If you are a first time home buyer, there are many complicated details you will need to know when you shop for your mortgage. Banks, credit unions and mortgage brokers all have different requirements for mortgage loans. Learn the differences between them so you can decide which is the best way to go.
When it comes to getting a good interest rate, shop around. Each individual lender sets their interest rate based on the current market rate; however, interest rates can vary from company to company. By shopping around, you can ensure that you will be receiving the lowest interest rate currently available.
Check your credit report before applying for a mortgage. With today's identity theft problems, there is a slight chance that your identity may have been compromised. By pulling a credit report, you can ensure that all of the information is correct. If you notice items on the credit report that are incorrect, seek assistance from a credit bureau.
If you can afford a higher monthly payment on the house you want to buy, consider getting a shorter mortgage. Most mortgage loans are based on a 30-year term. A mortgage loan for 15 or 20 years may increase your monthly payment but you will save money in the long run.
You should know that some mortgage providers sometimes approve clients for loans they cannot really afford. It is up to you to make sure you will be able to make the payments on time over the next years. It is sometimes best to choose a smaller mortgage even though your mortgage provider is being generous.
There is an incredible amount of information you need to know before applying for a home mortgage, and much of it is provided in this article. Whether applying at a bank, credit union or mortgage broker, remember what you learned here. Now that you are armed with this important information, begin shopping for your new home.
Internal report says Parks Canada buildings in worse shape than claimed
OTTAWA — Parks Canada’s crumbling forts, historical houses and other heritage structures are in much poorer shape than the agency estimates.
That’s the finding of an independent consultant asked to review a comprehensive inventory created by Parks Canada to determine how much repair work is needed for its varied infrastructure across the country.
The agency’s 2012 inventory found that 47 per cent of all its assets — from dams, bridges and roads, to old stone forts — are in poor or very poor condition.
But Opus International Consultants Ltd. said its own sampling of hundreds of assets pushed that overall level to 53 per cent.
And so-called cultural assets — the historical houses, fortifications, locks and other heritage gems from Canada’s past — are in even worse shape.
Opus estimates 61 per cent of these 2,000 structures are in poor or very poor shape, compared with Parks Canada’s more rosy assessment of just 33 per cent.
“Results indicate that at the portfolio level the value of (Parks Canada) assets in poor condition has increased from condition reported in the 2012 National Asset Review,” says the Opus report, which cost taxpayers $316,000.
A copy of the Dec. 16, 2013, document was obtained by The Canadian Press under the Access to Information Act.
Parks Canada has come under fire in recent years for weak management of its real-estate portfolio, which includes historic canals and archeological sites, in addition to campgrounds, access roads and visitor centres.
An internal evaluation in 2009 slammed officials for failing to maintain a reliable inventory of hundreds of buildings and other structures, estimated to be worth some $15 billion today.
In response, Parks Canada undertook a thorough review of all its assets in 2012 to set a baseline, estimating there was $2.9 billion worth of deferred repairs.
More than half the deferred work was earmarked for waterways, highways and bridges — so-called high-risk assets — but Opus found these structures were in better condition than Parks Canada estimated.
Instead, irreplaceable cultural assets were found to be the most neglected, with almost two-thirds requiring about $230 million worth of repairs and maintenance work.
A spokeswoman for Parks Canada said the agency is still reviewing the Opus report, which she said largely backs the inventory estimates about the cost of repair work.
“Parks Canada has invested an average of $119 million annually over the last 10 years on the recapitalization of its infrastructure,” Genevieve Patenaude said in an email.
“Investments include incremental capital resources announced by the government, the most recent of which was $19 million announced in Budget 2013 to address critical improvements to national park highways and bridges.”
Parks Canada, which operates more than 200 national parks, historic sites and marine conservation areas, has been hit hard since 2012 with budget cuts. The agency lost some 587 staff in 2012-2013, for example, or about 13 per cent of its workforce.
At the same time, 20.6 million people visited its sites in 2012-2013, a three per cent increase and the first rise in visitor numbers in four years.
That’s the finding of an independent consultant asked to review a comprehensive inventory created by Parks Canada to determine how much repair work is needed for its varied infrastructure across the country.
The agency’s 2012 inventory found that 47 per cent of all its assets — from dams, bridges and roads, to old stone forts — are in poor or very poor condition.
