The main event for Canadian investors since our last issue was the Bank of Canada’s recent interest rate announcement and Monetary Policy Report (MPR) where it clearly laid out the case for raising rates before long. It upgraded its growth outlook for 2012 to 2.4%, implying that the slack in the economy would be eliminated sooner than previously expected. Moreover, the central bank seems more comfortable with the risks that remain. The economic environment is characterized as one in which emerging market economies achieve a soft landing, the U.S. economy grows at a steady pace and Europe emerges from its recession before long.

Highlights

• Markets in Canada were reminded this past week that the other side of a stronger growth outlook is higher interest rates. The Bank of Canada’s latest rate announcement sounded a more hawkish note, and markets are now placing their bets on when rate hikes will occur.
• We anticipate the first tightening sooner rather than later. We expect the Bank to raise the overnight rate in two 25 basis-point steps in September and October of this year. However, due to the stillfragile nature of the recovery, and stronger Canadian dollar that is the likely result of higher rates, we foresee the Bank then taking a pause, before raising interest rates another 50 basis points in 2013.
• Our bond yield forecasts have been adjusted accordingly, but the bulk of the increases coming in shorter-dated issues, leaving the curve flatter overall (see page 3). We have also raised our forecast for the Canadian dollar in the near-term, reflecting the lure of higher interest rates to foreign investors.
• Beyond our borders the global economy is looking a tad brighter also, with the IMF and OECD recently upgrading their economic forecasts. The sovereign debt situation in Europe still bears close watching, as Spanish yields continue to rise. On the plus side, the risk from higher oil prices has eased recently, which should give some relief to struggling economies in the coming months.

In this benign scenario, the Bank stated “some modest withdrawal of the present considerable monetary policy stimulus may become appropriate”. We read that to mean modest and gradual rate hikes are coming this year, and we expect the Bank’s next 25 basis-point hike to come in September, followed by another 25 bps in October.

It is hard to envision a significant and extended tightening cycle, as the Bank will be sensitive to the moderate pace of economic growth, and the risks that remain both at home (household indebtedness) and abroad (Europe). Moreover, hiking rates aggressively would fuel an unwanted rally in the Canadian dollar, amplifying the impact of monetary tightening. Therefore, we expect the Bank to outline the case for a pause at its October MPR, and to wait and assess the impact of the tightening and the evolution of risks, before taking rates another 50 bps higher in two 25-point moves in the spring of 2013, followed again by a pause. This leaves Canada’s overnight rate at 2% at the end of 2013, the same target we have had for some time now, we have just moved up the timetable on the same degree of tightening.

One can quibble with exact timing. It could easily be argued that the Bank will act sooner and use the July MPR for justification. Equally, if the global economic risks intensify (with Europe being the leading candidate) it could once again change its messaging and stay on the sidelines longer. So, like any good forecast, the risks to the new base case scenario outlined above are balanced.

One implication of the earlier-than-expected rate hikes is that we have raised our Canadian dollar forecast in the near term, leaving the loonie higher in 2012 overall (see table page 4), and higher on average in 2013 as well. However, reflecting that our rate forecast end point has not changed, neither has our Canadian dollar target of 105 U.S. cents at the end of 2013. Our outlook for bond yields will also be somewhat higher this year; but, one needs to keep perspective – a half-point rise in the overnight rate will raise 10-year bond yields by about a quarter of a percentage point (see chart). This would translate into about a 30-35 basis point rise in 5-year bond yields, which would lift 5-year mortgage rates by a similar amount if sustained. A similar half point of rate hikes in the first half of 2013 would have roughly matching effects on bond yields, still leaving interest rates relatively low.

While not spelled out explicitly in the Bank of Canada’s messaging, higher interest rates would have the happy coincidence of tempering household debt growth, which is identified as “the biggest domestic risk”. Higher interest rates are poised to arrive at the same time that chartered banks are pursing tighter lending policies consistent with new regulatory guidelines, both of which will act to lower personal debt growth and dampen real estate activity. Ultimately, moving the timetable for higher interest rates forward adds to our conviction that home sales and home prices are headed for a correction in 2013.

