Market Commentary

December 6,2006 Here is a synopsis of the Bank of Canada's recent decision to keep their rate stable for the 4th time. Dec. 5 (Bloomberg) -- The Canadian dollar was little changed after the Bank of Canada kept its target rate unchanged for a fourth straight meeting, saying signs of slowing growth are coinciding with gains in employment and demand for commodities.

The rate for overnight loans between banks remains at 4.25 percent, the highest since August 2001 and 1 percentage point less than the U.S. Federal Reserve's target. All 30 economists surveyed by Bloomberg News predicted no change. ` `The potential is for Canadian dollar strength, but in the bigger picture the Canadian dollar has a bearish outlook,'' said Nick Bennenbroek , vice president of foreign-exchange research at Brown Brothers Harriman & Co. in New York, before the announcement. ``The U.S. dollar has been broadly soft against most currencies, but the Canadian dollar has been a laggard.''

The Canadian currency rose to 87.78 U.S. cents at 9:07 a.m. in Toronto from 87.68 U.S. cents yesterday. One U.S. dollar buys C$1.1394. Canada's dollar reached 91.44 U.S. cents on May 30, the highest since 91.47 U.S. cents on Jan. 4, 1978. Canada's economy is growing at the slowest pace in three years on weaker U.S. demand, a currency trading near a 28-year high, and the impact on construction of seven rate increases that ended in May. The central bank in October said the economy will grow 2.5 percent next year, down from 2.8 percent this year.

The Canadian currency has fallen about 3.8 percent since May 30, when it climbed to a 28-year high, as commodities prices peaked. The Canadian central bank raised the target rate for overnight loans between commercial banks seven times from September 2005 to May.

The yield on Canada's benchmark 10-year note was little changed at 3.87 percent. The price of the 4 percent bond due June 2016 rose 4 cents to C$101.04. Bond yields move inversely to prices. A basis point is 0.01 percentage point.

This is the actual announcement for those who would like the complete commentary:

Bank of Canada keeps target for the overnight rate at 4 1/4 per cent
OTTAWA-The Bank of Canada today announced that it is maintaining its target for the overnight rate at 4 1/4 per cent. The operating band for the overnight rate is unchanged, and the Bank Rate remains at 4 1/2 per cent. The Bank's outlook for Canadian economic growth and inflation in 2007-2008 is essentially unchanged from that set out in the October Monetary Policy Report (MPR). Global growth has been strong, commodity prices have remained high, and employment growth in Canada and the United States has been sustained. Some recent indicators suggest that output growth in Canada and the United States in the fourth quarter of 2006 may be a little weaker than previously expected. Inflation in Canada has evolved broadly in line with the Bank's expectations.

All things considered, both total CPI and core inflation in Canada are still projected to converge at 2 per cent in the second half of 2007. In line with the Bank's outlook, the current level of the target for the overnight rate is judged at this time to be consistent with achieving the inflation target over the medium term.

The principal risks remain those identified in the October MPR. The main upside risk relates to the momentum in household spending and housing prices. The main downside risk is that the U.S. economy could slow more sharply than expected, leading to lower Canadian exports. The Bank judges that, overall, risks around the inflation projection are roughly balanced. The Bank will continue to pay close attention to the evolution of risks, together with economic and financial developments in the Canadian and global economies. A full analysis of economic developments, trends, and risks will be outlined in the Monetary Policy Report Update, to be published on 18 January 2007. .

Information note: The Bank of Canada's next scheduled date for announcing the overnight rate target is 16 January 2007

While the Bank of Canada rate has remained steady,economists are still forecasting that the rate will start to reduce in the first quarter of 2007 and that they anticpate the rate could drop by as much as three quarters of a point by late 2007. On the fixed rate scene,there has some weakening in bond markets yields, which has translated into marginally lower rates.The five year term mortgage is now around 5.05-5.10%.If the trend continues,we should see 5 year rates drop below 5% again in the new year.

Renters Turn Into Homebuyers With 0 Down!
Since we announced the 100% financing program, we have successfully converted over 40 renters into homebuyers ,who have either purchased already or who are out looking for a new home.

It takes a few years to save the necessary down payment and this has been a major drawback for younger homebuyers entering the market .In addition, wih the higher price of homes, home ownership has not been affordable. This new program remedies both situations.

