortgage rule tightening by CMHC. 5% down for FTHB will become 10% down. 30 year max amort will become 25. Why do I expect this? Because the major banks have just engaged in a further – and completely unexpected – round of easing, irrespective of the BoC’s stand pat position. (e.g. BMO’s 2.99%, ING’s ten years at 4%, among others). I suspect the banks caught wind of impending rule changes, and are making a last ditch effort to capture (entrap?) those marginal buyers who will be forced to the sidelines by the new rules.
BMO’s 2.99% rate is more a gimmick. It’s at 25 years amortization and has other constraints (which I forget). I know the popular meme is that Canadians are like goldfish eating food when it comes to debt accumulation but the scale will tip regardless the actions of the Bank of Canada or the federal government.
In other words a debt wall will be reached one way or another. Given prices compared to incomes are higher now than before we are (obviously) closer in time to that wall than we were in 2011.
@jesse. tend to agree with that outlook. the turn for canada more likely to come (or already came) from an exhaustion of participants than from a real turn in the availability of credit. in terms of economic scale and population, is comparable to one of the large us states like ca, ny, tx or fl. it isn’t a huge market to tap out. the sort of neat thing is that unlike these states, it’s got its own printing press. way cool. party!
Gimmick it may be. But the new gimmicks are motivated by something. I’ve already stated what I suspect that motivation is. Reducing amorts to 25 will seriously reduce the volume of mortgage qualifiers for the banks. Doubling of minimum DP even more so.
As for the larger RE market, I agree, it will hit a wall regardless of what CMHC, Flaherty, Careny or anyone else does. It’s too late for some simple policy changes to make much difference.
Sorry for the off topic, but does any one here know a data source that could tell me the relative levels of lines-of-credit (2nd mortgage) lending that the various Canadian banks have done? In other words, which banks are most on the hook for LOC specifically? Thanks.
Check bank of canada websites. These type of economic stats do exist. However you might have to pay to get access.
I love the government, its fantastic do as I say don’t do as I do!
“I fully expect mortgage rule tightening by CMHC. 5% down for FTHB will become 10% down. 30 year max amort will become 25″.
that would be prudent, but it won’t effect Vancouver detached home prices since FTBers do not buy (cannot afford) SFH anyway.
In any event, we should have always had 10% down, 25 year max term for ANY buyer, not just FTB
“FTHB will become 10% down. 30 year max amort will become 25″
I would recommend eliminating the “FTHB” moniker. Those who are older tend to have lower DTI because they bought when prices were lower and they have been paying off their mortgages for longer. That does not mean a 20-year owner cannot end up with a DTI of 90%. Sometimes eyes eclipse stomachs and sometimes prices fall (while, as Carney reminds us, debts tend to linger).
The scary thing is a large percent of the populace doesn’t pay any attention to what Carney or Flaherty say. If it doesn’t make it in the first 15 minutes of the six o-clock “news” it is not absorbed. So what do the masses hear? Not “watch your debt levels, rates will go up” but “with such great rates, it’s never been a better time to buy”.
Go sheeple go!
On a different note, New Zealand wants sheep sheering to be an Olympic sport; I’m looking forward to the sheeple sheer thats coming for Vancouver speculators!
Rebgv listings are flooding in this month. There’s not much anyone can do now to stop the correction. Unless bank prime drops to 1%, we’ll bubble more
i understand the implications but am less clear on how much of an outlier is this current data? lists, sales and list/sales?
for several reasons, i expect the foreign bid may now be absent moving fwd.
RE listings grow starting in early February and can sometimes continue to grow through March. Peak listings can be anywhere from late February to late May. It’s going to be really interesting to see things unfold this spring. A house we looked at in late 2009, was listed for $1,025,000 (in Abbotsford, acreage, amazing house). It’s now listed for $939,000. It’s been on and off the market for more than two years.
reality creep. perhaps quote du jour courtesy of f, buried in the g&m. fwiw:
“It would be great if everyone just settled down and we saw housing come off 5 or 10 per cent and we kept having an economy that was growing but household credit levelled off, and that would be what I call a soft deleveraging,” he said in an interview. “But we’re not going to have it. And so, I think folks should prepare for – not this year, but somewhere down the line – a more disruptive resolution.”
http://m.theglobeandmail.com/report-on-business/economy/housing/flaherty-keeping-wary-eye-on-housing-market/article2305544/?service=mobile
The quote you refer to is from National Bank Financial analyst Peter Routledge.
doh!
predict you will hear the equivalent of this from central bankers after we hit the rocks
http://tinyurl.com/6qe27ef
Flaherty, Harper and Carney are already in proactive damage control mode. Going way out of their way to pin the impending doom on “Europe”, a tepid USA recovery, and anything else they can think of that points away from their own failed interventions.
Since I’m not a regular on this forum, I’m amazed on the information at http://evaluebc.bcassessment.ca/Default.aspx
Gee!
I would think that by looking at some of their charts that it would become clear to anyone that they are just encouraging exponential growth.
jal
“Rebgv listings are flooding in this month”.
you’re right about that. But the detached are all priced over 1M. The pricing does not provide any evidence of desperation
“The pricing does not provide any evidence of desperation”
Are you feeling nervous? You sound like it…
First is delusion. Desperation comes later.
Interesting historical retrospective: http://thedependent.ca/featured/land-destiny-history-vancouver/
OT but Ubisoft Vancouver just shut their doors.
At one time they had 110 employees.
Sad to see those good jobs go.
‘Flaherty keeping wary eye on housing market’, G&M, 17 Jun 2012′
Is that supposed to read 17 Jun 2011 or 17 Jan 2012?
It’s like giving people buckets of ice cream but warning them not to eat it because it will give them diabetes. You can’t prop up the junk food industry and keep health care costs down at the same time. Pick your battle or you’ll lose them both.
Thanks for the pick-up… 17 Jan 2012.
Corrected.
“The ratio of household debt to income is projected to grow further.” What total assholes. As a less-than-human renter and as part of a two-person family that pays its bills at the end of each and every fricken month, I’m so incredibly happy *not* to be part of whatever it is they’re cooking.
Meanwhile, I watch with much fascination the surging inventory and dearth of sales in the Gosh-Darned Best Rainforest on Earth. Interesting yet again how the Globals of the world grow massive boners over trumped-up condo lineups and equally bogus PR stunts, yet have so little to say about the many signs that seem to indicate it’s all over. Slime. Pure slime.
And here is another US blog worried for us…
Canada Home Prices: What, Me Worry?
Great anecdote vreaa. The hypocrisy of Flaherty and Carney has never been more blatant.
Hey vreaa how about starting a Hall of Fame/Shame or perhaps special awards for this stuff? When this thing blows and media comes looking for scapegoats they’ll find all the ammunition they need in the Hall of Shame. Maybe take ratings from viewers on quotes and anecdotes for scoring.
The ‘Bull Hubris’ and ‘What Bubble?’ sidebar collections cover some of that ground.
Government move in mysterious way, n’est ce pas?
Double digit inflation is the only way out of this private debt trap.
Yes. Who gives a crap about savers, bond holders, small businesses and people on fixed incomes. Lets inflate big so that debt drunk gamblers get a little relief.
not sure of your nuance. the responsible solution is laissez-faire and allow each creditor-debtor to sort it out themselves. for the most part, these would be outright defaults. market interest rates would skyrocket, punish the profligate and benefit the prudent, who would then inherit the reins of the economy to the ultimate benefit of all. however, i believe what you say (printing) is the policy that will be pursued.