World Markets Recalibrate Risks

Despite major economic agencies, like the IMF and the OECD upgrading their global growth outlooks recently, global equity markets are largely in the red over the past month as investors seem to be a bit more pessimistic about the outlook, taking most commodity prices lower, and government bond yields higher. One notable government bond yield that has been increasing lately is Spain’s (see chart). A recent Spanish government bond auction had good uptake, but at a higher yield as markets are becoming concerned about the new Prime Minister’s ability to get Spain’s fiscal house in order. However, there have been positive signs out of Europe, with the most recent German investor and business sentiment indicators showing increased optimism.

A big factor behind increased risk aversion in the U.S. was the disappointing payrolls report for March, after strong jobs growth in recent months had been cause for optimism among investors. But, other areas of the U.S. economy continue to exhibit positive signs. Confidence among manufacturers improved in March, and the Fed’s latest beige book painted a somewhat rosier picture. Perhaps most encouraging development in the past month, which had been flagged as a key area of concern in the beige book – rising gasoline prices – finally looks to be losing some momentum. Oil prices have been declining, with Brent crude down about $7/bbl in recent weeks. It could take some time before consumers start seeing much relief at the pumps, but it is good news that one of the major risks we had previously flagged has started to recede.

The more pessimistic mood on markets likely reflects a recalibration of the risks that still exist in the global economy, and that investors had probably gotten a little ahead of themselves in the rally seen so far this year. But from our perspective the main story has not changed. Europe is expected to recover slowly from its current recession. The U.S. economy is improving, but growth will only be moderate. In Canada, we have moved the timetable forward on interest rate hikes, but have left the end point unchanged, leaving a relatively low interest rate environment intact.

RBC poll finds majority of Canadians say it makes sense to buy a house now, but fewer may actually take the leap.

An increasing majority of Canadians believe that now is the time to get into the housing market (59 per cent, up four percentage points from last year), instead of waiting until next year (41 per cent), according to the 19th Annual RBC Homeownership Poll.

This year, slightly more Canadians say they are unlikely to buy within the next two years (73 per cent, up two percentage points), even as confidence in homeownership is on the rise. A majority of Canadians believe housing is a good investment (88 per cent, up two percentage points from last year) and more than two-thirds (68 per cent) believe the value of their home has increased in the past two years, similar to last year (69 per cent). Three-quarters of Canadians (74 per cent) feel they are well-positioned to weather a potential downturn in home prices.

“There’s a mix of opinions on the housing market, as Canadians still feel confident about real estate but are a little uncertain about where the market is heading and when it makes sense to buy,” said Marcia Moffat, head of home equity financing, RBC. “Considerations such as affordability and available housing choices may be the difference between intent and reality when purchasing a home.”

Market sentiment shifting to sellers, more expect stable housing prices

Steady as she goes seems to be the order of the day here, as more Canadians see stable home prices and mortgage rates over the next year…The RBC poll found that after four years of sentiment favouring a buyer’s market, the tide appears to be turning. More Canadians surveyed this year feel the current housing market is a seller’s market, in which sellers have the advantage because the number of buyers exceeds the number of homes available (27 per cent, up from 20 per cent in 2011). Nearly four-in-10 Canadians say it is a buyer’s market, in which buyers have the advantage because the number of houses available exceeds the number of buyers (38 per cent, down two percentage points from a year ago). Fewer believe that the housing market is balanced (36 per cent, down from 40 per cent a year ago).

Less than half of Canadians (47 per cent) feel housing prices will be higher this time next year, down five percentage points from last year (52 per cent), while more Canadians expect prices to be stable (30 per cent, up from 27 per cent in 2011). Nearly half of respondents (46 per cent) expect mortgage rates to stay the same next year, up sharply from 30 per cent in 2011, while significantly fewer anticipate higher rates (41 per cent, down sharply from 60 per cent in 2011).

“Steady as she goes seems to be the order of the day here, as more Canadians see stable home prices and mortgage rates over the next year,” added Moffat. “There’s a lot of information out there. Getting expert advice from a mortgage specialist on financing options and the all-in costs of home ownership can help you make an informed decision.”