But Opus International Consultants Ltd. said its own sampling of hundreds of assets pushed that overall level to 53 per cent.
And so-called cultural assets — the historical houses, fortifications, locks and other heritage gems from Canada’s past — are in even worse shape.
Opus estimates 61 per cent of these 2,000 structures are in poor or very poor shape, compared with Parks Canada’s more rosy assessment of just 33 per cent.
“Results indicate that at the portfolio level the value of (Parks Canada) assets in poor condition has increased from condition reported in the 2012 National Asset Review,” says the Opus report, which cost taxpayers $316,000.
A copy of the Dec. 16, 2013, document was obtained by The Canadian Press under the Access to Information Act.
Parks Canada has come under fire in recent years for weak management of its real-estate portfolio, which includes historic canals and archeological sites, in addition to campgrounds, access roads and visitor centres.
An internal evaluation in 2009 slammed officials for failing to maintain a reliable inventory of hundreds of buildings and other structures, estimated to be worth some $15 billion today.
In response, Parks Canada undertook a thorough review of all its assets in 2012 to set a baseline, estimating there was $2.9 billion worth of deferred repairs.
More than half the deferred work was earmarked for waterways, highways and bridges — so-called high-risk assets — but Opus found these structures were in better condition than Parks Canada estimated.
Instead, irreplaceable cultural assets were found to be the most neglected, with almost two-thirds requiring about $230 million worth of repairs and maintenance work.
A spokeswoman for Parks Canada said the agency is still reviewing the Opus report, which she said largely backs the inventory estimates about the cost of repair work.
“Parks Canada has invested an average of $119 million annually over the last 10 years on the recapitalization of its infrastructure,” Genevieve Patenaude said in an email.
“Investments include incremental capital resources announced by the government, the most recent of which was $19 million announced in Budget 2013 to address critical improvements to national park highways and bridges.”
Parks Canada, which operates more than 200 national parks, historic sites and marine conservation areas, has been hit hard since 2012 with budget cuts. The agency lost some 587 staff in 2012-2013, for example, or about 13 per cent of its workforce.
At the same time, 20.6 million people visited its sites in 2012-2013, a three per cent increase and the first rise in visitor numbers in four years.
Hundreds of Canadian Credit Cards Hacked By Infected Terminals, Firm Warns
A new strain of computer malware infecting payment card terminals in restaurant and gas station has compromised nearly 700 credit cards in Canada, a computer security firm says.
The viral code, JackPOS, infects point-of-sales terminals, a security breach similar to other highly publicized recent cases that struck victims such as the Target retailing chain or the White Lodging hotel management firm.
According to a map released Monday by the California security firm IntelCrawler LLC, JackPOS stole data from 400 cards in Vancouver and from 280 other cards at a location in Longueuil, Que., south of Montreal.
IntelCrawler said the infection appeared about three weeks ago.
In an e-mail to The Globe and Mail, IntelCrawler CEO Andrew Komarov said the point-of-sales terminals were breached through remote access, by hackers who created a large list of possible passwords (such as POS1, Administrator or 123456789) and then “brute-forced” themselves into the systems.
“It provides them good results, as the security in this sector is surprisingly really very poor,” M. Komarov wrote.
Other countries affected by JackPOS include Brazil, where data for 3,000 cards in Sao Paulo were stolen; India, where 420 cards were compromised in Bangalore; and Spain, where 230 cards were pirated in Madrid.
The two outbreaks in Canada likely happened at a gas station, said Richard Henderson, a Vancouver-based security strategist for Fortinet's Threat Research Labs.
“In Canada we’re lucky that the vast majority of our transactions done day-to-day are with chip-and-PIN, which are much more secure,” he said, adding however that some gas stations’ pumps are still relying on the old magnetic-swipe method that is more vulnerable to hacking.
JackPOS appears to be a variation of a previous malware, Alina. Both are known as RAM scrapers, which capture card data when it is transmitted from the sales terminal to a payment-processing centre.
Mr. Henderson said JackPOS’s key feature is its ability to hide on a machine by pretending to be a version of Java, a programming platform used by some computer applications.
“That’s a really neat obfuscation technique by the malware to make it look like it’s a legitimate piece of software.”
