Mortgages By Liz

Bank of Canada holds Overnight Lending Rate as is

Wed, 07 Dec 2011 11:04:25 GMT

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

Interesting Stats for Canadians

Fri, 11 Nov 2011 15:17:45 GMT

Canadians saved $2.7-billion in the past year renewing or refinancing their mortgages

37% of Canadians opted for a variable rate mortgage in the last year

Canadians have become conservative about taking equity out of their home with 10% of mortgage holders doing so in the last year, a drop from 40% a year earlier.

Canadians are enjoying the low interest rate environment that lowered the average mortgage rate to 3.92% from 4.22% from the previous year

32% of Canadians reported making some sort of change to their mortgage in the past year with almost two-thirds of those people saying they were refinancing or renewing their mortgages. Among those who renewed, 78% got a rate reduction.

source: Financial Post

Read more...

More Debates on Interest Rates!

Fri, 11 Nov 2011 13:48:13 GMT

Bank of Canada could slash interest rates in a big way next year

John Shmuel Nov 9, 2011 – 4:10 PM ET

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

Canadian Mortgage Bonds 101

Tue, 08 Nov 2011 15:43:31 GMT

Canada Mortgage Bonds (CMBs) are debt securities fully backed by CMHC that provide investors with a return that’s better than government bonds. CMBs are important to the Canadian housing market, because they provide vital liquidity to keep the housing market moving.

Here’s how the process works:

* Lenders originate mortgages
* Lenders aggregate a group mortgages (also known as pools) for the purpose of selling them to investors
* Lenders sell these pools as mortgage-backed securities (MBS) to the Canadian Housing Trust (CHT), a CMHC-run entity
* The CHT sells Canada Mortgage Bonds (CMBs) to generate funds to buy the lenders' mortgages
* The CHT uses the MBS cash flows to make interest payments on these CMBs to investors.
* The lenders take their proceeds and re-circulate them again as new mortgages

Because CMBs are fully guaranteed by the government, investors demand less interest on CMBs. That lowers the cost of funds for lenders and thereby lowers the cost of mortgage financing in Canada.

This mortgage can make your renovation happen!

Tue, 08 Nov 2011 15:36:41 GMT

KATHERINE SCARROW
Globe and Mail Update
Posted on Tuesday, November 1, 2011 6:19AM EDT

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.

read entire article....

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

Bank of Canada holds Overnight Lending Rate as is

Wed, 26 Oct 2011 09:53:44 GMT

As expected, there is no increase to the Bank rate and they are now saying that they don't expect economic growth to return to a healthy level until the end of 2013. Interestingly, inflation is expected to remain very low until then as well.

read more...

Flaherty rules out mortgage rule tightening

Sat, 08 Oct 2011 09:00:21 GMT

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."

Words to live by.......

Fri, 07 Oct 2011 12:56:11 GMT

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.

CMHC ~ Prepare Your Home for Winter

Sat, 10 Sep 2011 11:47:52 GMT

CMHC recently suggested that homeowners take the following steps to “help avoid the most common and costly problems before they occur.”

Homeowners need to clean out eaves troughs and spouts from debris like leaves- making sure that water will flow where it is intended to- away from the home’s foundation.

Now is the time to get non-electric heating systems serviced, before the cold sets in- along with the busy season. Also check chimneys and combustion vents for debris.

Remove dust from around baseboard heaters. Also vacuum forced-air vents to get rid of all dust and debris for most efficient, less hazardous flow of air when you do turn the heat on.

If there is an HRV with the property, go outside to make sure that the air intake grille is free of debris. Also make sure that it is turned on - and set to the right speed.

Make sure well water is of acceptable quality; remove obstructions from sump pumps, and make sure that they will function as they need to during a flooding emergency. For septic tanks, if they need to be emptied, now is the time.

Looking at the exterior of the home, remove screens, and make sure all windows and doors seal tightly and take care of any drafts before the cold weather comes.

Make sure that the foundation is well protected before the snow flies. Do a walk about, and look at the lay of the land. Is there anything present that will prevent the flow of water in a thaw away from the home, instead directing it back towards the foundation?

It is also time to come to grips with the fact that backyard BBQ’s are nearing their end. Towards the end of the month, look at storing patio furniture and wrap up vulnerable shrubs and bushes to protect from the elements.

Are You Really Pre-Approved For Your mortgage?

Fri, 09 Sep 2011 13:36:48 GMT

Pre-Approved or Pre-Qualified?