Price and mortgage increases top concerns

Prospective homebuyers who plan to buy in the next two years cited some concern about home prices increasing (23 per cent) and mortgage rates rising (22 per cent). These were followed by their current debt levels (20 per cent), qualifying for a mortgage (19 per cent), and having a good down payment (16 per cent).

Highlights from Alberta:

Alberta: Albertans lead the country in saying now is the time to get into the housing market (69 per cent, compared with 59 per cent nationally) rather than waiting until next year (31 per cent, compared with 41 per cent nationally). More than half of Albertans (55 per cent) surveyed say current housing conditions reflect a buyer’s market, a sentiment that leads the rest of Canada (38 per cent). This mood is underscored by a higher-than-average appetite to buy a home within the next two years (31 per cent, compared with 27 per cent nationally).

According to statistics released today by The Canadian Real Estate Association (CREA), national resale housing activity retreated in January 2012 from the strong finish reported for December 2011.

Highlights:

• Home sales were down 4.5% from December to January.
• Actual (not seasonally adjusted) activity came in 4.0% above levels in January 2011, and stood even with the 5 and 10 year averages for January sales.
• The number of newly listed homes edged down 1.4% from December to January.
• With sales down by more than new listings, the national market shifted further into balanced territory.
• The national average home price was up less than 2% year-over-year in January, ranking it among the smallest increases of the past year.

Sales activity recorded through the MLS® Systems of real estate Boards and Associations in Canada fell 4.5 per cent from December 2011 to January 2012. This marks the first monthly decline in national activity since August 2011 and the biggest monthly decline since July 2010. The monthly decline reversed a string of monthly increases over the closing months of last year, and returned national activity to where it stood at the end of the third quarter of 2011.

“The national housing market is stabilizing and remains well balanced,” said Gary Morse, CREA’s President. “That said, forecasts for economic and job growth going forward vary widely for different parts of the country, suggesting a possible continuation of a softening trend in some markets, as well as the potential that demand will pick up based on strong fundamentals in others. All real estate is local, so talk to your local REALTOR® to understand how price trends in your neighbourhood are shaping up.”

Activity was down in over half of all local markets in January from the previous month. Led by declines in Greater Toronto and Montréal, demand also softened in a number of other major urban centres including the Fraser Valley, Calgary, Edmonton, Winnipeg, Ottawa, and Greater Vancouver.

Actual (not seasonally adjusted) national sales activity was up four per cent from year-ago levels in January, the smallest year-over-year increase since last May. As was the case in a number of months last year, actual sales in January 2012 stood close to the five and ten year average for the month.

The number of newly listed homes edged down 1.4 per cent on a month-over-month basis in January following a 2.9 per cent increase in December. The monthly decline in new supply reflects a drop in new listings in a number of Canada’s largest urban centres, which offset a jump in new listings in Vancouver.

Sales fell in January shifting the national market back towards the mid-point of balanced territory and reversing the recent trend which had seen the market becoming tighter over the final four months of 2011. The national sales-to-new listings ratio, a measure of market balance, stood at 53.8 per cent in January, down from 55.5 per cent in December and 55.4 per cent in November.

Based on a sales-to-new listings ratio of between 40 to 60 per cent, 60 per cent of local markets were balanced in January. Compared to December, there were fewer buyers’ and sellers’ markets, and a greater number of balanced markets.

The number of months of inventory stood at six months at the end of January on a national basis, up from 5.7 months in December 2011 and returning it to where it stood in October 2011. The number of months of inventory represents the number of months it would take to sell current inventories at the current rate of sales activity, and is another measure of the balance between housing supply and demand.

The actual (not seasonally adjusted) national average price for homes sold in January 2012 was $348,178, representing an increase of 1.2 per cent from its year-ago level. This ranks among the smallest increases since late 2010.