According to a global security report by the anti-cybercrime firm Trustwave, victims of point-of-sale hacking tend to be merchants or franchises who have to outsource their IT work and rely on contractors who access their systems remotely. Weak passwords and remote access make it easier for hackers to breach POS systems.
Most of the breaches can be attributed to three criminal groups, with the data being dumped in Russia, Ukraine or Romania, the Trustwave report said.
The rollout of chip-and-PIN cards in Canada and Europe have made fraud harder. However, the report said cyber-thieves still go after POS targets in hotels and premium retailers, because those businesses attract an international clientele that does not have chip-and-PIN cards.
The viral code, JackPOS, infects point-of-sales terminals, a security breach similar to other highly publicized recent cases that struck victims such as the Target retailing chain or the White Lodging hotel management firm.
According to a map released Monday by the California security firm IntelCrawler LLC, JackPOS stole data from 400 cards in Vancouver and from 280 other cards at a location in Longueuil, Que., south of Montreal.
IntelCrawler said the infection appeared about three weeks ago.
In an e-mail to The Globe and Mail, IntelCrawler CEO Andrew Komarov said the point-of-sales terminals were breached through remote access, by hackers who created a large list of possible passwords (such as POS1, Administrator or 123456789) and then “brute-forced” themselves into the systems.
“It provides them good results, as the security in this sector is surprisingly really very poor,” M. Komarov wrote.
Other countries affected by JackPOS include Brazil, where data for 3,000 cards in Sao Paulo were stolen; India, where 420 cards were compromised in Bangalore; and Spain, where 230 cards were pirated in Madrid.
The two outbreaks in Canada likely happened at a gas station, said Richard Henderson, a Vancouver-based security strategist for Fortinet's Threat Research Labs.
“In Canada we’re lucky that the vast majority of our transactions done day-to-day are with chip-and-PIN, which are much more secure,” he said, adding however that some gas stations’ pumps are still relying on the old magnetic-swipe method that is more vulnerable to hacking.
JackPOS appears to be a variation of a previous malware, Alina. Both are known as RAM scrapers, which capture card data when it is transmitted from the sales terminal to a payment-processing centre.
Mr. Henderson said JackPOS’s key feature is its ability to hide on a machine by pretending to be a version of Java, a programming platform used by some computer applications.
“That’s a really neat obfuscation technique by the malware to make it look like it’s a legitimate piece of software.”
According to a global security report by the anti-cybercrime firm Trustwave, victims of point-of-sale hacking tend to be merchants or franchises who have to outsource their IT work and rely on contractors who access their systems remotely. Weak passwords and remote access make it easier for hackers to breach POS systems.
Most of the breaches can be attributed to three criminal groups, with the data being dumped in Russia, Ukraine or Romania, the Trustwave report said.
The rollout of chip-and-PIN cards in Canada and Europe have made fraud harder. However, the report said cyber-thieves still go after POS targets in hotels and premium retailers, because those businesses attract an international clientele that does not have chip-and-PIN cards.
How Higher Rates Might Affect Your Mortgage
Interest rates have been so low for so long that we barely raise an eyebrow about the warnings of higher rates ahead. But long-term interest rates might tick upward this year as the U.S. Federal Reserve cuts back on its economic stimulus which has kept rates low.
For the past five years, the Fed has been buying U.S. Treasury bonds every month by creating the money. It writes a cheque to buy the bonds which has expanded consumer credit, making it cheaper to borrow money.
The impact of the Fed’s action on Canadian homeowners is a gradual increase in long-term mortgage rates. This includes the five-year fixed rate mortgage, now among the most popular. In 2013, 82 per cent of new mortgages were fixed rate terms, according to the Canadian Association of Accredited Mortgage Professionals.
“We expect long-term rates to rise later this year, which will impact five- and10-year mortgage rates in Canada,” said Benjamin Tal, deputy chief economist at CIBC.
A homeowner who chose a five-year mortgage in 2012 would have paid 2.99 per cent. In 2013, the average was 3.29 per cent. That’s why it’s a good idea to take a look at how you might be affected by higher rates, especially if your mortgage will soon come up for renewal.
The idea is to prepare for the worst, says Robert McLister, editor of Canadian Mortgage Trends.
