RateSupermarket.ca’s Expert Mortgage Panel Believes Fixed and Variable Mortgage Rates Will Remain Level in February

TORONTO, Feb 7, 2012… Recent fluctuations in variable and fixed mortgage rates have left Canadian consumers confused about future mortgage trends.  The good news is that February should be less volatile, with RateSupermarket.ca‘s Mortgage Rate Outlook Panel anticipating both fixed and variable mortgage rates will remain level during the month.

At the end of last year lenders reduced their discounts to prime which increased variable rate mortgages due to tightening margins. Last month they dropped fixed mortgage rates to record lows to kick off 2012 and develop their sales pipelines for the new year.  So what’s in store for this month?

Fixed mortgage rates: Unchanged

The big banks recently dropped their best mortgage rates for fixed 4 and 5 year terms to record lows, causing a frenzy in the market.  Hyper competition to lock down market share early in the year has started to cool with most of the rate specials ending. Although, spreads between bond yields and current fixed rates still remain attractive (technically lenders have room to drop fixed rates even more!).

However, lenders are likely to practice caution given the continued uncertainty in the global economy and the escalating political and media pressure about low rates fuelling a housing bubble.  As a result, our Panel members anticipate fixed mortgage rates will remain unchanged in the short term.

Variable mortgage rates: Unchanged

The next Bank of Canada rate announcement will take place on March 8, 2012.  Most experts believe they will hold interest rates steady again, leaving variable mortgage rates unchanged. Given the Federal Bank’s recent announcement that it will keep US interest rates low into 2014, coupled with very weak recent Canadian economic data, our Panel members think any alternative action from the Bank of Canada is unlikely.

To read all the detailed commentary from our Panel Members, please visit: http://www.ratesupermarket.ca/mortgage_rate_outlook_panel/

About the Mortgage Rate Outlook Panel

The Panel includes some of the country’s top mortgage experts, and helps Canadian consumers make informed decisions by offering a short-term outlook for fixed and variable mortgage rates.

This month’s panel members:

• Mark Kocaurek, Senior Vice President, Treasury & Lending (Chief Lending Officer) of ING DIRECT Canada
• Dr. Ian Lee, Director of MBA Program, Sprott School of Business, Carleton University
• Wayne Spinney, Mortgage Agent, Centum Mortgage Professionals
• Dan Eisner, MBA. AMP. President, Verico True North Mortgage
• Elisseos Iriotakis, President, Safebridge Financial Group

About RateSupermarket.ca (www.ratesupermarket.ca)

RateSupermarket.ca is the largest impartial rate comparison service for personal finance products in Canada. Founded in May of 2008, their easy to use comparison engine provides much needed transparency to the Canadian financial market and allows visitors to quickly find the best mortgage rates. Their new Mortgage Tool App for the iPhone also allows house hunters to compare mortgage rates using their Smartphone. Over 1.5M Canadians have turned to RateSupermarket.ca to save money on their mortgage, insurance, credit cards and GICs.

January is turning into one of the hottest months ever for real estate sales. Realtors say they have never experienced such a busy January.

What’s Behind the Boom?

Its being fueled by BMO’s move earlier this month to lower its five year fixed rate to 2.99 per cent. That’s the lowest posted rate from a major bank in Canadian history. The other banks have followed offering their own version of fixed rates below prime.  This historic event is pushing home buyers back into the market.

Royal LePage, which franchises brokerages across the country, recently forecast the Canadian real estate market will rise 2.8 per cent in 2012. That is slower compared to 2011, when the market rose 4.8 per cent.  But that forecast did not know banks were going to move fixed rates as low as they have.

Real Estate Poised to Heat Up

In my opinion, 2012 could be one of the hottest years for real estate.  The mini boom the country is experiencing now will only grow as we move into the busiest real estate season. March is traditionally the month when inventory of homes for sale increases and more buyers are out looking for a place to buy that will close during the summer months.

Canada’s Excellent Track Record is Paying Off

Why are mortgage rates so low in Canada? Our country’s reputation is driving international demand for bonds from Canada’s biggest banks. Foreign investors are fleeing to safety in Canada.  In the case of BMO, it was able to sell $1.5 billion worth of five-year bonds at a rate of 2.544 per cent, this month.  Making it easy for them to offer consumers the historically low-posted fixed rate. The lower the yield the better the signal that investors have confidence in a lender’s ability to live up to the terms of the loan.