Both these terms are now used to describe the action of seeking a mortgage approval before actually negotiating a property purchase. Unfortunately, in most cases, the borrower is not really fully approved for the mortgage & the lender does little or nothing to actually qualify the borrower.

What actually occurs is the typical lender provides an interest rate guarantee for a period of time, usually to a max of 120 days. The borrower is advised that they are "pre-approved" & can begin shopping for a home.

At the pre-approval stage, many lenders do not review credit or even determine if the client meets their guidelines for income & down payment. Lenders do not begin the actual qualification process until the file goes 'live' (meaning the Borrower now has an accepted Contract of Purchase). At this point the lender will begin a serious examination of the borrower's qualifications & may refuse to proceed with the pre approved mortgage for a wide variety of reasons. Because of this, it is very important for purchasers to keep their offer to purchase 'subject to mortgage approval'.

If rates have risen since the original "pre-approval" & the lender now declines the mortgage, the client may no longer be able to get as good a rate elsewhere. Borrowers can reduce the chance of disappointment & get full approval faster by working with a professional Mortgage Broker early in the process. A broker will often recognize potential concerns & address them directly with lenders at the time the "pre-approval" is requested. It may even be prudent to gather employment & income documentation at this stage, particularly for individuals who are self-employed or have had changes or inconsistencies in income or employment. Gathering documents early also helps reduce stress & waiting time after that hard search for the right property at the right price!

What are the risks of writing an offer to purchase without a financing clause? Many.

Let’s say you have a team of professionals who have worked with you to get you as ready as you can be to make that offer to purchase. Your team should consist of an Accredited Mortgage Professional and an experienced Realtor – a Realtor who knows how to present your offer to purchase in the best light and sell the vendors on why they should accept your offer. Your Accredited Mortgage Professional will have pre-approved you to purchase, pulled a credit bureau, provided you with parameters for affordability, assembled your income and down payment verification and provided you with a mortgage pre-approval subject only to CMHC or a satisfactory appraisal of the property. You may be tempted to write an unconditional offer to purchase because your Mortgage Professional has indicated that you look strong and you have passed the test on affordability and credit, right?

But your mortgage financing approval is not based on you alone. The lender and the insurer (CMHC, Genworth Financial or AIG) also need to pass their approval on the property too. The property is the physical collateral for the loan, and your covenant (personal strength credit wise and ability to repay the loan) and the property itself both become part of the approval process. In high ratio mortgage approvals, the insurer (CMHC, AIG or Genworth) have the final say. In conventional properties, the approval will be subject to an appraisal to confirm value.

Here’s what could go wrong:

For example, let’s say you have 5% down payment, plus your closing costs. It is a bidding war, so you come in with your strongest offer, and bid well over the asking price. It is within the price range that your Accredited Mortgage Professional has advised you on the affordability test. The deal is submitted by the lender to CMHC for their approval. CMHC compares the property value against recent and comparable sales in the area, and determines that they will not support the value you offered. They may request a full appraisal of the property. If, for example, you bid $240,000 on the property and CMHC assesses the maximum value of $230,000, they will only allow a maximum mortgage of 95% of $230,000. You would be responsible for the shortfall in the down payment. If the offer to purchase was not subject to financing, and you could not cover the shortfall in the extra down payment, you could be subject to losing your deposit and risk being sued for damages. In reality, you have paid too much for this property and because the offer to purchase was unconditional, the contract would be binding.

Another scenario is that CMHC requests a full appraisal on the property. The appraiser comes back with a report that there is a foundation problem, and they are not willing to insure at all. Or in conventional financing, the value may again effect the purchasers in the amount the purchasers have to provide as down payment.

My recommendation is that if you are requiring mortgage financing, you should always put in a financing condition - for your own protection. If you've written an offer subject to financing and CMHC doesn’t approve the property, you'll be disappointed, but protected. If you've written an offer unconditional and you don't get your mortgage financing, you'll lose your deposit and risk being sued for damages.

I will do a thorough job of getting you as ready as I can for your purchase. All your documentation will be on file before you write your offer, so the financing condition can be completed in just a few days. If you have an experienced Realtor to negotiate with the vendors, writing a financing condition should not prohibit you from getting the home of your dreams. There are many Realtors who are very successful at winning bidding wars that always include a financing condition.

Mortgage Misconceptions

Wed, 07 Sep 2011 14:41:43 GMT

Great article from Canadian Mortgage Trends!

Misconceptions occur in every business and the mortgage business is no different.

A recent example is this post by Boomer & Echo (B&E), a prominent blog that we typically enjoy. In it, B&E opines on why not to use a mortgage broker.