“At the very least, folks should run a couple of rate hike scenarios through a stress test calculator,” McLister said.
The goal is to ensure you can afford payments at that higher rate come maturity time.
“If the results look ominous given your budget, the time to strategize is now, well before maturity,” he said.
Here are some examples:
If you have a $300,000 mortgage at 3.49 per cent and rates rise by two points at renewal time it will cost you $274 more a month. At $400,000 it’s $365 more per month.
Here are some options if your payments are too high for you to carry at renewal:
Refinance: If you have to, extend the amortization. If you’ve worked it down to 20 years, say, increase it. This option generally requires at least 20 per cent equity in the home and it means you’ll be increasing your interest bill over the life of the mortgage. It’s a last-ditch thing to do, McLister says, but “it’s better than defaulting on your mortgage.”
Take a payment vacation: Some mortgages have a skip-a-payment feature. This is an alternative to extending your amortization.
Go shorter: Choose a shorter term with a lower interest rate and payment. That assumes you can handle the risk of rising rates when it comes time to renew again, but if you’re having cash flow problems, there’s a good chance you can’t.
Downsize: A last resort, maybe. But consider selling or renting out a portion of your home.
McLister says that if you find yourself in this position then maybe it’s time to sell and avoid the stress.
“If your budget is stretched, something will happen to stretch it further. It’s Murphy’s Law of borrowing,” he said.
While long-term interest rates may finally head up this year, the Bank of Canada remains committed to keeping short-term rates low. As the spread between long- and short-term interest rates widens, variable rate mortgages become more attractive.
“When long-term rates rise, more and more people look at variable rate mortgages,” said Tal.
For the past five years, the Fed has been buying U.S. Treasury bonds every month by creating the money. It writes a cheque to buy the bonds which has expanded consumer credit, making it cheaper to borrow money.
The impact of the Fed’s action on Canadian homeowners is a gradual increase in long-term mortgage rates. This includes the five-year fixed rate mortgage, now among the most popular. In 2013, 82 per cent of new mortgages were fixed rate terms, according to the Canadian Association of Accredited Mortgage Professionals.
“We expect long-term rates to rise later this year, which will impact five- and10-year mortgage rates in Canada,” said Benjamin Tal, deputy chief economist at CIBC.
A homeowner who chose a five-year mortgage in 2012 would have paid 2.99 per cent. In 2013, the average was 3.29 per cent. That’s why it’s a good idea to take a look at how you might be affected by higher rates, especially if your mortgage will soon come up for renewal.
The idea is to prepare for the worst, says Robert McLister, editor of Canadian Mortgage Trends.
“At the very least, folks should run a couple of rate hike scenarios through a stress test calculator,” McLister said.
The goal is to ensure you can afford payments at that higher rate come maturity time.
“If the results look ominous given your budget, the time to strategize is now, well before maturity,” he said.
Here are some examples:
If you have a $300,000 mortgage at 3.49 per cent and rates rise by two points at renewal time it will cost you $274 more a month. At $400,000 it’s $365 more per month.
Here are some options if your payments are too high for you to carry at renewal:
Refinance: If you have to, extend the amortization. If you’ve worked it down to 20 years, say, increase it. This option generally requires at least 20 per cent equity in the home and it means you’ll be increasing your interest bill over the life of the mortgage. It’s a last-ditch thing to do, McLister says, but “it’s better than defaulting on your mortgage.”
Take a payment vacation: Some mortgages have a skip-a-payment feature. This is an alternative to extending your amortization.
Go shorter: Choose a shorter term with a lower interest rate and payment. That assumes you can handle the risk of rising rates when it comes time to renew again, but if you’re having cash flow problems, there’s a good chance you can’t.
Downsize: A last resort, maybe. But consider selling or renting out a portion of your home.
McLister says that if you find yourself in this position then maybe it’s time to sell and avoid the stress.
“If your budget is stretched, something will happen to stretch it further. It’s Murphy’s Law of borrowing,” he said.
While long-term interest rates may finally head up this year, the Bank of Canada remains committed to keeping short-term rates low. As the spread between long- and short-term interest rates widens, variable rate mortgages become more attractive.
“When long-term rates rise, more and more people look at variable rate mortgages,” said Tal.