To qualify ,a renter has to have a steady job for at least 2 years; excellent credit with at least 3 trade lines that been reported on their credit for 2 years and $2,000-$3,000 for closing costs.

The new 100% program provides amortizations up to 40 years, which make ownership very affordable, even with today's higher priced homes. A $200,000 purchase is only $1052.00 per month P & I.

A family with a joint family income of $50,000 could qualify to purchase this home with nothing down! If you know of anyone who is renting and paying from $800-$1200 per month, tell them to call me. They could be homeowners in 2007 and paying themselves every month instead of their landlord!

Finally-Recognition for Self Employed and Commissioned Borrowers
Self employed and commissioned borrowers in the past were only allowed up to 90% financing and only if they had a provable income record and at least three years in business. Today, more and more people are entering the ranks of the self employed. These people pay their bills and have always had good credit, but due to tax considerations, they may not be in a position of having "provable income" to qualify for a mortgage.

A new Genworth insured mortgage now allows up to 95% financing for borrowers with a "stated income" component that means we don't have to prove income. If someone has great credit and 2 years, instead of three ,as a self employed individual or fully commissioned salesperson, they can now access 95% financing.

If you know someone, in this circumstance that is looking to purchase, have them contact me for further details.

Using Your Equity Becomes Even More Affordable!
Previously, if you wished to access the equity in your home you were limited to 90% of it's current market value and limited to a 25 year amortization.

Under another new Genworth initiative, financing is now available for up to 95% of the value of your home with amortization up to 40 years. This opens the door to a whole new range of possibilities for homeowners to take advantage of the equity in their home. It will be especially advantageous for anyone looking to purchase a cottage or investment property.

If you know of anyone who is considering making a financial move in 2007,have them give me a call. This is a mortgage strategy that can be put in place for a variety of purposes.

Buying Rental Property Becomes Easier!
The price of rental property has appreciated to the point where the economics of rent versus carrying costs has made it difficult to find a property that is economically feasible.

With the new refinancing plan available to homeowners and extended amortization, rental property purchases can now make more sense .In addition ,there is also a new 100% financing plan available to qualified borrowers that will make it easier to own and economically feasible at the same time.

If you know of anyone looking to buy an investment property in 2007, have them give me a call to see if we can put some of these new mortgage strategies in place for them.

Mortgage Brokers Make History
In 1994,I was asked to join a group of mortgage brokers and lenders to lay the groundwork for a national association of mortgage brokers and lenders across Canada. At that time ,mortgage brokers represented only 3% of mortgages originated in Canada and there were no professional standards.

In 1995,we held our first national conference that had 350 people in attendance.

I just came back from the 2006 Conference. This year's event sold out with over 2000 mortgage brokers and lenders in attendance from across Canada. The organization today represents over 9400 professionals and mortgage brokers today account for over 30% of all mortgages originated in Canada. This number is expected to increase to over 50% by 2010. Today ,we have a recognized professional accreditation process with the designation of "AMP" or Accredited Mortgage Professional. The organization known by the acronym "CIMBL" will change it's name to "CAAMP" in May, which stands for the Canadian Association of Accredited Mortgage Professionals. Our organization has been instrumental in rewriting consumer protection guidelines, which are now being incorporated into the new Mortgage Brokers Act, currently before the provincial legislature in Ontario. The old act is over 30 years old so the new act will bring into play a new level of professionalism and guidelines for consumer protection. All of our Mortgage Professionals are involved in the new professional accreditation process. They have either obtained their "AMP" or they are working on the necessary educational and work experience criteria necessary to be an "AMP" I am proud to have had a hand in raising the profile of mortgage brokers nationally into a recognized professional industry. The Mortgage Professionals- "Our Name Says It All" If you would like any more information on "CIMBL", you can go to their website at www.cimbl.ca

What's Ahead In Mortgage Financing for Consumers in 2007
In 2007,I will have been in the banking lending industry for over 37 years. I have never seen as many changes in the lending climate as I have in the last year.

Since I started as a mortgage broker in 1989, I have always preached that a mortgage is more than just a financing vehicle, it is a financial planning tool.