On a seasonally adjusted basis, the national average home price rose 1.6 per cent on a month-over-month basis, marking a rebound from a decline of similar magnitude in December. This pattern mirrors the one playing out in the newly-launched MLS® Home Price Index (HPI), published on February 6.

“Year-over-year comparisons in the national average price are expected to become volatile and may turn negative, reflecting average price developments in the first half of 2011 in Vancouver,” said Gregory Klump, CREA’s Chief Economist. “At that time, high-end home sales in Vancouver’s priciest neighbourhoods surged to all-time record levels, which skewed the national average price upward considerably. A replay of this phenomenon is not expected this year. As a result, comparisons for national average price to year-ago levels over the coming months will reflect an upwardly skewed base effect. For this reason, year-over-year comparisons should be kept in perspective. Developments in the MLS® HPI will provide important guidance on price trends, since it is not affected by the problem of compositional shifts in the mix of sales activity.”

The MLS® HPI also takes into account the contributions toward the price of a home made by a broad range of quantitative and qualitative housing features, allowing it to track Canadian home price trends better than any other measure.

A national report predicts average house prices in Calgary will increase by 3.6 per cent this year.

The Royal LePage House Price Survey and Market Survey Forecast, released Thursday, said a vibrant local economy and low interest rates will drive demand for homes in the city in 2012.

It expects Calgary to post some of the highest year-over-year price increases in Canada.

In the fourth quarter of 2011, detached bungalows in Calgary posted the largest year-over-year price increases, rising 6.2 per cent to $416,622. Prices for standard two-storey homes rose 2.2 per cent year-over-year to $414,778, while prices for standard condominiums were flat, rising slightly 0.1 per cent year-over-year to $248,567.

“The modest year-over-year gains we saw in the fourth quarter conceal a strengthening market in Calgary,” said Ted Zaharko, broker and owner of Royal LePage Foothills, in a statement. “A vibrant local economy combined with continued low interest rates has Calgary poised to be one of Canada’s strongest real estate markets.”

The modest year-over-year gains we saw in the fourth quarter conceal a strengthening market in CalgaryHe said low interest rates combined with a lack of homes for sale helped create upward pricing pressure and led to frequent multiple offer situations as the year drew to a close.

Zaharko said first-time buyers looking to take advantage of low rates were an active group in the fourth quarter of 2011. Retirees looking to downsize were also an active group and drove demand for the city’s detached bungalows.

According to Royal LePage, by the end of 2012, average house prices in Calgary are expected to increase 3.6 per cent. Market activity is forecast to be the strongest in Canada with 2012 unit sales expected to rise 10.6 per cent higher than they were in 2011. At the national level, in the fourth quarter of 2011, standard two-storey homes rose 4.2 per cent year-over-year to $375,427, while detached bungalows increased 6.1 per cent to $344,392. Average prices for standard condominiums increased 3.6 per cent to $234,680.

Royal LePage expects average price growth to continue through 2012 and predicts national average prices to increase by 2.8 per cent by the end of the year.

The year-over-year growth rate for Calgary MLS residential sales in November grew at a pace three times more than the national average, according to data released Thursday by the Canadian Real Estate Association.

The association said there were 1,656 MLS sales in Calgary during the month, a hike of 16.0 per cent from November 2010.

Nationally, there were 34,534 sales representing an increase of 5.0 per cent.

In Calgary, the average MLS sale price in November was $398,722 which was basically the same as a year ago while the Canadian average price grew by 4.6 per cent to $360,396.

New listings in Calgary dropped by 5.3 per cent to 2,356 but they grew by 2.7 per cent across the country to 53, 515.

“The Canadian housing market is proving resilient in the face of ongoing global economic and financial uncertainty, to the benefit of Canadian economic growth,” said Gary Morse, CREA’s president, in a statement.

Gary MorseThe Canadian housing market is proving resilient in the face of ongoing global economic and financial uncertainty…November sales across the country were seven per cent above the 10-year average, reaching the fourth highest level on record for the month.

