30 Jun

Latest information about the bond rates…


Posted by: Drummond Team

Canadian 5 year bond yields markets + 0.15 bps to 2.30%.  That’s an increase of 30 bps since Monday! The spread (based on the5 year rate published rate of 3.79%) is now down  to the middle of the comfort zone at 1.49% as money moves away from bonds to stocks therefore the spread is shortening up and this could mean a potential rate increase!

13 Jun

13 costs to consider when you buy a house


Posted by: Drummond Team

By Alison Griffiths | Sat Mar 19 2011


Spring fever! Ahhhh — that hint of warmth in the air, bursting buds, the caress of sunshine. Oh yes, and a new home.

Nothing compares to the excitement of abode shopping except, perhaps, love. And spring is definitely the season for both.

House and condo sales are in the doldrums after the new year then leap forward in April and May. “On average, the peak in sales has been about 2.25 times higher than January,” says Jason Mercer, senior manager of market analysis for the Toronto Real Estate Board. “In 2010, the highest monthly sales were reported in April (10,898), which were 2.18 times higher than January.”

There’s hardly a more emotional event than buying a new home and in the process it’s all too easy to forget a host of nickel, dime and dollar charges that can tip you from under-budget to over in less than the time it takes to seal the deal.

Here’s a baker’s dozen of standard costs to consider before you make your first offer.

Mortgage costs. Make sure you know the range of payment possibilities for varying amortizations, payment schedules (monthly, bimonthly, weekly) and types and terms of mortgages. Ask your lender to provide a printout to keep handy when home buyer stars are blinding your eyes.

Other mortgage costs to keep on your radar include interest adjustments to cover any gap between closing date and first mortgage payment. You can avoid this cost if you line up the closing date and first payment so they are exactly a month apart. Another cost is optional mortgage insurance. Before you agree to it compare with a term life insurance policy. Usually the latter is a better deal.

Insurance. Mortgage insurance is mandatory with 5 per cent down and usually required by lenders with 20 per cent or less. This can include a one-time cost of up to 2.75 per cent of your mortgage (more if you are self-employed without third-party verification of income.) Typically insurance is added to the principal borrowed and will increase your payments. CMHC offers a table of premiums for various downpayment percentages, http://www.cmhc.ca/en/co/moloin/moloin_005.cfm.


Home Inspection. This is an absolute must for re-sale homes, late model and older editions alike. The average cost is around $100 an hour, though some home inspectors will charge by the house size. Smaller homes may take a couple of hours while larger, older ones four or five.

Survey (certificate of location). If there isn’t an up-to-date one available from the vendor, plan on spending from $750 to $1,500. In some circumstances a bank might cover this cost if it is dying for your business.

Legal costs and disbursements. They vary depending on where you live but plan on $1,500 to $2,500. It’s a good idea to ask your lawyer for an estimate beforehand. Optional title insurance is becoming increasingly common and it covers survey issues and undischarged mortgages relating to previous owners. The cost averages $200 to $300.

Property appraisal. This may be required by your lender to determine how much it is prepared to lend you. Remember, the amount isn’t the same as the purchase price so don’t be surprised if the figure is less than you expect. As with the survey, some lenders may include this as part of the mortgage package. Otherwise plan on $150 to $200.

Home insurance. This is an oft overlooked item when calculating monthly payments. Get at least two estimates and make sure you inquire about the need for separate riders for jewelry, high performance bicycles, art and antiques.

Vendor reimbursements. There may be reimbursements for things such as taxes and fuel which the vendor may have paid for in advance for the year.

Land transfer tax. Loathed by home buyers this tax may be levied in your area but there also could be reductions for first time or senior buyers. To calculate the amount go to http://www.torontorealestateboard.com/consumer_info/buying_selling/additional_costs.htm#.


Repairs. You know how it goes. The real estate agent sails through the house noting that a little paint here, a bit of carpentry there, a new fixture somewhere else and presto! You have an abode worthy of Elle Decor. Take a pen and paper or camera with you to record what repairs must be made and also those you would simply like to make. Pass these on to the home inspector, most of whom will provide an estimate schedule for repair of common items.