Mortgage brokers today represent 40-50 lenders and there are literally hundred's of mortgage products out there now, with more to come. The mortgage brokerage industry is growing by leaps and bounds ,because we represent the only true unbiased financing choice for the consumer. Banks can only sell you their product and it may not be the best available product for you, but they are not about to tell you that. Gone are the days when going to a mortgage broker meant you didn't qualify at your own bank. Gone are the days when going to a mortgage broker meant paying a fee.

Today, a mortgage broker has to be a true financing professional ,who is able to analyze a wide range of factors ,when determining the best mortgage strategy to suit you. You will see more emphasis in the near future on mortgage strategy ,where a mortgage broker becomes your life long partner in protecting your financial interest. Stay tuned for more exciting news in 2007 as our industry becomes even more dynamic!

Bank of Canada-No Increase again!
Posted October 20, 2006

Bank of Canada keeps target for the overnight rate at 4 1/4 per cent OTTAWA-The Bank of Canada today announced that it is maintaining its target for the overnight rate at 4 1/4 per cent. The operating band for the overnight rate is unchanged, and the Bank Rate remains at 4 1/2 per cent. Since the July Monetary Policy Report Update (MPRU), total CPI inflation, excluding the temporary effect of the GST reduction, has been above 2 per cent and domestic demand has continued to grow at a robust pace. However, GDP growth over the second and third quarters of 2006 has been weaker than expected, largely because of weaker net exports. Labour productivity growth has also been somewhat lower than expected. All factors considered, the Bank judges that the Canadian economy continues to operate just above its production capacity. Although global economic growth is expected to be a little higher than previously anticipated, a weaker short-term outlook for the U.S. economy has curbed the near-term prospects for Canadian exports and growth. As well, given developments in labour productivity growth, the Bank has reduced its assumption for potential growth to 2.8 per cent for the 2006-2008 period. As a result of these factors, the Bank has revised its projection for economic growth in Canada to 2.8 per cent this year, 2.5 per cent in 2007, and 2.8 per cent in 2008. This growth profile implies that the small amount of excess demand now in the economy will be eliminated by the second half of 2007, and that the economy will then remain roughly in balance through to the end of the projection period. Consistent with this profile, core inflation is expected to move slightly above 2 per cent in coming months, and to return to 2 per cent by the middle of 2007. Lower energy prices have led to a downward revision to the near-term projection for total CPI inflation. Total inflation (which includes the temporary impact of the GST reduction) will likely average about 1 1/2 per cent through to the second quarter of 2007, before returning to the 2 per cent target and remaining there through to the end of 2008. In line with this updated outlook, the current level of the target for the overnight rate is judged at this time to be consistent with achieving the inflation target over the medium term. As the Bank indicated in its 6 September interest rate press release, risks around the base-case projection are judged to be a little greater than they were at the time of the July MPRU. The main upside risk relates to the momentum in household spending and housing prices. The main downside risk is that the U.S. economy could slow more sharply than expected, leading to lower Canadian exports. It is the Bank's judgment that, overall, risks around the inflation projection are roughly balanced. The Bank will continue to pay close attention to the evolution of risks, together with economic and financial developments in the Canadian and global economies. A full analysis of economic developments, trends, and risks will be set out in the Monetary Policy Report, to be published on 19 October 2006.

Information note: The Bank of Canada's next scheduled date for announcing the overnight rate target is 5 December 2006.

Economists had expected rates to stay unchanged today. Several predict the central bank will trim interest rates in the first half of next year amid tepid economic growth

The Most Dramatic Announcement in Mortgage History for Homebuyers
100% Financing Is Here at our Best Discounted Mortgage Rates Ok-do you know somebody that has been struggling to save a down payment for a home?Do you know someone who is paying rent of $800-$1000 per month and would like to own?Do you know of a single parent who would like to own ,but doesn't think he/she could afford it?Do you know someone who is going through a seperation or divorce and thinks that he/she may not be able to afford to own again?If you do,send them to see me. There is a new program announced by Genworth Canada last week that provides 100% of the purchase price to homebuyers and at our best discounted mortgage rates and buyers are allowed to access the new 35 year amortization for their payments.All they need is good credit and stable employment and enough money to cover their closing costs(about $2500-3000) This is the most historic announcement ever in the mortgage industry.To give you an example,a purchase of a home for $160,000 would cost $861.69 per month plus taxes!!!.The qualifying income for that buyer would be $39,000 per year! Home ownership is now reachable for thousands of renters!!Tell your friends,family and co-workers that 2007 is the year for them to buy their own home. All lenders do not currently offer this program so it may not be available at someone's bank or known about by many people.Spread the word!!We would love to help someone achieve the dream of affordable homeownership in 2007