“Toward the end of every year, there’s a natural inclination to compare how momentum for national sales activity and average price compare to the year before,” said Gregory Klump, CREA’s chief economist, in a statement. “National sales activity picked up late last year, and November’s results suggest that a similar trend may be playing out again this year. By contrast, national average price also picked up toward the end of last year, whereas this year it has held steady after having peaked in the spring.

“With interest rates expected to remain low for longer, the housing sector will no doubt be closely watched for signs of excess. That said, current trends for resale housing and new home construction suggest that tightened mortgage regulations are working as intended and fostering economic stability in Canada.”

In Alberta, sales of 3,761 units were up 3.8 per cent from last year and the average price of $356,535 increased by 2.7 per cent. New listings of 5,820 were down six per cent.

An RBC Housing Snapshot poll said 33 per cent of Canadians think the real estate market is balanced, down seven percentage points in the fourth quarter from the first quarter, indicating opinion has begun to shift slightly to a seller’s market.

Also, 26 per cent define the current real estate market as a seller’s market, up six percentage points since the start of the year.

The RBC poll showed most Canadians describe the real estate market as a buyer’s market (41 per cent), where buyers have the advantage. That sentiment is fairly stable from the first quarter (40 per cent).

Albertans believe it is a buyer’s market (65 per cent), much more than any other region and 14 percentage points above the national average They also firmly believe it is not a seller’s market (six per cent).

The ‘sizzle’ will be taken out of the Canadian housing market next year, according to the Housing Forecast report from the Altus Group.

Actually, using ‘sizzle’ in the same sentence as ‘Canadian housing market’ is misleading in that the hot areas are only in certain parts of the country and certainly not in Alberta.

“You’re right about Calgary and Edmonton, which have been slower than elsewhere in the country,” says Peter Norman, chief economist at Altus Group.

“They are at a different point in the cycle (than other cities) but stand out in terms of where they are going.” And where they are going is up, unlike the rest of the country, says Norman in the report.

“Altus Group looked at regional trends across the country for the coming year,” he says. “Alberta has seen job conditions and interprovincial migration rise sharply this year (at the expense of Ontario and British Columbia,) positively impacting housing demand next year.

Peter NormanThey are at a different point in the cycle (than other cities) but stand out in terms of where they are going.” And where they are going is up, unlike the rest of the country…“However, other areas of the country will experience lower starts, including Atlantic Canada, where migration will continue to be impacted by the weak economy, which will hamper new housing demand.”

Part of the coming slowdown across the country can be attributed to the three rounds of tightening of mortgage qualification regulations by the federal government, which brought thousands of buyers forward to get into homeownership before the rules came into effect, but a larger issue is in play, says Norman.

“Most of the rules were aimed at (younger) first-time buyers, but to some extent first-timers never came back after the recession, anyway,” he says. “It will likely be a long time until we see them come back.

“Certainly the market is coping without first-time buyers, but it’s one of our biggest challenges.”

The importance of younger first-timers cannot be understated: Homeowners can’t move up unless there are buyers for their homes and traditionally most of those buyers come from the first-timer pool.

As noted by Norman, there is a potential first-time buyer pool, not necessarily in younger demographics, in Alberta: New arrivals.

The Altus report, using figures from Statistics Canada, shows the level of net interprovincial migration to the province in the period of January 2011 to June 2011 was higher than the entire year of 2010.

Figures from Canada Mortgage and Housing Corp. indicate Calgary has received a good share of the newcomers, who traditionally rent before buying a home.

The apartment vacancy rate for October 2011 is forecast to be 3.4%, down from 5.3% two years ago, and is forecast to fall again to 2.9% by October 2012.

When Alberta last enjoyed large net migration numbers, the lag between renting and buying was about nine months.

If and when the current vacancy rates will translate into increased home sales is the great unknown — what is known is Alberta is heading in the right direction.

Single-family and condominium MLS sales increased in October compared with a year ago, according to the Calgary Real Estate Board.

The board said Tuesday that single-family sales of 988 for the month were up by 11.39 per cent from October 2010 while condo transactions jumped by 19.87 per cent to 368 units.

The average sale price for a single-family home was up by 2.35 per cent year-over-year to $455,399 while the condo average dropped by 1.70 per cent to $282,903.