Canada Pension Plan, Shapoorji Pallonji Tie Up For Real Estate Investments In India
Mumbai: Canada Pension Plan Investment Board (CPPIB) and real estate developer Shapoorji Pallonji Group on Thursday announced an alliance to acquire foreign direct investment (FDI)-compliant office buildings in large Indian cities.
CPPIB will own 80% of the venture with an initial equity commitment of $200 million, said a statement released by the partners.
The venture will target FDI-compliant office buildings that are leased out and offer good scope for returns from asset management. It will be supported locally by the Shapoorji Pallonji Investment Advisors team led by Rajesh Agarwal.
CPPIB was advised by Vikram Gandhi, founder of VSG Capital Advisors.
“We are delighted to be partnering with Shapoorji Pallonji to launch our first real estate venture in India focusing on stabilized office properties in major urban centres,” said Mark Wiseman, president and chief executive officer, CPPIB.
“India is a key growth market for CPPIB and, as a long-term investor, we believe there are attractive investment opportunities across various sectors. We look forward to working alongside Shapoorji Pallonji, a well-aligned and experienced operator and developer in India,” Wiseman said.
Investment bankers say pension funds can make up for a shortage of fund raising avenues to companies at a time when the initial public offering (IPO) market is largely comatose and equity and currency markets volatile in the face of subdued economic growth.
In a recent interview with Mint, Kaku Nakhate, the India head of Bank of America Merrill Lynch said, “The capital market should be developed in order to lure different pockets of finance. For instance, pension funds from world over should be able to come in.” Nakhate said pension funds can provide long-term finance as well.
On 21 October, Mint had reported that Canadian pension funds had expressed keen interest in investing in the proposed infrastructure trust funds modelled on the real estate investment trusts (REITs) in Singapore to open a new refinancing facility for India’s fund-starved infrastructure sector.
CPPIB will own 80% of the venture with an initial equity commitment of $200 million, said a statement released by the partners.
The venture will target FDI-compliant office buildings that are leased out and offer good scope for returns from asset management. It will be supported locally by the Shapoorji Pallonji Investment Advisors team led by Rajesh Agarwal.
CPPIB was advised by Vikram Gandhi, founder of VSG Capital Advisors.
“We are delighted to be partnering with Shapoorji Pallonji to launch our first real estate venture in India focusing on stabilized office properties in major urban centres,” said Mark Wiseman, president and chief executive officer, CPPIB.
“India is a key growth market for CPPIB and, as a long-term investor, we believe there are attractive investment opportunities across various sectors. We look forward to working alongside Shapoorji Pallonji, a well-aligned and experienced operator and developer in India,” Wiseman said.
Investment bankers say pension funds can make up for a shortage of fund raising avenues to companies at a time when the initial public offering (IPO) market is largely comatose and equity and currency markets volatile in the face of subdued economic growth.
In a recent interview with Mint, Kaku Nakhate, the India head of Bank of America Merrill Lynch said, “The capital market should be developed in order to lure different pockets of finance. For instance, pension funds from world over should be able to come in.” Nakhate said pension funds can provide long-term finance as well.
On 21 October, Mint had reported that Canadian pension funds had expressed keen interest in investing in the proposed infrastructure trust funds modelled on the real estate investment trusts (REITs) in Singapore to open a new refinancing facility for India’s fund-starved infrastructure sector.
24 Sussex Drive Worth $7.2 Million, U.S. Real Estate Firm Says
OTTAWA - Call it fake estate.
An American real estate company has done a fictional listing for 24 Sussex Dr.
California-based national brokerage Movoto says the home of Canada’s prime minister is worth $7.2 million.
Movoto does legitimate work for publications such as Forbes, but its fake listings are gaining in popularity. Previous faux listings have included Wayne Manor in Gotham City, Superman’s fortress, Sesame Street and The White House.
The firm is clearly familiar with Canadian stereotypes. The 24 Sussex “listing agent” is identified as “The Mountie” with an accompanying photo. It also includes a testimonial quote from Stephen Harper.
"The Mountie was always there when I needed him, hot poutine at the ready!"
Funny, eh?
Local elite real estate agent Marilyn Wilson of Dream Properties claims 24 Sussex is worth far more — as long as the home is torn down first.