These bond sales are moving through the system and pushing mortgage rates to record lows. It means homeowners can benefit from even cheaper money as more foreign investment moves into Canadian bank bonds.  With the Europe debt problems still spiraling out of control and the U.S.economy still on shaky ground the push for Canadian bonds could continue for the long run.

A Warning About Cheap Money

But as it’s been for three years, lower rates threaten to move Canadians into dangerously high debt levels. Many may be unable to afford their homes down the road. Anyone out shopping for a home should continue to calculate their own affordability at least 2 percentage points higher than what they are being offered.

The BMO special rate offer has now ended but fixed rates still remain unbelievably low at close to 3 per cent. Variable mortgage rates continue to be offered below prime and that means anyone searching for a new mortgage can explore this option. Low rates won’t last forever, but they seem to be here to stay for 2012. And the Canadian market stands to gain from it in a big way.

Since fixed mortgage rates have been dropping like flies lately, many Canadians are beginning to wonder if they should abandon their current mortgage and refinance at a lower rate.  “How do I do this?  Is it worth it?   What is it going to cost me?  WHERE DO I BEGIN!?” … sounds stressful doesn’t it?  Let me help!

The Break-Up

First and foremost, you need to figure out what all of this is going to cost you.  It doesn’t take a genius to know that paying $10,000 in penalties to save only $5,500 in interest with a lower rate isn’t exactly worth it.  So, what is the penalty going to be to get out of your mortgage?  GENERALLY SPEAKING (check with your lender), it is the greater of 3 months interest or the Interest Rate Differential (IRD).  3 months interest is pretty self explanatory, but the IRD involves a little math.

An Example

Let’s say that you have a mortgage balance of $200,000, your mortgage rate is 5.29% (originally a 5 year fixed rate) but you’re not up for renewal for another 2 years and you’re looking at another 5 year fixed at 2.99%:

3 months interest = [(mortgage balance x annual interest rate)/12] x 3
= [($200,000 x 5.29%)/12] x 3
= ($10,580/12) x 3
= ($881.67) x 3
= ~$2,645

IRD = mortgage balance x months remaining in term x [(your rate – current rates)/12]
= $200,000 x 24 x [(5.29% - 2.99%)/12]
= $200,000 x 24 x (0.1675%)
= $9,200

In the above example, (I hope that you are sitting down) your penalty would be a whopping $9,200 .  Do you HATE MATH?  Let us do the estimate for you, check out our mortgage penalty calculator.

But What’s the Benefit?

The benefit and break-even point can be difficult for the average person to calculate, especially when you have so many options available to you.  You can pay the penalty out of pocket or finance the penalty by increasing your mortgage amount; you can keep your payments consistent (therefore paying your mortgage off FASTER with a lower rate) or maybe you’d like to better your cash flow situation and have a lower payment with the lower interest rate!  Having said all of that, you should really speak to a licensed agent to help you figure it out.  Let them do the math!

Other Costs to Consider

If you are staying with the same lender, these charges shouldn’t apply.  However, if you are thinking about jumping ship you may incur a discharge fee to leave (approximately $250), legal fees to re-assign the mortgage (approximately $495-$1,000) and/or an e-registration fee to the tax department (approximately $72.50).  Additionally, the lender may require an appraisal to be conducted on the property.  An appraisal can run anywhere from $100-$250 depending on the type of appraisal required (i.e. drive by or full).  Sometimes the appraisals are rebated by the lenders and sometimes they are extra.  Ensure that you take these costs into consideration as well before jumping into a new mortgage rate

RateSupermarket.ca Week in Review

Bears aren’t the only thing hibernating in the winter months.  Typically there isn’t too much activity in the real estate (and mortgage) market in the first months of the year either.  So, in an effort to win over some business and fill their sales pipelines, many lenders have been offering some incredibly low rates.

**This chart is based on changes over the last week to our Best Mortgage Rates Canada page. Mortgage Rates may vary depending on Province.

It comes to no surprise that nearly half (49.6%) of our visitors are searching for the best 5 year fixed closed rate (due to all of the hype from last Friday’s rate drop announcement by BMO).  However you may find it interesting that the other half (48.6%) of our visitors are searching for the best 5 year variable closed rate; although there hasn’t been any big changes in pricing for the 5 year variable rate it still remains one of the top mortgage searches!  The next most popular searches were the 3 and 4 year fixed products (each at 0.4%).

What’s in store for mortgage shoppers next week?  Stay tuned!