“A boost in full-time jobs throughout the year is gradually translating into improved sales in the real estate sector,” said Sano Stante, CREB president, in a statement. “Consumers are taking advantage of price stability and a healthy variety of selection. While these gains are moderate, we are set to outpace 2010 sales.”

Richard ChoFull-time employment growth has turned around this year, an area that had struggled in the past two years…Year-to-date sales in the single-family sector are 11,503, a 9.89 per cent increase over last year.

Condo year-to-date sales of 4,681 are up 2.92 per cent from last year.

“Consumers are feeling more confident about the local real estate market,” said Stante. “Overall, the resale housing market continues to show signs of improvement and, with no near term change in interest rates, we can expect the market will continue to see moderate and stable growth throughout the rest of the year.”

Richard Cho, senior market analyst in Calgary for Canada Mortgage and Housing Corp., said resale activity in the city is benefiting from improved labour market conditions, historically low mortgage rates and positive migration flows.

“Full-time employment growth has turned around this year, an area that had struggled in the past two years,” he said. “Low mortgage rates have also benefited many prospective buyers and will continue to remain favourable as rates are not anticipated to increase in the short term. Despite some of the financial uncertainty occurring in other countries, demand for housing in Calgary remains steady.”

On September 28, Calgary Economic Development and TD Bank Group presented the annual Economic Outlook event featuring Craig Alexander, Senior Vice President and Chief Economist for TD Bank Group and Mario Lefebvre, Director of the Centre for Municipal Studies at the Conference Board of Canada.

Calgarians were the first in Canada to hear Craig Alexander present TD Economics’ 2012 Alberta forecast – Risk & Volatility: Economic and Financial Perspectives for 2012, and Mario Lefebvre presented the Conference Board of Canada’s 2012 Economic Outlook for Calgary.

View Video Presentation

During the run-up to every U.S. presidential election, countless Americans threaten to move to Canada if their preferred candidate does not emerge victorious. Of course, few follow through with a move north. Maybe it is time to reconsider.

Canada ranks No. 1 in our annual look at the Best Countries for Business. While the U.S. is paralyzed by fears of a double-dip recession and Europe struggles with sovereign debt issues, Canada’s economy has held up better than most. The $1.6 trillion economy is the ninth biggest in the world and grew 3.1% last year. It is expected to expand 2.4% in 2011, according to the Royal Bank of Canada.

Canada skirted the banking meltdown that plagued the U.S. and Europe. Banks like Royal Bank of Canada, Bank of Nova Scotia and Bank of Montreal avoided bailouts and were profitable during the financial crises that started in 2007. Canadian banks emerged from the tumult among the strongest in the world thanks to their conservative lending practices.

Canada is the only country that ranks in the top 20 in 10 metrics that we considered to determine the Best Countries for Business (we factored in 11 overall). It ranks in the top five for both investor protection as well as lack of red tape, which measures how easy it is to start a business.

Canada #1Canadian banks emerged from the tumult among the strongest in the world thanks to their conservative lending practices.
Canada moves up from No. 4 in last year’s ranking thanks to its improved tax standing. It ranks ninth overall for tax burden compared to No. 23 in 2010. Credit a reformed tax structure with a Harmonized Sales Tax introduced in Ontario and British Columbia in 2010. The goal is to make Canadian businesses more competitive. Canada’s tax status also improved thanks to reduced corporate and employee tax rates.

Canada leans on the U.S. economy heavily: it’s the biggest oil supplier to Uncle Sam and three-quarters of its exports end up in the U.S. each year. Yet while U.S. unemployment has stayed above 9%, it’s only 7.3% in Canada compared to the 25-year average of 8.5%. The eurozone unemployment rate is 10%.

We determined the Best Countries for Business by looking at 11 different factors for 134 countries. We considered property rights, innovation, taxes, technology, corruption, freedom (personal, trade and monetary), red tape, investor protection and stock market performance.

Forbes leaned on research and published reports from the Central Intelligence Agency, Freedom House, Heritage Foundation, Property Rights Alliance, Transparency International, the World Bank and World Economic Forum to compile the rankings.