Bank of Canada keeps target for the overnight rate at 4 1/4 per cent again
Posted September 6, 2006

The Bank of Canada today announced that it is maintaining its target for the overnight rate at 4 1/4 per cent. The operating band for the overnight rate is unchanged, and the Bank Rate remains at 4 1/2 per cent. Since the July Monetary Policy Report Update (MPRU), the global economy has continued its solid expansion. While there has been some moderation in U.S. economic growth, in the rest of the world growth has strengthened further. Commodity prices have remained firm through this period. In Canada, the level of economic activity in the second quarter of 2006 was somewhat below the Bank's expectations, primarily because of weaker exports. Total and core CPI inflation in July came in slightly higher than the Bank expected, owing largely to price strength in the housing and services sectors. Nevertheless, all things considered, the underlying trends in the Canadian economy appear to be in line with the broad thrust of the Bank's July projection in terms of output and inflation. Looking forward, the Bank continues to expect the Canadian economy to operate at about its production potential, with total CPI inflation returning to the 2 per cent inflation target in the second half of 2007. In line with this outlook, the current level of the target for the overnight rate is judged at this time to be consistent with achieving the inflation target over the medium term. The key risks to the outlook over the next few quarters remain those set out in the July MPRU: the upside risks to Canadian output and inflation relate primarily to the momentum in household spending and housing prices, while the main downside risk is that U.S. household demand could slow more rapidly than expected, thus reducing demand for Canadian exports. While both these risks appear to be a little greater than they were in July, the Bank continues to judge that, overall, risks are roughly balanced. The Bank will pay close attention to the evolution of risks, together with economic and financial developments in the Canadian and global economies. A full analysis of economic developments, trends, and risks will be provided in the Monetary Policy Report, to be published on 19 October 2006.

Information note: The Bank of Canada's next scheduled date for announcing the overnight rate target is 17 October 2006.

Bank of Canada keeps target for the overnight rate at 4 1/4 per cent posted August 1, 2006

Kingston,Ontario July 12,2006 OTTAWA-The Bank of Canada today announced that it is maintaining its target for the overnight rate at 4 1/4 per cent. The operating band for the overnight rate is unchanged, and the Bank Rate remains at 4 1/2 per cent. Overall, the outlook for economic growth and inflation in Canada is largely unchanged from the April Monetary Policy Report (MPR). The global economic expansion remains robust. Growth in Canada in the first half of 2006 appears to have been a little stronger and the Canadian dollar has traded in a somewhat higher range than was envisaged in the April MPR. As well, there was a further shift in the composition of demand towards consumption and away from exports. Total CPI inflation has remained above the 2 per cent target, mainly because of increases in consumer energy prices, while core inflation moved up to 2 per cent slightly sooner than expected. All factors considered, the Canadian economy is currently judged to be operating just above its production capacity. In 2007 and 2008, growth is projected to be a little weaker than was set out in the April MPR. The additional strength that has developed in domestic demand is expected to persist into next year, but this should be more than offset by a weaker outlook for net exports, owing primarily to the recent strength of the Canadian dollar. With some anticipated moderation in U.S. growth, combined with past interest rate and exchange rate increases, the Canadian economy is projected to return to its production capacity by the end of 2008. Total CPI inflation is expected to average just over 1 1/2 per cent from mid-2006 to mid-2007, with the reduction in the Goods and Services Tax lowering the inflation rate by 0.6 percentage points over this period. Inflation should then return to the 2 per cent target. Core inflation should remain at about 2 per cent throughout the projection period. In line with the Bank's largely unchanged outlook, the current level of the target for the overnight rate is judged at this time to be consistent with achieving the inflation target over the medium term. The Bank will monitor global and domestic economic and financial developments, including adjustments in the Canadian economy, relative to its projection. Risks to the projection remain roughly balanced, with a small tilt to the downside later in the projection period related to global imbalances. Further details of the Bank's outlook for output and inflation will be discussed in the Monetary Policy Report Update, to be released on 13 July 2006.

Information note: The Bank of Canada's next scheduled date for announcing the overnight rate target is 6 September 2006.