This past Tuesday the Bank of Canada had their first meeting of 2012 to discuss any changes they were going to make to the overnight lending rate.  Low and behold … no change.  This came as no big surprise to Canadians and the overnight rate remains steady at 1 percent.  FYI the next meeting is scheduled for March 8^th, 2012.

How does this impact the mortgage industry exactly?

Well, the overnight lending rate (the rate at which banks lend money to each other) has a direct influence on the prime lending rate (the rate at which banks lend money to consumers).  Think of the prime lending rate like the sun in the variable mortgage rate’s solar system since all variable rates revolve around prime.  Bottom line, no increase in prime means no increase in variable rate mortgages and no increase in monthly mortgage payments.

Release the HOUNDS!

Talk about some hot competition!  Last Friday, BMO announced a special 2.99 percent 5 year fixed rate.  RBC quickly responded by offering the same 2.99 percent but only for a 4 year term.  TD matched RBC’s 2.99 percent 4 year fixed and ING is now offering a 3.99 percent not on a 4, not a 5 but a 10 year fixed (wow)!  After mulling over and digesting what this might mean for their market share and presence in the competitive mortgage market over the weekend, Scotiabank announced their 2.89 percent 3 year fixed offer on Monday.

The Three Little P’s (no, not piggys)

Given the super low rates that hit the market over this past week, it’s even more important for consumers to know what other details they need to consider before signing on the dotted line.  Think about the 3 P’s: pre-payment privileges, portability and penalties.  These options could make or break that perfectly low mortgage rate.

1. Pre-Payment Options

According to a survey conducted by CAAMP, 17 percent of mortgage holders made lump sum payments in 2011 and those who did prepaid an average of 7.8 percent.  For this to be you next year you should ensure that your ability to make lump sum payments coincides with the option to do so.  Generally speaking, pre-payment privileges are around 15-20 percent of the original principal amount, but sometimes “no frill” mortgages will offer a lower pre-payment privilege at a lower rate.

So before you get enticed by that really low mortgage rate, check out the pre-payment options.  If the low mortgage rate limits your ability to pay down your mortgage faster, it may cost you more in interest in the long run. On the same note, make sure you are not paying a higher rate for a mortgage feature that you are not taking full advantage of.

2. Portability

Really love that low 10 year fixed rate but think there is a chance you could move in the next 10 years?  If the mortgage you have is portable, you’re in good shape!  Portability can save you money down the road if your rate (a.k.a. today’s historically low rate) is lower than the rates at the time you move in the future.  A portable mortgage allows you to transfer your mortgage to a new property (subject to a credit approval and sometimes a property appraisal), avoiding any penalties of breaking your mortgage.

Not to worry if the new mortgage you need is larger than the remaining balance on your existing mortgage, you can actually apply for a larger amount and your rate will be a weighted average between your old rate and the current rates offered.

3. Penalties

Your dream house just went up for sale and after years of working for the man, it is actually in your budget!  But you didn’t have this helpful blog to read when you first shopped for a mortgage and now you realize your mortgage doesn’t have a portability option.  Oops!  The good news is you can break your mortgage and get a whole new one for your dream home.  The bad news is it’s going to cost you a mortgage penalty, likely the greater of 3 months interest or the interest rate differential (IRD).

Before you commit to any mortgage product make sure you have an understanding about what it will cost you if you need to break the contract and get out early.

Today’s Mortgage Shopper

If you’re currently in the market for a mortgage, consult with a mortgage professional before making a decision and don’t be ashamed to ask a lot of questions.  You shouldn’t only consider the lowest possible rate when searching, look at the product details as well.  Also, it’s not just about finding a mortgage that meets your needs today, but also in 1, 3 and 5 years time.  Yes the 5 year rates are great, but if you’re home is only a stepping stone and you can’t port the rate later you may want to consider a shorter term.  A custom mortgage for a custom home.

In the red corner… currently weighing in just under the Canadian Prime lending rate at Prime – 0.25%… the 5 year variable rate. And in the blue corner… currently weighing in around 2.99% (new rate advertised January 13, 2012)… the 5 year fixed rate. LET’S GET READY TO RUMBLE!!!!

This will be a good fight over the next few months; but many Canadian’s are putting their money on fixed mortgage rates.

This Week – The Fixed vs Variable Debate Heats Up

Variable rate mortgages have typically been a better choice for Canadians over the last 25 years. However, with the spread between the two rates currently around 0.24%, consumers are finding it harder and harder to gamble and are turning to lenders and brokers for a fixed rate.

