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Benjamin Tal Economic Buzz – Financial News Update

Everything is falling into place with one exception

Benjamin Tal - Economic Buzz - Ontario Finance and Mortgage UpdateSo far so good. Overall activity in the global economy continues to move in the right direction and global stock markets continue to react positively.

US Financial and Mortgage Outlook

In the US, growth-related data continue to be relatively strong. Housing activity continues to surge, led by another strong gain in multi-family units. Housing starts were up by more than 80% annual rate in the fourth quarter. While the Fed will probably be willing to keep interest rates stable until 2015, it is likely that by spring, we will start hearing talks about downscaling the current pace of asset purchasing by the Fed ($85 billion a month). That will work as a negative for the long-end of the yield curve.

Canadian Financial and Mortgage Outlook

In Canada, everything is falling into place with one exception—the labour market. Looking at recent numbers suggest that the economy is slowing. Retail sales (ex-autos) are slowing and overall GDP is also showing signs of deceleration. The inflation numbers are softer than expected (with falling mortgage interest cost accounting for roughly half of the gap between market expectations and the actual figure). The only thing that does not fit into this picture is the robust employment numbers that show net monthly gain of more than 60,000 jobs. It is interesting that the Bank of Canada hardly mentioned the better than expected employment numbers in its recent communication to the market, suggesting that even the Bank is not convinced that these numbers are sustainable. In fact, it appears that the Bank is a bit more dovish regarding the momentum in the economy. At this point, our thinking is that the Bank will keep rates unchanged until early 2014.

Your Ontario Mortgage Agent’s Thoughts

Over the past 18 months, there has been quite a bit of talk regarding the possibility of the Bank of Canada increasing rates. However, it seems that every update has speculators predicting rates will stay put for the time being. In my opinion, I think we are looking at interest rates staying consistent for at least the remainder of 2013 and possibly longer.

What Ontario Mortgage Term Should I Choose?

While every situation is unique, if you plan to stay in your home for at least 5 years, I would suggest sticking with the 5-year fixed rate. Right now, we can offer clients 2.89% for an Ontario 5-year fixed mortgage or a variable rate mortgage at 2.60%. Both options are ideal, but as rates begin to rise again in the next 18 to 24 months, a variable may not seem worth the while.

Reach Out

Feel free to contact me via phone or email to discuss your options and to develop a plan for your new purchase, renewal, or refinance mortgage in Windsor, London, Toronto, Ottawa and across Ontario.

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