This Is What We Said In Our Last Economic Update
Forecasting another 25 bp increase from the Fed south of the border and they don't sit down again until May. With the housing market beginning to soften in the US and low core inflation the prediction is for the Fed to stop increasing rates and stay at 5.00 for the remainder of 2006. In Canada there is a chance of another 25 bp increase to a Prime rate of 6.00% and then Canada is anticipated to follow the US lead and leave rates stable for the remainder of the year.It would appear central bankers are willing to take the economy to the edge if inflation is still in the air. There are already signs of a weakening housing market in the US and rate increases could have a snowball effect on the economy which would echo itself in Canada. Benjamin Tal,chief economist with CIBC World markets feels we are nearing the end of the tightening cycle. Forecast is for variable rates to drop in 2007 and 2008 in Canada and the US. Here is also a quote on the economy in 2006 from Philip Hager & North investment Management in their April update:"Surging commodity prices have ignited a boom in Western Canada that has brought growth in jobs,incomes,investment,house prices and tax revenue-but also higher interest and exchange rates that hurt our manufacturers.In 2006,some reprieve is expected as The Bank of Canada finishes hiking interest rates and the Canadian dollar eases a bit from recent highs." Even though prime is up 2.00% from it's low,we've seen stability in fixed rate mortgages, particularly the longer term starting at the 5 year. Since January 2003, the 5 Year posted rate has seen a high of 6.85% (Feb 14, 2003), a low of 5.70% (March 17, 2004), an average of 6.23% and it currently sits at 6.45%. That's 39 months of stability in fixed rates, despite fluctuations in Prime. While Prime has risen 150 bps since Sept 2005, posted 5 year fixed rates have only gone up 75 bps and the prediction is for fixed rates to come down in late 2006 and early 2007. The Five year bond rate in December was 3.86 and the corresponding best discounted 5 year mortgage rate was 4.94%.Today, the 5 year bond rate has moved to 4.26. The five year best discounted mortgage rate still stand around 5.25-5.35%.Lenders continue to operate on a very thin margin over the bond rate of .99-1.09%.Based on the increase in bond rates since December,we should have a 5 year around 5.44%.Interestingly,the last time rates were 5.35% on a five year mortgage in December 2002,the 5 year bond rate was 4.06 and the prime rate was 4.50%. Those clients strategizing with their mortgage and who opted for 6, 9 or 12 month heavily discounted teaser periods have had the benefit of taking advantage of extremely low rates for the duration of the teaser period.Those clients who chose a fixed discount on their mortgage may not have benefited from the up front discount,but continue to benefit from a rate close to or lower than the current 5 year fixed rate.While variable rates have gone up,variable rate clients will benefit from an overall lower average mortgage rate if prime falls again in 2007 and 2008,as forecast.There is still some benefit to choosing a variable rate product given the wide range of customized discount plans available and your propensity for risk.First time buyers,however,would be better advised to go with at least a 5 year mortgage,if security is an issue.

This Is What The Bank of Canada Said in May 2006
OTTAWA-The Bank of Canada today announced that it is raising its target for the overnight rate by one-quarter of one percentage point to 4 1/4 per cent. The operating band for the overnight rate is correspondingly increased, and the Bank Rate is now 4 1/2 per cent. The strong momentum in the global and Canadian economies has continued, although there has recently been an increased degree of volatility in commodity markets, foreign exchange markets, and financial markets more generally. Recent Canadian data confirm that domestic demand remains solid, and that both CPI and core inflation are evolving largely in line with the Bank's expectations. With today's increase, the target for the overnight rate is now at a level that is expected to keep the Canadian economy on the base-case path projected in the April Monetary Policy Report (MPR) and to return inflation to the 2 per cent target. The Bank will monitor global and domestic economic and financial developments, including adjustments in the Canadian economy, relative to the projection set out in the MPR. The Bank continues to assess the risks to this projection to be as presented in the MPR.