This trend is especially pronounced today after TD changed their special 4 year fixed rate to 2.99% in order to compete with BMO’s 5 year fixed rate, also at 2.99%. But just like any good deal, these rates won’t last forever! TD’s rate is valid until February 29th and BMO’s will only last until January 25^th.

Who will Come Out on Top?

Here’s a comparison of fixed vs variable mortgage rates over the last 25 years from FirstLine Mortgages:

Note: when you visit your bank they will typically discount the posted rate, (or at least they should) so the green line shown should be a little lower across the board

Over the last 25 years, the Bank of Canada has:

• Made changes to the prime lending rate an average of 6 times each year
• Each change to the rate has been by either 0.25% or 0.50%
• Year over year the prime lending rate has fluctuated by 1.23%

So, what you really need to ask yourself in the next few weeks if you are currently looking for a mortgage is … “Do I think that over the next 5 years, the prime lending rate is going to increase by more than 0.24%?” If the past is any indication of the future, it is more likely than not that it will. What does that mean? You would be better off going with a fixed mortgage rate!

Econ 101: Since the downturn of the market in 08/09, the Canadian economy has been moving in the right direction; however the global economy has really been holding us back from our full potential. If Canada was an island economy (meaning it was unaffected by global economies), We would likely see a rise in interest rates.  Unfortunately if we increase rates too soon our exports become more expensive relative to other competitors in the global market and that would be bad news for Canada.

Final Thoughts for the Week

Weigh out your options and play around on a mortgage calculator to see what your mortgage payment would look like if the prime rate would increase vs. what they would be at current fixed rates, you may be surprised! Ask your broker what your options are if rates do increase and you have a variable mortgage, can you lock in? And finally, stop searching for Prime – 0.90%… it doesn’t exist!!

RateSupermarket.ca’s Expert Panel Believes Fixed Mortgage Rates Will Decrease as Competition Heats Up.

TORONTO, Jan 9, 2012… Canadian consumers could see lower fixed mortgage rates this month as competition heats up and lenders look to build their mortgage pipeline for the year, says RateSupermarket.ca’s Mortgage Rate Outlook Panel for January 2012.

Lenders are eager to get a good start to the new year and build up their fixed mortgage rate client base, which means fixed rates could decrease as competition picks up. Variable mortgage rates, on the other hand, are expected to remain level.

Fixed mortgage rates: Down

Given the forecast for slow growth in 2012 and the ongoing European sovereign debt crisis, Canadian bond yields are expected to stay where they are; which is a strong indication that fixed mortgage rates should remain unchanged in the short term.

However, our panel of mortgage experts is not ruling out a slight reduction in fixed mortgage rates as lenders get a jump start on the year and build their pipeline for 2012.

Variable mortgage rates: Unchanged

The next Bank of Canada interest rate announcement will take place on January 17th, 2012.   Our panel of mortgage experts is not expecting any change in the key overnight lending rate for at least the next 6 months due to ongoing turmoil in the global economy.  It is also unlikely that lenders will increase or decrease their discounts to prime rates in the short term.  As a result, Canadian consumers can expect variable mortgage rates to remain where they are.

To read all the detailed commentary from our Panel Members, please visit:

http://www.ratesupermarket.ca/mortgage_rate_outlook_panel/

About the Mortgage Rate Outlook Panel

The Panel includes some of the country’s top mortgage experts, and helps Canadian consumers make informed decisions by offering a short-term outlook for fixed and variable mortgage rates.

This month’s panel members:

• Mark Kocaurek, Senior Vice President, Treasury & Lending (Chief Lending Officer) of ING DIRECT Canada
• Dr. Ian Lee, Director of MBA Program, Sprott School of Business, Carleton University
• Dan Eisner, MBA. AMP. President,  Verico True North Mortgage
• Elisseos Iriotakis, President, Safebridge Financial Group
• Wayne Spinney, Mortgage Agent, Centum Mortgage Professionals

About RateSupermarket.ca (www.ratesupermarket.ca)

RateSupermarket.ca is the largest impartial rate comparison service for personal finance products in Canada.  Founded in May of 2008, their easy to use comparison engine provides much needed transparency to the Canadian financial market and allows visitors to quickly find the best mortgage rates.  Their new Mortgage Tool App for the iPhone also allows house hunters to compare mortgage rates using their Smartphone. Over 1.5M Canadians have turned to RateSupermarket.ca to save money on their mortgage, insurance, credit cards and GICs.

First things first, I hope everyone had a fantastic Holiday with family and friends.  I know I did!

This week, as 2011 comes to a close, I wanted to pull together my thoughts and observations from the year – and what a year it has been!  Let’s start with mortgage rates.