Looking over the municipal property assessment, Wilson figures the property itself — minus the buildings — would go for $12 million even though it’s assessed for $7.9 million.
"It would be worth more as vacant land," she said. "A buyer would want their own style. It’s not formidable, it’s lacking great bones. It wasn’t built to be a prime minister’s residence."
She says the cost to renovate would be prohibitive.
"It would be cheaper to demolish it and perhaps reuse the stone," she said. "Do it over in a new style, to 2014 standards."
An American real estate company has done a fictional listing for 24 Sussex Dr.
California-based national brokerage Movoto says the home of Canada’s prime minister is worth $7.2 million.
Movoto does legitimate work for publications such as Forbes, but its fake listings are gaining in popularity. Previous faux listings have included Wayne Manor in Gotham City, Superman’s fortress, Sesame Street and The White House.
The firm is clearly familiar with Canadian stereotypes. The 24 Sussex “listing agent” is identified as “The Mountie” with an accompanying photo. It also includes a testimonial quote from Stephen Harper.
"The Mountie was always there when I needed him, hot poutine at the ready!"
Funny, eh?
Local elite real estate agent Marilyn Wilson of Dream Properties claims 24 Sussex is worth far more — as long as the home is torn down first.
Looking over the municipal property assessment, Wilson figures the property itself — minus the buildings — would go for $12 million even though it’s assessed for $7.9 million.
"It would be worth more as vacant land," she said. "A buyer would want their own style. It’s not formidable, it’s lacking great bones. It wasn’t built to be a prime minister’s residence."
She says the cost to renovate would be prohibitive.
"It would be cheaper to demolish it and perhaps reuse the stone," she said. "Do it over in a new style, to 2014 standards."
Canadian Real Estate Market Is Not In A Bubble, Poloz Says
OTTAWA - Canada’s housing market is not in a bubble and not likely to suffer a sudden and sharp correction in prices unless there is another major global shock to the economy, Bank of Canada governor Stephen Poloz said Wednesday.
The central banker, testifying before the Senate banking committee on his latest economic outlook, said he believes the most likely scenario is a soft landing where home prices stabilize, although he acknowledged that an imbalance in the market and high household debt remain key risks.
Poloz used the testimony to pointedly disagree with a couple of forecasting organizations that weighed in this week on the Canadian situation — the Fitch Rating service that judged Canada’s housing market as 21 per cent overpriced, and an OECD recommendation that he start raising interest rates in a year’s time.
"Our judgment is (the housing market) is a situation that is improving, this is not a bubble that exists here that would have to be corrected," he said. "If there is a disturbance from outside our country that’s another analysis."
Poloz said most of the fundamentals surrounding the housing market appear headed in the right direction. The prospects for the economy is improving, he noted, which should create more jobs.
As well, he said banks are now demanding higher credit scores from new borrowers and added that he does not believe there has been serious overbuilding in the housing market.
"It looks expensive," he said of home prices. "But which markets are expensive? Well those markets have been expensive my whole life,"he said, noting that Toronto and Vancouver both absorb high rates of immigration.
Asked to put odds on his soft landing scenario, Poloz said he would place it in the 60-to-80 per cent probability range.
Poloz was asked about the Organization for Economic Co-operation and Development’s advice this week that the Bank of Canada start moving off its one per cent policy rate by the end of 2014 and keep hiking until it reaches 2.25 per cent by the end of 2015.
In unusual clarity for a central banker, Poloz said he respectfully disagreed. In his analysis, he said, there remains plenty of slack in the Canadian economy and inflation, at 1.1 per cent, is well south of the central bank’s two per cent target.
"Those things together give us the judgments we reach and obviously they differ in a material way from what the OECD is saying … and it’s our job to reach that final conclusion," he told the senators.
Last month, Poloz surprised markets by dropping the central bank’s official tightening bias and moved to a more neutral stance, which signals that the bank is as likely to cut as to raise interest rates in the future.
Analysts interpreted the move as the bank telling markets it won’t likely start raising borrowing costs until the first or second quarter of 2015. Markets reacted to that assessment by selling off the loonie.
On the overall economic outlook, Poloz said he believes the global economy is “healing” and that Canadian growth will start picking up next year as the U.S. recovery intensifies.
