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McLeans market musings for July 19


Blog by Nick Swinburne | July 19th, 2013


Ben Bernanke, the chairman of the US Federal Reserve, continues to try and calm concerns about possible pullback of the asset-buying stimulus program, also known as quantitative easing (QE).  Since Bernanke has been reiterating the view that potential tapering of the stimulus program is still a ways off, especially since such a move will not occur until the labour market improves significantly and inflation becomes more of a concern.  Inflation still needs to get back up to desirable levels and the potential for deflation is still a concern in some corners.   The US economy did see some positive data this week as factory activity picked up and new jobless claims continued to decline.   If the economy continues to improve as expected, which is always a big “if”, then the potential tapering of QE could begin in late 2013 or early 2014.

Stephen Poloz, the new Governor of the Bank of Canada, led his first scheduled major policy decision this week.   As expected, he left the Prime interest rate unchanged and commented that the Canadian economy still requires the stimulus of low lending rates during this period of uncertain and slow economic recovery.   After stating that he is unsure when rates will increase to more traditional levels, he mentioned that some requirements for increasing rates include:  a reduction of the current excess capacity in the economy, and an improved global economic outlook.    He also reduced the outlook on the US, Chinese, European and global economies and these concerns will continue to colour the outlook of the Bank of Canada.   Some economists have indicated that the current outlook will likely see the Prime rate unchanged until late 2014 or early 2015.

Bond yields have continued a slow retreat from the high levels that caused the most recent rate spike.  This may result in some lenders reducing rates by 0.05% over the next couple of weeks.  Although current fixed rates remain very low, the greatest potential for another rate spike is the potential tapering of QE in the US.   If this happens, rates could shoot up by 1% over a period of less than a week.  In order to protect against this possibility, rate holds are recommended for all consumers considering new purchases, refinances or renewals that are within 18 months.

Variable rates have improved over the past 6 months and are now available at Prime less 0.3% for most Whistler properties and even lower for regular residential properties.  Prime is currently 3.0%.

Please remember that 80% financing is available for qualified US residents at great rates!


Cheers,
Jason

Jason McLean   BSc, AMP
The Mortgage Centre: Garibaldi Mortgage  
www.garibaldimortgage.com
fax: 604-905-3801
cell:  604-935-9190