Canada in Top 5Canada is the only country that ranks in the top 20 in 10 metrics that we considered to determine the Best Countries for Business (we factored in 11 overall). It ranks in the top five for both investor protection as well as lack of red tape, which measures how easy it is to start a business.
Denmark dropped from the top spot in 2010 to No. 5 this year as its relative monetary freedom declined as measured by the Heritage Foundation. Denmark’s stock market also fell 14%, which was the worst performance of any of our top 10 countries. Four other European countries in last year’s top 20 also dropped in the rankings, with Finland sliding to No. 13, the Netherlands to No. 15 Netherlands, Germany to No. 21 and Iceland to No. 23.

The U.S. ranked No. 10, down from No. 9 in 2010. The world’s largest economy at $14.7 trillion continues to be one of the most innovative, ranking sixth in patents per capita among all countries (No.7 overall Sweden ranks tops for innovation).

What hurts the U.S. is its heavy tax burden. This year it surpassed Japan to have the highest corporate tax rate among developed countries. The U.S. also gets dinged for a poor showing on monetary freedom as measured by the Heritage Foundation. Heritage gauges price stability and price controls and the U.S. ranks No. 50 out of 134 countries.

Bringing up the rear are three countries where the economies are smaller than $10 billion. No. 132 Burundi, No. 133 Zimbabwe and No. 134 Chad all fare poorly when it comes to trade and monetary freedom as well as innovation and technology. Chad has the highest GDP per capita of the three at $1,600, but scores last among all countries on both corruption and red tape.

Want to pay down your mortgage faster?

When you pay down your mortgage faster, you can reduce your total interest costs by thousands of dollars and be mortgage-free years before you had thought possible. At The Mortgage Group, our Associates are able to advise you of the options available that will enable you to achieve this goal.

Prepayment Privileges

We all want to be mortgage-free faster. The Mortgage Group has ways to help you. With flexible prepayment options, you put extra cash towards your mortgage principal without incurring charges. This can save you thousands of dollars on your mortgage. Here’s how it works:

Increase your mortgage payments (principal and interest).

You can increase the amount of your mortgage payment once each calendar year by:

• 10% for a Low-Rate Fixed Closed Mortgage or
• 20% for any other type of closed mortgage

Make a lump-sum payment against your mortgage principal

In addition to increasing your mortgage payments, you can make a lump-sum prepayment (in $100 increments) each year without added charge (Some conditions apply). The maximum prepayment per calendar year is:

• 10% of the original mortgage amount for a Low-Rate Fixed Closed Mortgage; or
• 20% of the original mortgage amount for any other kind of closed mortgage

Pay more frequently

By switching from monthly mortgage payments to an accelerated weekly or bi-weekly schedule, you can become mortgage-free sooner and save thousands.

Example: $250,000 mortgage @ 6% APR on a 5-year fixed term with different payment frequencies for a 25-year amortization*.

* The Annual Percentage Rate (APR) is for a mortgage of $250,000 and a 25-year amortization. APR assumes no fee(s) will apply. If an appraisal is required, the appraisal fee would increase the APR. The interest for a fixed rate mortgage is calculated half yearly, not in advance. The rate shown is an example only and is not necessarily applicable to an actual mortgage. Assume same interest rate for entire amortization period. These results are based on the above example as well as a number of assumptions. While care is taken in the preparation of the illustration, no warranty can be made as to its accuracy or applicability for any particular case.

Increase your regular mortgage payment and shorten your amortization

You can choose to increase the amount of your regular mortgage payment (principal and interest) by up to 20% (10% if you have a Low-Rate Fixed Closed Mortgage) without added charge. You can do this once in every calendar year. Paying more each month shortens your amortization and can significantly reduce your interest costs over time.

Example: $250,000 mortgage at 6% interest on a fixed term with monthly payments1

1Per annum, calculated half yearly, not in advance. The rate shown is an example only and is not necessarily applicable to an actual mortgage.

2Assume same interest rate for entire amortization period.