If you’ve been carrying a variable rate mortgage, 2011 has been a great year for you.  The Bank of Canada held their target for the overnight rate at 1% all year long and subsequently none of the major banks changed their prime rates, currently steady at 3%. This resulted in no change to monthly payments for variable mortgage holders, and those of you on Prime – 1% are very lucky!

Fixed mortgage rates also decreased in 2011, with the benchmark 5 year fixed mortgage rate hitting an all-time low of 2.99% in November, as mortgage lenders became more competitive and the bond markets responded to the global financial crisis.  As a result, the spread between the 5 year fixed rate and variable rate dropped to a mere 0.45%. This is giving Canadians shopping for a mortgage a lot to think about as they lay out their five-year financial plans.

The European debt crisis and the dire global economic outlook is bearish and that is putting downward pressure on longer-term bond yields. It means its likely fixed mortgage rates will remain low or even drop further in early 2012.

The Fixed Versus Variable Debate

History shows that 90% of the time going with a variable mortgage rate will save you money. But with fixed and variable rates so close together during the second half of 2011 this may be the one of those times when a fixed mortgage rate is a better deal.

Another phenomenon we saw in 2011 is that less and less banks are offering prime minus on their variable rate products, sending the signal they are not willing to offer money at such a deep discount if rates are going to remain low. They’re simply not making the profits on mortgages as they have in the past.

The Canadian Economy Sits and Waits

Canada’s economy is doing better than the U.S. and certainly is much healthier than any European nation, but the Central Bank can’t move and raise rates to “normal levels” unless there’s more confidence that the global economy is recovering.

In 2011, Greece asked for two more bailouts. The leaders of Italy and Greece stepped down and currently the future of the Euro hangs in the balance. This year made it clear that the European debt crisis is far from over.

This is why we are seeing a standstill in Canada’s overnight lending rate. Economists say we can expect these lower than normal rates to stick around until at least mid 2012 at which time the Bank of Canada Governor Mark Carney will need to decide if the country is ready for a rate hike.

Carney finds himself walking a tightrope as he tries to balance what’s best for the country compared to what is happening around the world.  If Canada was an island-economy that remained uninfluenced by outside problems, by now, interest rates would be higher. But we depend heavily on our foreign partners for trade and our interest rates will lie dormant until the world economy starts to wake up.

Mortgage Rates in 2012

If you’re looking for a mortgage right now you should take a good hard look at fixed rates. 3 year (2.89%) and 4 year fixed mortgage rates (2.99%) are currently available below Prime, and 20 – 30bps lower than the popular 5 year fixed rate, you could be locking in real savings over the next few years. If the Bank of Canada raises rates in the next couple of years, your fixed rate will look like a bargain.

If you’re considering a variable rate make sure you calculate your affordability taking into account possible rate hikes (assuming the economy recovers slowly and gradually) over the next 2-3 years.  A good assumption is that rates will be 2 – 3  percentage points higher then where prime is right now. Even better, base your current monthly mortgage payments on this higher interest rate to protect your budget from being affected if rates start to rise faster than what you expected.

Remember, 2011 was not a normal year. Rates should not remain this low for the whole of 2012.  Expect slow, incremental increases in the second half of next year.

Variable mortgage holders can rest easy knowing that their mortgage payments are not expected to increase any time soon.  Once again the Bank of Canada announced that they will leave the target overnight lending rate constant at 1%.

This means that Prime rates will also stay the same and therefore variable mortgage rates.

The Bank of Canada stated the following reasons for holding the course:

• The debt crisis in Europe is intensifying
• The recession in Europe is expected to be worse than originally thought
• This will dampen global growth and particularly expansion within the US.
• The US housing market is showing no signs of recovery

On a positive note, the Bank of Canada announcement also referred to slightly better than expected growth in the US due to consumer spending and business investment.  Growth in China and other emerging-market economies continues to be strong.

Here in Canada, things are surprisingly good.  Economic growth in the second half of the year is expected to be slightly higher than forecasted.  But we are not immune to the activity going on across the ocean and only time will tell just how much of an affect the crisis in Europe will have on Canadians.

The Bank of Canada meets again on 17 January 2012 for the next interest rate announcement.

RateSupermarket.ca’s Expert Panel Expects higher Variable Mortgage Rates as Discounts Shrink

TORONTO, Nov 4, 2011… … Variable mortgage rate discounts have dropped 45 basis points in under two months, despite no change to Bank of Canada interest rates.
The disappearing act isn’t over yet, says RateSupermarket.ca’s Mortgage Rate Outlook Panel for November 2011.