Replacements. Curtains and rugs mostly come in standard sizes but, amazingly, when you move they never seem to fit the new nest. And if the drapes remain from the previous owner they won’t match your furniture. Costs vary hugely but do the measurements and estimate a mid-level replacement cost using the site of a major home renovation retailer.

Condo costs. These can include a parking spot, estoppel or status certificate, in-advance monthly condo fee and a host of charges for new construction including PSTHST on chattels (appliances), occupancy fees, tax on upgrades and warranty program enrollment fees.

Moving. Unless you have friends who adore you and own trucks, get at least two estimates from moving companies once you zero in on a location for your new purchase. Be aware that there are still costs for DIY moves from vehicle rental to replacing broken items and worn out friendships.

It takes a little work but calculating the extra costs of home-buying in advance saves you from sticker shock at closing and after you take possession.

7 Jun

The Big Picture


Posted by: Drummond Team

By Benjamin Tal, Deputy Chief Economist, CIBC (June 2011)

Recently both the U.S. Federal Reserve (the Fed) and the Bank of Canada described the economic picture as “unusually uncertain.” And this was before the unrest in the Middle East and Africa and before the devastating development in Japan . Add to this scenario the recent downgrading of Spain and Portugal by Moody’s, and you have a world that is even more uncertain than “unusually uncertain.”

If the real measure of intelligence is what you do when you don’t know what to do, then the next few months will test the economic IQ of both the Fed and the Bank of Canada. Given the increased uncertainty, it is reasonable to assume that both banks will be extremely conservative when it comes to monetary policy.

While short-term volatility will continue to influence markets in the near term, the focus should be on the big picture, which is much more predictable. And this big picture is changing. The great recession gave birth to a dramatic shift in the engines of economic growth in North America , and any successful investment strategy must incorporate this information.

The near 3% growth rate projected for gross domestic product (GDP) in 2011 masks the dynamics of powerful economic forces pulling in different directions. A vibrant business sector will gradually take over an exhausted consumer and restrained government.

Government spending was a buffer for economic activity during the downturn, but with ongoing gains in business activity, the coming years should see the government hand the reins of growth back to the private sector. Significant reductions in spending will come by late 2011, when infrastructure stimulus projects wrap up. Additional cuts to program spending should see compensation expenses drop on wage restraint, employment attrition and select job cuts.

On the other side of the scale, corporate Canada is doing much better. By any measure, the current recovery in capital spending is impressive. The rate of return on capital employed is back to its mid-2008 level, and despite the surge in investment, corporate Canada ’s cash position is at a record high (in relation to both equity and sales). Large corporations can still raise funds relatively cheaply, and cash-starved small- and mid-sized firms can now borrow more easily, with overall credit outstanding to this sector starting to show signs of life after being in negative territory for the past two years.

In fact, the manufacturing sector is already positioned to start expanding — with its current capacity utilization reading of 81%, it stands above its long-term average and a record six points above that of the rest of the economy. The last time the utilization gap approached this level was in 1995, and manufacturing investment advanced by an average annual rate of more than 10% for the following three years. With relatively elevated capacity use and rates of return on capital employed in the manufacturing sector approaching a 10-year high, look for business investment in manufacturing to rise strongly in 2011, joining the upswing in western oil sands projects.

While current economic uncertainty will continue to influence markets and lead to sharp swings in commodity prices and related equities, the new mix clearly suggests that investors should focus on the improving the conditions of corporate Canada, in general, and the manufacturing sector, in particular. With supply-chain opportunities arising south of the border as a result of the U.S. manufacturing sector’s increased exposure to emerging markets, look for growing opportunities for high-end Canadian exporters in the coming years with positive implications for their valuations.

Another opportunity in this environment is the dividend-paying segment of the market. The recent increase in risk aversion will benefit this sector directly, as it tends to attract conservative money, and indirectly as increased uncertainty will limit any potential upward pressure on interest rates.