This Is Where We Are Now
The US fed raised rates to 5.25%,as they feel there are still inflationary pressures at work.Some economists feel they have overshot their mark and the increase in rates will push the US into recession.David Rosenberg,Merrill Lynch's North American economist said in the Globe and mail today that bond yields are all below the Fed funds rate.This situation has happened 4 times in the past in March 2000,August 1998,January 1989 and January 1982.In each case,these signs preceeded a major economic downturn in the US economy.br> In May,the Bank of Canada raised rates ,but sent out a signal that rate increases could be at an end.Their July announcement confirms that position. Bond market rates since our last economic report have increased slowly upward ,moving the 5 year mortgage rate to around 5.50%,but with the latest move by the Bank,they fell sharply today.In the last three days ,the 5 year bond market rate has fallen from a high of 4.528 to 4.292,a move of .23BP's,which is the first major move down in rates in the last two months,taking pressure off long term rates.The move by the Bank also prompted a softening in the Canadian dollar to the 88 cent range.

The Bank has given us a sign of things to come and barring any major economic signals that point to more inflationary pressures,we should spend the rest of the summer in a realtive calm interest rate environment.If the economists are correct and if the Bank sees the economy unfolding somewhat later this year,we should see prime and long term mortgage rates soften into fall and into 2007.

Bank Prime moves to 5.75% posted May 1, 2006

OTTAWA-The Bank of Canada today announced that it is raising its target for the overnight rate by one-quarter of one percentage point to 4 per cent. The operating band for the overnight rate is correspondingly increased, and the Bank Rate is now 4 1/4 per cent.

The global economy has been growing at a robust pace, exhibiting a little more momentum than had been anticipated. This global strength and the associated higher prices of many commodities, together with strong domestic demand in Canada, have produced solid growth in the Canadian economy at a pace consistent with the Bank's outlook in the January Monetary Policy Report Update. At the same time, global competition and the past appreciation of the Canadian dollar continue to pose challenges for a number of sectors of the economy. All factors considered, the Canadian economy is judged to be operating at, or just above, its production capacity.

High energy prices have kept total CPI inflation in Canada somewhat above the Bank's 2 per cent target. Core inflation has remained below 2 per cent owing to persistent downward pressure from prices of imported consumer goods. Against this backdrop, the Bank decided to raise its target for the overnight rate.

Looking forward, the Bank projects that the Canadian economy will grow by 3.1 per cent in 2006, 3.0 per cent in 2007, and 2.9 per cent in 2008. Total CPI inflation is projected to average close to 2 per cent in 2007 and 2008 (excluding the effect of any changes in the GST). The Bank judges that the risks to its projection are roughly balanced, with a small tilt to the downside later in the projection period.

In line with the Bank's outlook for the Canadian economy, some modest further increase in the policy interest rate may be required to keep aggregate supply and demand in balance and inflation on target over the medium term. The Bank will closely monitor evolving developments in the Canadian economy in light of the cumulative increase in the policy interest rate since last September.
A full analysis of economic developments, trends, and risks will be provided in the Monetary Policy Report, to be published on 27 April 2006

'Outlook from CIBC World Markets

Forecasting another 25 bp increase from the Fed south of the border and they don't sit down again until May. With the housing market beginning to soften in the US and low core inflation the prediction is for the Fed to stop increasing rates and stay at 5.00 for the remainder of 2006.

In Canada there is a chance of another 25 bp increase to a Prime rate of 6.00% and then Canada is anticipated to follow the US lead and leave rates stable for the remainder of the year.It would appear central bankers are willing to take the economy to the edge if inflation is still in the air. There are already signs of a weakening housing market in the US and rate increases could have a snowball effect on the economy which would echo itself in Canada. Benjamin Tal,chief economist with CIBC World markets feels we are nearing the end of the tightening cycle.

Forecast is for variable rates to drop in 2007 and 2008 in Canada and the US.
Here is also a quote on the economy in 2006 from Philip Hager & North investment Management in their April update:"Surging commodity prices have ignited a boom in Western Canada that has brought growth in jobs,incomes,investment,house prices and tax revenue-but also higher interest and exchange rates that hurt our manufacturers.In 2006,some reprieve is expected as The Bank of Canada finishes hiking interest rates and the Canadian dollar eases a bit from recent highs."