It’s expected that variable rate mortgages could increase as discounts to prime shrink even more in the short term.  The Panel also believes fixed mortgage rates will stay constant; lenders are unlikely to make any hasty decisions given the recent job loss numbers for October and the fluctuating bond market.

Fixed mortgage rates: Unchanged

The financial issues in Europe are continuing to affect Canadian bond yields, which have fluctuated by over 50bps in the last month alone.  Indecision in Greece and throughout the continent is causing people to flock to the safety of Canadian bonds, driving yields down.

With all this action, our Mortgage Rate Outlook Panel members believe the banks are likely to employ a ‘sit and wait’ approach, meaning fixed mortgage rates are expected to stay constant in the short term.

Variable mortgage rates: Up

The Bank of Canada made no change to interest rates at their last meeting. This is expected to be the norm well into the New Year as the likelihood of a double-dip recession continues, especially given the recent increase in the unemployment rate.  This means bank prime rates won’t change anytime soon.

However, our panel members can’t say the same about discounts off Prime.  Disappearing discounts will continue as banks aim for greater profitability.  As a result, the Panel believes Canadians can expect variable mortgage rates to inch up in the short term.

To read all the detailed commentary from our Panel Members, please visit:

http://www.ratesupermarket.ca/mortgage_rate_outlook_panel/

About the Mortgage Rate Outlook Panel

The Panel includes some of the country’s top mortgage experts, and helps Canadian consumers make informed decisions by offering a short-term outlook for fixed and variable mortgage rates.

This month’s panel members:

• Mark Kocaurek, Senior Vice President, Treasury & Lending (Chief Lending Officer) of ING DIRECT Canada
• Dr. Ian Lee, Director of MBA Program, Sprott School of Business, Carleton University
• Dan Eisner, MBA. AMP. President,  Verico True North Mortgage
• Elisseos Iriotakis, President, Safebridge Financial Group
• Wayne Spinney, Mortgage Agent, Centum Mortgage Professional

About RateSupermarket.ca (www.ratesupermarket.ca)

RateSupermarket.ca is the largest impartial rate comparison service for personal finance products in Canada.  Founded in May of 2008, their easy to use comparison engine provides much needed transparency to the Canadian financial market and allows visitors to quickly find the best mortgage rates.  Their new Mortgage Tool App for the iPhone also allows house hunters to compare mortgage rates using their Smartphone. Over 1.5M Canadians have turned to RateSupermarket.ca to save money on their mortgage, insurance, credit cards and GICs.

Surprise!  The Bank of Canada kept their target for the overnight rate at its current level of 1%, the 9th straight time it’s done so since the last increase on September 2010.  Well, let’s be honest, it really wasn’t a surprise, the decision was widely expected by industry experts.

The supporting commentary on the global and national outlook was more important this time around as the markets and economists were waiting to hear the Bank of Canada’s outlook on growth.  More details will be supplied with the release of the Monetary Policy Report tomorrow, October 26, 2011.  This also means that Canadian prime rates will not change either.

The Central Bank’s press release addressed downside risks several times including global and national threats that will slow down economic growth:

“Financial market volatility has increased… The combination of ongoing deleveraging by banks and households, increased fiscal austerity and declining business and consumer confidence is expected to restrain growth across the advanced economies.”  

An increasing concern is that Europe is expected go into a brief recession, with no indication of how brief this could be.  The US will see weak GDP growth until next summer, and then hopefully bounce back soon afterwards.  Growth in Japan and China is expected to slow due to weaker international demand, reducing inflation pressure on other countries.

At home, the forecasted recovery of the Canadian economy has gotten worse since the summer, and this is expected to continue until the middle of 2012.  Consumer and business demand is expected to be the main growth driver.  The Bank of Canada expects the national economy to grow by 2.1% in 2011, 1.9% in 2012, and 2.9% in 2013.

The threat of inflation has subsided and is not expected to return to the 2% target until the end of 2013.  As a result, there is not much the Central Bank can do, given their main mandate is to keep inflation under control. Check.  Job well done.

This is one of the reasons there has been recent news that the Harper government is considering expanding the Bank of Canada’s current narrow focus on containing inflation to a broader mandate.  Finance Minister, Jim Flaherty, and Bank of Canada Governor, Mark Carney, are set to acknowledge that more flexibility is needed to ensure the Canadian economy has stable growth in the future.