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Issue No. 10                      "Representing Your Best Interest!!" August 27, 2009
Interest Rates Continue to Hold!

Another Small Decrease in 5 Year Fixed and Variable Terms!

 The fixed rates continue to trickle downward with the lenders coming out with Quick Close products once again, signalling they feel secure in rates staying put for awhile! You heard it here first, but I am predicting a significant drop in the stock markets in late Sept - October, with a rebound going towards the end of the year, meaning that rates will remain at the current levels!  Stay tuned, and read the article below!!
Rod Minnes
Managing Broker

Rates as of Aug. 27, 2009
Fixed Rate Mortgages    
6 month convertible            4.60%
1 year open                           6.55%
1 year closed                        2.75%
2 year closed                        3.05%
3 year closed                        3.65%
4 year closed                        3.99%
5 year closed                        4.09% 

Variable Rate Mortgages    
5 year closed - Prime* +.30%
5 year open   - Prime* + .80%

Home Equity Line Of Credit

Please call for product availability and rates.

Information from sources deemed to be reliable. Product availability and borrower qualification apply.
*Prime = 2.25%
Rod Minnes
Global West Mortgages
Recession may be over but growth will be limited next year: CIBC
Inflation and interest rates will remain low as economy recovers
TORONTO, Aug. 25 /CNW/ - CIBC (CM: TSX; NYSE) - The recession in Canada and the U.S. may be over, but the damage it left behind means Canadian growth and inflation will be muted next year, keeping Bank of Canada interest rate hikes on the sidelines until 2011, notes a new report from CIBC World Markets.
"While the 2009 recession may already be over, the slack it created is both large and likely to persist," says CIBC's Chief Economist Avery Shenfeld.  "Unlike the Bank of Canada, we don't expect growth to average above the non-inflationary potential until 2011. But even under Governor Carney's more optimistic trajectory, inflation will still be feeling the downward pressure of a sizeable output gap next year, one as large as we saw in the early 1980s and 1990s downturns."
Mr. Shenfeld finds that while the core inflation rate did not decelerate as much as the Bank of Canada predicted earlier this year, there are reasons to expect a further easing in core inflation ahead. "A look at the underlying components for headline and core inflation helps identify what has, in our view temporarily, prevented core inflation from easing much thus far. And part of the answer lies in what economists call, the "income effect."
He notes that by stripping out volatile items from the CPI, the Bank of Canada's core measure now excludes most of the items that have been deflating, much more so than in the "old" core measure that simply left out all food and energy prices. With the "volatile" measures included, headline CPI is negative, largely driven by the dive in gasoline prices from a year ago. Lower gas prices have pulled down costs for intercity transportation fares as well, which the Bank of Canada also excludes from core inflation. Other non-core items such as natural gas, fuel oil and mortgage interest costs have also eased off.
"The deep dive in non-core items, has left those Canadians still working with some spending power," adds Mr. Shenfeld. "While nominal wages have begun to decelerate in a slack labour market, a negative year-on-year inflation rate has meant that in real terms, the buying power of the average wage has escalated. So after filling their gas tank and paying their new, lower, mortgage bills, Canadians simply have more money in their pockets when they go shopping for other items, keeping those prices aloft."
Mr. Shenfeld notes that economic slack usually takes time in exerting its disinflationary force. Given that wages get adjusted only as contracts come up and that some prices are fixed ahead of time (as is the case for catalogues), he believes the upward pressure on prices will ease in the coming months.
"Headline inflation rates won't be as benign as they have been," says Mr. Shenfeld. "If crude oil hugs the $60-70 range, energy will revert from a huge negative contributor to CPI to a modest positive in early 2010, with spillovers into related products like airline fares. But by reversing the "income effects" noted above, that implies diminished buying power for other goods, contributing to a cooling in core CPI. With a lag, a strong Canadian dollar will also provide a dampening impact on retail prices for imported goods and services.
"All told, Governor Carney will not fret about the stickiness of core inflation because, given time, core prices will come down. Look for headline and core prices to cross paths in the second quarter of 2010, at a level well under the Bank of Canada's two per cent target. As a result, Canada's inflation rate will be no threat to the Bank easily fulfilling its pledge to keep interest rates at a slim quarter point through mid-2010. In fact, market expectations for rate hikes in the first half of 2010 could be a full year too premature."
Unlike the central bank's outlook, the CIBC report does not see the Canadian economy gaining much benefit from a forecast U.S. recovery. It notes that the nature of the budding recovery will be very different than what we have seen in the past, with U.S. consumer spending taking a back seat to government stimulus.

OTTAWA -- The worst is over for North America's beleaguered housing markets, with a steady stream of data out of Canada and the U.S. indicating the recovery is at hand, economists say.
"A similar pattern in both countries is unmistakenly suggesting we've not only bottomed in housing, but we're on the way back up," said TD Bank chief economist Don Drummond.
Canada's already brightening picture was helped along Wednesday by a report showing housing prices in major markets across the country jumped 1.5% in June, building on May's 2% advance.
The rebound in prices was evident even in most of Canada's hardest hit urban markets, like Toronto and Vancouver, the Teranet-National Bank report showed.
For National Bank senior economist Marc Pinsonneault, that means "the worst of home-price deflation in Canada is behind us," he said Wednesday.
"The improvement is consistent with the huge improvement in market conditions in most of the major cities in Canada," which show sales resales rising sharply - up 18% in July alone - and listings on the decline, Mr. Pinsonneault said.
The numbers out of the U.S. are also good, at least relative to bone-jarring declines that marked the subprime meltdown and drove housing prices 31% below their peak in 2006, Drummond said.
On Tuesday, the S&P/Case-Shiller composite index showed home prices in the U.S. also bouncing higher, for the second straight month.
And on Wednesday, the U.S. Commerce Department announced new-homes sales surpassed expectations by increasing 9.6% to 433,000 units in July, the biggest increase in more than four years and the highest level of activity in 10 months.
"The housing market has clearly turned the corner," BMO Capital Markets economist Jennifer Lee said in an interview.
"The items supporting a housing recovery have been working in tandem over the past while, and they are still going strong, like the Energizer bunny."
Renewed strength in the Canadian market was evident in four of six major markets tracked by the Teranet-National Bank survey. Vancouver posted its first price gain after 11 months of declines, up 1.6%; Montreal posted its fourth straight monthly increase, up 1.2%; Ottawa gained 2.1%; and Toronto recorded its second straight month of gains, up 2.3%.
Halifax and Calgary were the only laggards, each slipping 0.2%. For Calgary, it was the 12th consecutive losing month.
Economists were quick to point out that while the trend has shifted, markets on both sides of the border are way off previous peaks. In the U.S., for instance, about 600,000 new homes are being built annually, compared with the 2.3 million homes at the peak of the cycle.
Current conditions in Canada have created a seller's market, said Pinsonneault, although he expects greater balance to return as higher prices draw more properties onto the market.
Mortgage rates, meanwhile, won't rise over the next 12 month by more than 50 to 75 basis points from today's 5.85% posted rate on fixed five-year mortgages, he said.
One uncertainty is whether the Bank of Canada can hold lending rates steady, as promised, until the middle of next year, economists say.