Even though prime is up 2.00% from it's low,we've seen stability in fixed rate mortgages, particularly the longer term starting at the 5 year. Since January 2003, the 5 Year posted rate has seen a high of 6.85% (Feb 14, 2003), a low of 5.70% (March 17, 2004), an average of 6.23% and it currently sits at 6.45%. That's 39 months of stability in fixed rates, despite fluctuations in Prime. While Prime has risen 150 bps since Sept 2005, posted 5 year fixed rates have only gone up 75 bps and the prediction is for fixed rates to come down in late 2006 and early 2007.
The Five year bond rate in December was 3.86 and the corresponding best discounted 5 year mortgage rate was 4.94%.Today, the 5 year bond rate has moved to 4.26. The five year best discounted mortgage rate still stand around 5.25-5.35%.Lenders continue to operate on a very thin margin over the bond rate of .99-1.09%.Based on the increase in bond rates since December,we should have a 5 year around 5.44%.Interestingly,the last time rates were 5.35% on a five year mortgage in December 2002,the 5 year bond rate was 4.06 and the prime rate was 4.50%.

Those clients strategizing with their mortgage and who opted for 6, 9 or 12 month heavily discounted teaser periods have had the benefit of taking advantage of extremely low rates for the duration of the teaser period.Those clients who chose a fixed discount on their mortgage may not have benefited from the up front discount,but continue to benefit from a rate close to or lower than the current 5 year fixed rate.While variable rates have gone up,variable rate clients will benefit from an overall lower average mortgage rate if prime falls again in 2007 and 2008,as forecast.There is still some benefit to choosing a variable rate product given the wide range of customized discount plans available and your propensity for risk.First time buyers,however,would be better advised to go with at least a 5 year mortgage,if security is an issue.

"New 30 and 35 Year Amortizations Make a Difference"

With the price of housing increasing rapidly over the past few years and with interest rates moving up,many first time homebuyers have seen their purchase qualification level decreased and their affordability challenged.Both CMHC and Genworth,who insure mortgages for first time buyers, have introduced plans to allow amortizations up to 30-35 years,making it more affordable for first time buyers entering the market.

For details on CMHC's program go to:cmhc.ca/en/corp/nero/nere/2006/2006-02-25-1400.cfm

For details on Genworth's program go to:www.genworth.ca/mi/eng/index.html under "What's New"

Feb 13,2006-Bank of Canada January rate increase and market outlook for early 2006

Bank of Canada announcement: "FOR IMMEDIATE RELEASE" 24 January 2006

Bank of Canada raises overnight rate target by 1/4 percentage point to 3 1/2 per cent OTTAWA

What does it all mean and where are we going?

Well, the bank is still committed to raising it's prime rate again March. This would bring prime bank rate to 5.50%. Many economists feel that this will be where we sit for the most of 2006, and then we will see the Bank pull in its horns in the latter part of 2006 and into 2007. Reading the Bank's announcement they hint at the same scenario. If prime moves to 5.50%, variable rate mortgages with discounts of .40-.85% would be at 4.65% to 5.10%.

Long term rates have remained relatively stable. In our December report, the 5 year bond rate was around 3.86% and the corresponding 5 year mortgage rate was around 4.94%. The 5 year bond rate was 4.078 on Feb 10th and 5 year mortgages were anywhere from 5.00% to 5.10%. The represents a very narrow spread over bond of only .92-1.03%. Five year mortgage rates have only moved up by .06- .16% since December.

Comparing prime rate to 5 year mortgage rates, the prime rate has moved up 150 basis points from its low in 2004, while the five year rate is only up approximately .60% off its lowest point.

For those of you in a variable rate mortgage - if you chose a flat discounted variable, as opposed to an up front discounted variable, your rate would currently be .65-.85% below prime. If you chose an up front discounted variable, your current discount from prime is more likely .40%-.50%. Those in a 5 variable rate mortgage with a discount of .40% to .85% will move to a rate of 4.70% to 5.10%, if the rate moves again in March. If you locked in today, your 5-year fixed rate would be around 5.00 to 5.10%. This is equal to or greater than where you may be with another prime rate increase, so there really is no monetary benefit to locking in. In fact, some economists are forecasting a possible drop in prime later this year and into 2007, as well as corresponding fixed rate drops should the economy take a turn. The current flattening of the yield curve (where short term rates approached long term rates) is reminiscent 1998/99. That period led to an exodus from variable rate mortgages into fixed rate plans. An interesting statistic states "those who switched from a variable to a fixed rate mortgage in 1998 lost a cumulative $8300 during the subsequent years based on a $200,000 mortgage."