The bank’s official forecast is for 2.3 per cent growth in 2014, following a lacklustre 1.6 pace this year, and for 2015 to see the economy speed up to 2.6 per cent.
The testimony before the banking committee was the first for Poloz, who took charge of the central bank in June, and senators took the opportunity to question him on a wide range of topics, including the dearth of women on the new currency.
Poloz repeated previous remarks that he was “wide open” to the idea of finding images that include more women in the next roll-out of bank notes, but cautioned that won’t happen overnight — the current new bills took eight years to develop.
On the issue of Dutch disease — the theory that a commodity bubble such as oil exports pushes up the value of a nation’s currency and undermines manufacturing — Poloz said that while generally a “myth,” there was a certain element of truth to the theory.
He said oil exports helped maintain the Canadian economy during the recession and did contribute to the loonie’s appreciation, increasing competitive pressures on the manufacturing sector.
But he said the collapse in global demand also was a major factor and overall, revenues from the oil exports were a net benefit to Canada
The central banker, testifying before the Senate banking committee on his latest economic outlook, said he believes the most likely scenario is a soft landing where home prices stabilize, although he acknowledged that an imbalance in the market and high household debt remain key risks.
Poloz used the testimony to pointedly disagree with a couple of forecasting organizations that weighed in this week on the Canadian situation — the Fitch Rating service that judged Canada’s housing market as 21 per cent overpriced, and an OECD recommendation that he start raising interest rates in a year’s time.
"Our judgment is (the housing market) is a situation that is improving, this is not a bubble that exists here that would have to be corrected," he said. "If there is a disturbance from outside our country that’s another analysis."
Poloz said most of the fundamentals surrounding the housing market appear headed in the right direction. The prospects for the economy is improving, he noted, which should create more jobs.
As well, he said banks are now demanding higher credit scores from new borrowers and added that he does not believe there has been serious overbuilding in the housing market.
"It looks expensive," he said of home prices. "But which markets are expensive? Well those markets have been expensive my whole life,"he said, noting that Toronto and Vancouver both absorb high rates of immigration.
Asked to put odds on his soft landing scenario, Poloz said he would place it in the 60-to-80 per cent probability range.
Poloz was asked about the Organization for Economic Co-operation and Development’s advice this week that the Bank of Canada start moving off its one per cent policy rate by the end of 2014 and keep hiking until it reaches 2.25 per cent by the end of 2015.
In unusual clarity for a central banker, Poloz said he respectfully disagreed. In his analysis, he said, there remains plenty of slack in the Canadian economy and inflation, at 1.1 per cent, is well south of the central bank’s two per cent target.
"Those things together give us the judgments we reach and obviously they differ in a material way from what the OECD is saying … and it’s our job to reach that final conclusion," he told the senators.
Last month, Poloz surprised markets by dropping the central bank’s official tightening bias and moved to a more neutral stance, which signals that the bank is as likely to cut as to raise interest rates in the future.
Analysts interpreted the move as the bank telling markets it won’t likely start raising borrowing costs until the first or second quarter of 2015. Markets reacted to that assessment by selling off the loonie.
On the overall economic outlook, Poloz said he believes the global economy is “healing” and that Canadian growth will start picking up next year as the U.S. recovery intensifies.
The bank’s official forecast is for 2.3 per cent growth in 2014, following a lacklustre 1.6 pace this year, and for 2015 to see the economy speed up to 2.6 per cent.
The testimony before the banking committee was the first for Poloz, who took charge of the central bank in June, and senators took the opportunity to question him on a wide range of topics, including the dearth of women on the new currency.
Poloz repeated previous remarks that he was “wide open” to the idea of finding images that include more women in the next roll-out of bank notes, but cautioned that won’t happen overnight — the current new bills took eight years to develop.
On the issue of Dutch disease — the theory that a commodity bubble such as oil exports pushes up the value of a nation’s currency and undermines manufacturing — Poloz said that while generally a “myth,” there was a certain element of truth to the theory.
He said oil exports helped maintain the Canadian economy during the recession and did contribute to the loonie’s appreciation, increasing competitive pressures on the manufacturing sector.
But he said the collapse in global demand also was a major factor and overall, revenues from the oil exports were a net benefit to Canada
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