Below is a link to today's rate announcement from Bank of Canada. As expected, Prime remains unchanged and there is nothing to suggest that they intend to move in either direction in the near term. Several "experts" have indicated they expect BoC to reduce rates early next year. The North American economy is showing a gradually improving trend. If that persists, I think the Bank will stay on the sidelines and leave rates unchanged, probably into 2013.

The BIG wildcard remains Europe. The endless debate over sovereign debt solutions is like 'Nero fiddling while Rome burns'. The longer it drags on, the more confidence is lost and the greater the danger that the financial system seizes up. Prime will likely stay low but the factor under or over Prime could deteriorate if the Banks lose confidence in each other.

Both fixed and variable look very good from a borrowing standpoint and are likely to be that way for a long while. I think this will keep the housing market stable

read press release 

As the nail biter in Europe continues this week, two economists are predicting the Bank of Canada will move to cut rates in a big way next year.

Sheryl King, an economist at Bank of America Merril Lynch, said in a note that the volatility hitting Europe and the risk of damage to the global economy means the Bank of Canada will move to cut its benchmark interest rate to ward off the risk of recession. Her prediction is the cut will be a whopping 0.75% decrease from the current rate of 1%.

“With the Eurozone sovereign debt and banking crisis showing no sign of containment, we think the Bank of Canada will cut rates back to the effective lower bound of 25 basis points (0.25%) early next year,” she said.

Ms. King forecasts that the cut would come in two phases, with a 0.50% trim being announced during the bank’s January 17 meeting, while the second and final 0.25% cut coming during the March 8 meeting.

Also predicting a lower interest rate next year was David Madani, Canada economist at Capital Economics. He is forecasting a more mild cut of 50 basis points, however, saying he expects it to occur in April or June.

Either way, Mr. Madani said he expects interest rates in Canada will remain low for some time.

“The Bank might communicate that its policy rate will remain at 0.50% for a lengthy period of time, conditional on its projected outlook for consumer price inflation,” he said, in reference to the Bank of Canada’s target of 2% annual inflation.

“Even if we are wrong, the broader message remains that interest rates will remain unusually low for a very long time.”

Most economists, however, are still predicting that the Bank of Canada will raise interest rates rather than lower them in 2012. In a recent Reuters survey of 40 economists last month, the consensus was that an interest rate increase will occur in the third quarter of next year.

If rates are cut, it will mark a sharp turnaround for the Bank of Canada, which only last year raised interest rates. Canada became one of the first advanced economies to raise its benchmark interest rates following the recession when the Bank of Canada implemented a 25 basis point hike in September of last year. The benchmark rate has since remained unchanged at 1%.

Email: jshmuel@nationalpost.com | Twitter: jshmuel

The house is nearly perfect: decent condition, nice neighbourhood and while it's priced at the higher end of their budget, the young couple feels they can shoulder the cost.

The only thing standing between them and the purchase of their first home is the dreaded circa 1960s bathroom. With its cracked ceramic tile, leaky taps and old bathtub, it’s in dire need of an overhaul - an expensive deal-breaker that wasn't accounted for in the homebuyers’ original budget.

So, what are their options?

The first, of course, is to walk away until they find something they can afford. A complete bathroom renovation can cost upwards of $15,000 and if the couple doesn’t feel comfortable tacking on the additional debt, they need to think twice.

Another option is to obtain a line of credit. They’re an easy way to access low interest short-term cash quickly but they’re not necessarily the smartest way to go, at least not according to David Chilton, the Wealthy Barber himself.

A third, less common route the couple could take is to apply to the purchase plus improvements program (PPIP). Also known as the improvement, renovation or high-ratio mortgage, this option covers the sale price of the home, as well as any renovations that would increase the value of the property.

The program allows homebuyers to take advantage of the historically low interest rates associated with a mortgage and pay one lump sum monthly payment. But the PPIP involves a few steps, the first being to make the purchase offer conditional on getting approval for the renovation mortgage program.

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A purchase plus improvement mortgage is a great way to turn that "almost perfect house" into a perfect home.  

Give me a call for details.  250.475.1166 or send me an email

Finance Minister Jim Flaherty dismissed speculation about a Canadian housing bubble, telling reporters in New York on Wednesday that he sees no need to tighten the country’s mortgage rules further.

"We have seen in the past year some softening in the Canadian housing market, in part due to the tightening of the insured mortgage market rules that we did earlier this year … That's an appropriate result from that tightening," Flaherty said during a news conference. "It will take clear evidence of a bubble in the housing market in Canada, which we have not seen."

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The following is an excerpt from Steve Job's Commencement address to the Stanford University 2005 graduating class of 2005

When I was 17, I read a quote that went something like: "If you live each day as if it was your last, someday you'll most certainly be right." It made an impression on me, and since then, for the past 33 years, I have looked in the mirror every morning and asked myself: "If today were the last day of my life, would I want to do what I am about to do today?" And whenever the answer has been "No" for too many days in a row, I know I need to change something.

Remembering that I'll be dead soon is the most important tool I've ever encountered to help me make the big choices in life. Because almost everything — all external expectations, all pride, all fear of embarrassment or failure - these things just fall away in the face of death, leaving only what is truly important. Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose. You are already naked. There is no reason not to follow your heart.

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