Certainly the savings in a variable rate mortgage has diminished since 2001 to date. Another interesting research report compared variable rates to a fixed rate mortgage over the period 2001 through to 2005, based on a $200,000 mortgage, and concluded the following: The difference between variable and fixed for someone with a $200,000 since 2001 saved $17,421 or $3484 per year! That same mortgage in 2005 saved approximately $1372 year over year from 2004.

There is still a case to be made for someone choosing a variable rate mortgage over a fixed rate today, depending on the plan they choose, their propensity to risk and their financial status. For a new homebuyer, however, with a relatively large mortgage compared to their income, other considerations should be made: Today's current environment would suggest that a fixed rate mortgage (i.e. payment and income stability) will offset any interest-saving advantage in a variable mortgage in the near term.

Learn more... Bank of Canada (new browser will open)

Update before December Bank of Canada Increase .....
The Mortgage Professionals Economic Update

Kingston, Ontario. December 1st, 2005. It is almost a given that we will see a Bank of Canada rate increase of .25% on December 6th. With currrent economic sentiment, this will likely be followed by an additional .25% increase on January 24th. Third quarter economic economic results were much more robust than expected, which has added fuel to the Bank of Canada's position for rate increases in the face of possible inflation. This will bring prime to 5.25% by early 2006.

The third quarter burst was stimulated almost entirely by the run up in energy prices in August and September. Fourth quarter results are expected to be lacklustre due to a drop in manufacturing shipments and motor vehicle sales, but economists feel that the drop will not be enough to deter the Bank of Canada from their tightening cycle.The Organization for Economic Co-Operation and Development said the Bank of Canada should increase it's rate by 1.25% through the end of 2007, if the economy continues to roll on at its current growth level. If this forecast is correct, that would bring prime to 6.00% by the end of 2007. I think we will see prime rate move to at least 5.25% by early 2006 and then take a breather until the flow-through effect of these and past increases work themselves through the economy. The Bank of Canada has a tough balancing act to maintain between Canada's west, growing on the back of the energy industry, and the east where manufacturing slowdown's and plant closures are hitting Ontario's economy.

On the bond market side, the bond market rates have risen from their October levels. The 5 year bond has risen from a low of 3.60% to 3.86%. The 5 year mortgage rate has adjusted from 4.5% to 4.94%. Lenders were operating on a narrow spread over the 5 year bond of only .90% heading into October. This is typical of this time of year as lenders try to create as much mortgage volume as they can before fiscal year-ends. The average spread over the 5 year bond is generally between 1.15% to 1.20%. Current rates are operating on a reduced spread of only 1.08%. This appears to be a psychological move to keep the 5 year rate below 5%. Some economic forecasters see bond market rates falling in 2006, which may allow for fixed mortgage rate reductions.

Some may remember similar rhetoric in previous years, as rates increased to 5.25% on a 5 year mortgage, and then subsequently dropped back to the 4.5% range. The last time prime his 6% was in 2001.There are still too many economic factors at play to even guess where we are headed. Individual decisions must still be based on affordability and comfort for the customer. .

I am in a variable mortgage - what should I do? If you have an ongoing discount from prime of .75% or more, your current rate would be 4.00%. With the forecast in 2006 of prime at 5.25%, you will be at 4.50%. If prime rate moves to 6% by 2007, your rate will be 5.25%. The current rate for a 5 year mortgage would be approximately 5.00%. Remember, you have benefitted from very low rates up to this point, so your overall average rate will be much lower than a 5 year fixed rate during the same period.

Now if you have a discount of less than .40%, you may wish to consider locking into a 5 or 10 year mortgage. Many of my clients are locking into a 10 year mortgage for long term security. Ten year rates approximate 5.35%, which is only .45% over this past year's lowest 10 year rate of 4.90%. If you are looking to refinance or purchase another home, now is an ideal time to review all of your options.

The Smith Manoeuvre Have you heard of 'The Smith Manouevre'? Do you have a mortgage? Do you have equity in your home of 25% or more? If either of the above applies to you, you are a prime candidate for this brilliant financial planning strategy. If you have any non-registered cash assets,you are in an even better position!!

What if I told you that you could make your mortgage interest tax deductible? What if you could accumulate assets outside of your mortgage at the same time? Interested in learning more? Would you be interested in attending a seminar to learn how this is done? Watch your email for a follow up on this fascinating mortgage strategy.