In the piece, the author gets some stuff wrong. As often happens, we came across it in our weekly blog scan and feel obliged to offer some counterpoints.

B&E makes four claims. They are:

Brokers push 5-year fixed rates.

Counterpoint: Brokers sell a higher ratio of variable-rate mortgages than bank salespeople, and have for quite some time. That’s per executives we’ve questioned at banks with both broker and retail channels (e.g. CIBC and Scotiabank). In general, however, all mortgage professionals (bank or broker) sell a lot of 5-year fixed product. It’s the most popular term (has been for decades), it’s the easiest to qualify for, and it has the most competitive discounting (albeit, not presently).

Loyalty to your bank pays.

Counterpoint: The Bank of Canada concluded exactly the opposite (more). To summarize, its research found that existing customers pay more than new customers. What’s more, no one lender continually has the best mortgage options. By comparison shopping, good brokers can save homeowners interest and identify the lender with the right flexibility/value tradeoff. The best brokers provide expert term analysis, proper deal structuring and helpful strategies to reduce a borrower’s amortization.

Bankers have better reputations

Facts: The RBC specialist incident last April proved that reputation should be judged individually, not by virtue of where a mortgage advisor works. Generally, brokers and bank specialists are both paid by commission and the commission is similar whether they sell a 5-year fixed or variable. Neither is holier that the other in that respect, except that bank reps are hired to push only one brand.

You're better off doing it yourself

Counterpoint: We have visions that people will someday get a mortgage online like they buy a stock at iTrade. But we’re not there yet. Good brokers provide counsel that saves time and money. Do-it-yourselfers sometimes discount the value of advice, mesmerized instead by brokers/bankers who can save them a few basis points in rate. For most, that’s a mistake because:

Few individuals grasp the mortgage math needed to perform proper term selection. Term selection impacts borrowing cost far more than rate selection. A “good rate” alone does not equal a “good deal.”

There are lots of creative techniques that skilled advisors can use to help people whittle down principal quicker.

Lenders rarely disclose all of their mortgage restrictions until you sign their contracts. Brokers know the benefits and pitfalls of multiple lenders, and advise borrowers in advance.

It is possible to pick your own investments, do your own taxes or write your own will, but people still hire financial planners, accountants and lawyers. There’s only so much time in a day and we can’t specialize in everything.

In all of those industries there are great and not-so-great practitioners. Brokers are no different. Interview several before picking one. Ask questions like:

Which lenders they use most often and why?

How long they’ve been in business full-time?

Why their term recommendation is mathematically sound for your specific needs?

Sense if you can trust them. If they seem to care about you, are competent and make you feel comfortable, you’ll be glad to have them on your side.

Rob McLister, CMT

Refinancing Mortgages: 40% decline since new CMHC rules

Tue, 30 Aug 2011 10:08:36 GMT

Canada Mortgage and Housing Corp. says that it has seen mortgage refinance activity drop nearly 40 per cent since Ottawa brought in new rules.

CMHC said that refinance activity fell by almost 40 per cent and has continued to remain around that level since Finance Minister Jim Flaherty made changes to the mortgage insurance rules earlier this year.

One of those rules was to reduce the maximum amount that Canadians can borrow in refinancing their mortgages from 90 per cent to 85 per cent of the value of their homes. That rule kicked in on March 18.

Power of Attorney

Tue, 23 Aug 2011 15:30:57 GMT

Thanks to Victoria Notary Kristy Martin for the great article!

What a Power of Attorney Document could mean to you.

Imagine this – You have a home, a spouse and young children, both you and your spouse work you have bills to pay, including your mortgage, car payments, your other monthly bills, and you think you have everything organized then tragedy strikes and you become “mentally incapable”. This could have happened because of an accident where you were seriously injured, a disease such as cancer could have compromised your capacity or you could have suddenly developed a degenerative disease such as early onset Alzheimer’s or dementia. You may still have some of your finances in order, but your mortgage is up for renewal and you can’t sign....Your bills need to be paid but your spouse isn’t a co-signer on your bank account where the money is to pay your bills, now what?

It’s hard to imagine that these scenarios could happen to us, but they do, so how can you protect your family from all the stress and difficulty involved in dealing with your financial and legal affairs in the event you become incapacitated? The answer is Simple – get a power of attorney! This simple yet important document allows an adult to give the legal right to another adult to care for their financial and legal affairs in the event they are unable to or if one simply needs assistance.

Anyone who owns a property, has minor children, travels, has any major health concerns or may be coming to a point in life where help to care for your finances would bring great relief should take the time to learn more about powers of Attorney and how they may be of assistance to them now or in the future.

