Canada’s Budget 2010 aims to take advantage of  Canada’s economic recovery and prepare it for the future.
The budget plan has three main broad aims.

1. It confirms $19 billion in new federal stimulus under Year 2 of Canada’s Economic Action Plan, to create and maintain jobs complemented by $6 billion from provinces, territories, municipalities and other partners.
2. It invests in a limited number of new, targeted initiatives to build jobs and growth for the economy of tomorrow, strengthen Canadian innovation, and make Canada a destination of choice for new business investment.
3. Budget 2010 charts a course to bring Canada’s finances back to balance over the medium term and well before any other Group of Seven (G7) country.

The Canadian brand will be based on competitive taxes, renewed infrastructure and skills, a strong head start in clean energy, a tariff advantage, less red tape, and a more prominent voice as a global financial sector leader.

All of these measures will contribute to maintain and sustain Canada’s fiscal health, which according to the Department of Finance is the envy of the world.

As far as the mortgage industry us concerned the 2010 federal budget includes new regulations to standardize mortgage prepayment disclosure and the elimination of the Insured Mortgage Purchase Program (IMPP).

Under the Insured Mortgage Purchase Program, Canada Mortgage and Housing Corporation (CMHC) purchased securities comprised of pools of insured residential mortgages from Canadian financial institutions to provide long-term stable funding to lenders and help them continue lending to Canadian consumers and businesses.

Of the $125 billion available, as of September 21, 2009, $64.2 billion had been disbursed through 16 reverse auctions: $43.3 billion through 10 fixed-rate reverse auctions and $20.9 billion through six floating-rate reverse auctions. 19 different financial institutions participated directly in the program, including banks, non-bank deposit-taking institutions, and life insurance companies.

Some bankers argue that the program should remain in place as a safeguard. However, recent figures suggested that bank interest had dwindled with just $65.9 billion worth of mortgages having been disbursed. Just a few weeks ago the government offered to buy up to $4-billion of mortgages, but banks only sold it $1.4-billion worth. One last purchase is scheduled for March 24.

The government also says that it will introduce legislation setting out a framework for covered bonds, a type of bond that remains on a banks’ balance sheet and can be backed by assets such as mortgages. They are similar to Canada Mortgage Bonds, except for the fact that they remain on the banks’ balance sheets and that they do not carry the government’s guarantee. A number of Canadian banks have already begun issuing covered bonds during the last two years, and have been successful in selling them to investors.

• http://www.budget.gc.ca/2010/plan/chap1-eng.html
• http://canada-money-affairs.blogspot.com/2010/03/canadas-federal-budget-2010.html

Although there was a sales surge of home sales in the Edmonton area during February, prices didn’t raise significantly, according to the Multiple Listing Service’s (MLS) figures released last Tuesday.

While the average single-family house price was $369,573 for February, up 1.4 per cent from January, or 5.6 per cent from a year ago, condominium prices actually dropped 3.8 per cent in February to $231,530 from $240,686 and duplex and row house prices rose 3.3 per cent to $315,390.

Sales figures for February showed even more extreme monthly and yearly increases.

“While prices remained stable through February, the increase in sales activity indicates that there is a demand for housing in the Edmonton area,”

said Larry Westergard, president of the Realtors Association of Edmonton.

There were 1,184 housing sales in February — up 33.9 per cent compared to January. This number was up 7.6 per cent from a year earlier.

“The upcoming changes to mortgage qualification rules and impending mortgage rate increases may prompt some buyers to enter the market earlier and cause some additional slowdown in the third quarter,”

Westergard said.

Concerns about inventory falling short were also allayed by 2,505 residential listings added during the month for a total inventory of 5,449 homes, while the average number of days on market was 10 days down to 47.

The sales-to-listings ratio, a key indicator of market conditions, was 47 per cent, which suggests a balanced market.

Source:

Edmonton Journal

The Bank of Canada reiterated last Tuesday its conditional pledge to keep its key-lending rate at a record low until July, but took a more hawkish view on inflation by indicating the risks to its outlook are “roughly balanced” as opposed to tilted to the downside.

That was the one significant change in its scheduled interest-rate announcement, and analysts might interpret this as a first step by the central bank to ready markets for an interest-rate hike.

“The Bank of Canada is now walking not crawling towards the exit,” said Kathy Lien, director of currency research at fx.360.com, following the release of the statement.

“Change is afoot. Evolutionary change, but change nonetheless,” added Stewart Hall, economist at HSBC Securities Canada.

For nearly a year, the central bank has pledged to keep its benchmark rate at 0.25 per cent until July in an effort to pump up economic growth, on the condition that inflation would not hit its preferred two per cent target until mid-2011. The central bank’s mandate is to set its key policy rate at a level to achieve two per cent inflation.

In previous statements, the central bank had suggested inflation risks were titled downward because of the possible need to engage in quantitative easing, in which the Bank of Canada would flood financial markets with cash in an effort to spur lending and combat deflation.

But through the statement, the central bank might be indicating deflation is no longer a concern.

“The bank judges that the main macroeconomic risks to the inflation projection are roughly balanced,” it said, with upside risks being stronger-than-projected growth, while a protracted recovery and strong Canadian dollar flagged as downside risks.

Hall said this shift in nuance was “indicative of the need for a policy change at some point.”

The change in the inflation outlook emerged after Statistics Canada reported that the economy grew at a five per cent annualized rate in the fourth quarter of last year – blowing past market expectations for a four per cent gain and the central bank’s original 3.3 per cent forecast. Economists say the fourth-quarter performance has set the stage for another robust gain, of perhaps four per cent or more, for the first three months of 2010.

Recent data indicate that both the headline and core inflation rates have moved much closer to the two per cent level than the central bank had expected. Under the bank’s forecast, the two per cent level would not be reached until the third quarter of next year.

“Core inflation has been slightly firmer than projected, the result of both transitory factors and the higher level of economic activity,” the central bank said in its one-page statement. “The outlook for inflation should continue to reflect the combined influences of stronger domestic demand, slowing wage growth, and overall excess (economic slack).”

In its economic outlook in January, the central bank said stubborn unit labour costs along with increases in property taxes and other administered prices accounted for the recent “stickiness” of core inflation.

The longer inflation stays “sticky,” analysts say, the more likely that the output gap, or the measure of excess economic capacity, is narrowing at a faster pace than previous central bank expectations.

The bank has said it anticipated the output gap to close in the third quarter of 2011. A large amount of excess production capacity suggests a lack of consumer demand, and gives producers little to no pricing power.

Meanwhile, the central bank also acknowledged that economic activity has been “slightly higher” than its own projections, with the five per cent gain in the fourth quarter powered by “vigorous domestic demand” and a recovery in exports.

“The underlying factors supporting Canada’s recovery are largely unchanged – policy stimulus, increased confidence, improved financial conditions, global growth and higher terms of trade,” the bank statement said.

It added that “persistent strength” in the Canadian currency and the “low absolute level” of U.S. demand would continue to act as “significant drags” on economic activity.

“The Bank of Canada has walked a fine line with its latest decision, though overall it is undeniable that the risks to Canadian monetary policy are starting to tilt upwards,” said Eric Lascelles, chief economics and rates strategist at TD Securities. He added the firm’s view was that the central bank would not begin raising rates until the fourth quarter, “but it is hardly inconceivable that this could now come a touch sooner, in September or possibly even July.”

The central bank’s next statement on interest rates is April 20, and two days later it will release its updated economic forecast. Meanwhile, the governor, Mark Carney, has scheduled two speeches this month in which he may provide further guidance as to how the bank would behave as its conditional pledge comes to an end.

Source:
Edmonton Journal