Don’t hesitate to ask a professional if a Power of Attorney may be a useful document to invest in.

• The law is changing as of September 1st, 2011 and there will be new laws affecting a Power of Attorney document so make sure your Notary or Lawyer is up to date and using new precedents and interviewing criteria that conforms with the new law.

Kristy Martin Notary

Farley Martin Notaries Public Inc.

P: 250-388-5905

F: 250-388-7921

E: kristy@farleymartinnotary.com

W: www.farleymartinnotary.com

Top 10 Reasons to Use a Realtor When Buying a Home

Tue, 23 Aug 2011 11:45:07 GMT

1. You get a personal real estate coach – Realtor work to guide you through the process

2. Get proper representation – Realtors by law have to protect YOUR best interests

3. Save yourself time – Realtors complete numerous property transactions every year and know how it all works and can act as YOUR guide

4. Get all the information – Realtors have access to past sales data, neighbourhood sales statistics, tax assessments, past MLS listings, historical market data and trends

5. Save money – Realtors save their clients money by negotiating the purchase, and finding you the BEST deal out there

6. Learn from a professional about real estate investing and local market trends – Realtors have both been formally educated about real estate, and have TONS of experiential lessons to share

7. Get connected to the best industry professionals - Realtors have pre-screened and found the best lawyers, mortgage brokers, bankers, and inspectors.

8. Get access to new listing information BEFORE the general public – working with a Realtor gives you access to new listings in real time

9. Avoid unnecessary headaches – Realtors work hard to help you avoid any issues in your real estate purchase, making sure that the transaction closes on time and the property is delivered in the proper condition

10. It’s FREE – there is no cost to a buyer to use a Realtor!!

For more information on the benefits of working with a Realtor, or to meet for private consultation to assess your needs and review the current market conditions in Victoria please contact Christina Carrick at Christina@ChristinaCarrick.ca or visit www.ChristinaCarrick.ca

What is Title Insurance?

Tue, 23 Aug 2011 10:44:54 GMT

Today, almost every single transaction is title insured whether it is a routine condominium transaction or a complicated commercial transaction.

Before title insurance, lawyers had to do all there on title searches at the land registry offices and their off-title searches to various government compliance authorities such as zoning, building, environmental, fire, utilities, tax, etc. All these searches are costly and could take weeks to obtain. Title insurance replaces off-title searches by compensating the Purchaser if there are any undisclosed off title issues. Moreover, title insurance will compensate the Purchaser for any on title issues not disclosed by a land titles parcel abstract available electronically through the land registry offices.

With title insurance, a lawyer does not need to give an opinion on title, meaning that he or she is not guaranteeing title. Title insurance can also cover or insure over known title defects in order to help facilitate the transaction should the defect threaten to cloud title. Moreover, title insurance can be obtained in lieu of a survey. Most Seller’s do not have up-to-date surveys, therefore if there are encroachment issues that the Buyer was not aware of due to the unavailability of an up-to-date survey, the title insurer will compensate the Buyer.

Title insurance also protects against real estate and mortgage fraud which can occur with the use of fake identification when fraudsters purport to be the home owners, dupe lawyers, and proceed to sell or mortgage the property without the real owner’s knowledge.

While title insurance is at the option of the purchaser, it is a great product that protects the title holder and typically the lender for as long as the property owner owns the property without having to pay any fees except a one time fee on closing. There are different title insurance policies and title insurance companies. On your next transaction, speak to your lawyer about the different available policies and the pro’s and cons of obtaining title insurance.

What is Interest Rate Differential? (IRD)

Tue, 23 Aug 2011 10:42:02 GMT

The IRD is a compensation charge that may apply if you pay off your mortgage prior to the maturity date, or pay the mortgage principal down beyond the amount of your prepayment privileges.

The IRD is based on:

The amount you are pre-paying; and,

An interest rate that equals the difference between your original mortgage interest rate and the interest rate that the lender can charge today when re-lending the funds for the remaining term of the mortgage.

Most closed fixed-rate mortgages have a prepayment penalty that is the higher of 3-months interest or the IRD.

Most variable-rate mortgages do not have IRD penalties.

Major Banks Forecast Rate Hold Through Q2 2012

Tue, 23 Aug 2011 10:38:14 GMT

What a difference a few weeks makes!

It was only a month ago, on the heels of the Bank of Canada’s last interest rate announcement made in July, that many had predicted a rate hike was all but certain in the fall. In fact, many even pointed to Mark Carney himself suggesting a rate hike - in the form of the language he used during the rate announcement as a signal of things to come.

Now, a few short weeks, later there has been major global financial turmoil in the form of renewed European debt crisis and US debt downgrading, and a major roller coaster ride on the international markets. The end result is we are in much the same place we were before.

Weekly Highlights ~ Economy

Sat, 13 Aug 2011 13:45:02 GMT

weekly highlights courtesy of TD Canada Trust

United States

• It was a particularly turbulent week for financial markets. On Monday, the S&P 500 was down 6.6%, but is poised to end to week only 1.5% lower.

• In an attempt to shore up confidence in the economy, the Fed replaced its promise to keep rates low for an extended period with a conditional commitment to leave interest rates unchanged through mid-2013.

• Retail sales and initial jobless claims were both stronger than expected and point to a modest acceleration in Q3 growth.

Canada

• Global financial markets were put through the wringer this week – there were some up rallies, but mostly lows. The S&P/TSX composite index remains down so far in August.

• The apparent crisis of confidence that permeated markets came from all angles: (1) the ramifications of Standard and Poor’s downgrade of the U.S. government; (2) lingering concerns about the debt crisis in Europe and whether big players like France will be swept up in the fiscal troubles plaguing the continent; and (3) disappointing international trade numbers which have raised the risk of a Canadian economic contraction in Q2.

• In this environment, the Bank of Canada (BoC) is put in a difficult position. With the Fed on hold until mid-2013, the BoC is likely unable to raise rates by more than one percentage point over the next two years.

Weekly Bottom Line Webcasts:

Canada

United States

Got a secure job and lots of debt? Rejoice

Fri, 12 Aug 2011 14:15:39 GMT

By ROB CARRICK
From Thursday's Globe and Mail

Heavily indebted Canadians are in a position to benefit from the global economic downturn

...heavily indebted Canadians get a reprieve from the higher interest rates they've been warned about for more than a year. "But you have to be careful what wish for," Mr. Porter said. "There are real economic consequences to this kind of financial upset. We could end up with much weaker job growth that what would have otherwise been the case."

This is why you should reduce your debts, even while borrowing costs remain at attractively cheap levels. If the economy struggles and your job is affected, it's not going to matter that you got a great rate on your mega-mortgage....

read entire article

Federal Reserve Announcement

Wed, 10 Aug 2011 12:54:01 GMT

Please see below the Federal Reserve Announcement effectively committing to leave US rates at current levels until mid 2013. This will make it very difficult for Bank of Canada to increase rates significantly.

Aug 9, 2011

The following is a reformatted version of the full text of the statement released today by the Federal Reserve in Washington:

Information received since the Federal Open Market Committee in June indicates that economic growth so far this year has been considerably slower than the Committee had expected. Indicators suggest a deterioration in overall labor market conditions in recent months, and the unemployment rate has moved up. Household spending has flattened out, investment in nonresidential structures is still weak, and the housing sector remains depressed. However, business investment in equipment and software continues to expand. Temporary factors, including the damping effect of higher food and energy prices on consumer purchasing power and spending as well as supply chain disruptions associated with the tragic events in Japan, appear to account for only some of the recent weakness in economic activity.

Inflation picked up earlier in the year, mainly reflecting higher prices for some commodities and imported goods, as well as the supply chain disruptions. More recently, inflation has moderated as prices of energy and some commodities have declined from their earlier peaks. Longer-term inflation expectations have remained stable. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee now expects a somewhat slower pace of recovery over coming quarters than it did at the time of the previous meeting and anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate. Moreover, downside risks to the economic outlook have increased. The Committee also anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the Committee’s dual mandate as the effects of past energy and other commodity price increases dissipate further. However. the Committee will continue to pay close attention to the evolution of inflation and inflation expectations.

To promote the ongoing economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent. The Committee currently anticipates that economic conditions -- including low rates of resource utilization and a subdued outlook for inflation over the medium run -- are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013. The Committee also will maintain its existing policy of reinvesting principal payments from its securities holdings. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.

The Committee discussed the range of policy tools available to promote a stronger economic recovery in a context of price stability. It will continue to assess the economic outlook in light of incoming information and is prepared to employ these tools as appropriate.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Sarah Bloom Raskin; Daniel K. Tarullo; and Janet L Yellen.

Voting against the action were: Richard W. Fisher, Narayana Kocherlakota, and Charles I. Plosser, who would have preferred to continue to describe economic conditions as likely to warrant exceptionally low levels for the federal funds rate for an extended period.