14 Apr

Bank of Canada Cautious About the Outlook


Posted by: Val Thibault

To no one’s surprise, the Bank of Canada left its target overnight rate unchanged at 1/2 percent. The Bank, however, reduced its forecast for the global economy and for the U.S. economy as well, suggesting that the outlook for Canadian exports is less favorable than earlier forecast. (Table 1 below shows the Bank’s current global forecasts with the January forecasts in parentheses.)

While oil prices are off their lows and slightly above the level forecast by the Bank in January, the central bank now expects deeper cuts in oil sector business investment. The Bank expects crude oil prices to remain low (Chart 2). The Canadian dollar has increased sharply from its lows earlier this year, “reflecting shifting expectations for monetary policy in Canada and the United States, as well as recent increases in commodity prices.” The loonie has surged 15% in less than three months to its strongest level in since mid-2015. This, of course is bad news for exports, and the Bank played down the outlook for Canadian growth in its policy statement and Monetary Policy Report (MPR).

The Bank suggested the surprising strength in the first quarter is in part due to temporary factors and will reverse in the second quarter. Their estimate of output growth in the first quarter is now 2.8%, below consensus private-sector estimates of 3+%, slowing to 1% output growth in the second quarter. The Bank re-emphasized that the structural adjustment to the decline in oil prices is ongoing and will dampen growth over the next three years. This is a more pessimistic, but realistic view than the Bank took a year ago.

The Bank’s forecast for growth this year and next is significantly less optimistic than many market watchers expected, especially in light of the recent strengthening in the employment and monthly GDP data. The Bank’s Governing Council suggested that had it not been for the recent budget’s fiscal stimulus, the growth outlook would have been revised down from the January outlook. Including the effects of the budgetary easing, the Bank now forecasts Canadian growth this year at 1.7%, next year at 2.3% and and 2.0% in 2018. Slower foreign demand growth, the higher Canadian dollar and a downward revision to business investment all have negative impacts on the outlook but are more than offset by the positive effects of the fiscal measures announced in the federal budget in March.

The Bank of Canada also revised down its estimate of potential growth in the economy to roughly 1.5%, mainly reflecting slower growth in trend labour productivity as a result of weaker investment. The new growth profile, combined with the revised estimate for potential, suggests the output gap could close somewhat earlier than the Bank had anticipated in January, likely in the second half of 2017. Inflation is expected to remain at or below the target rate of 2%.

Bottom Line: Caution is the watchword for today’s Bank of Canada policy report.

Article Source: Dr. Sherry Cooper Chief Economist, Dominion Lending Centres 

9 Apr

Acceptable Down Payment Sources


Posted by: Val Thibault

So there seems to be some misunderstanding about down payments. It’s no wonder really given that there were a number of changes made over the last few years by the government in regards to all things mortgage. This week we are going to take a look at acceptable down payment sources so you can achieve your dream of home ownership ASAP.


You are able to utilize up to $25,000 of your RRSP for your down payment. You will let you current RRSP provider know that you are using the funds for this purpose so that they can complete the process with the correct forms ensuring that you are not penalized for an early withdrawal. We will need to show the lender a 90 history on these funds. The expectation is that you will reinvest into your RRSP within 15 years.


Maybe your family is able to help with a gift? That works too. The gift must come from an immediate family member such as your parent, sibling or grandparent. An official letter will be signed by all parties which states that the gift is never expected to be paid back. You will also be required to show proof of the deposit going into your bank account. Heads up on this one that some of our lenders now require verification of the funds in the account of your family member.


The funds can of course come from a good old fashioned savings account or a TFSA. Again, we will have to provide a 90 day history on this account and if you have been transferring from another account we will need a 90 day history on that one too.

Sale of Assets

If you have a vehicle or a collection or a quad or any manner of asset that you are able to sell and we can properly document it through a receipt and proof of deposit, you have an acceptable down payment source.

Home Equity Line of Credit

Perhaps the mortgage on your current home is a Home equity Line of Credit? If so we are able to use an advance against this for the down payment on another home.

Borrowed Funds

A few of our lenders will still allow you to borrow the down payment from an alternate source. This could be a personal loan with set payments or a Line of credit where you are able to pay the interest only. You must have strong credit and have been with your current employer for a minimum of 2 years to qualify for this. We also have to factor in the repayment on the new loan as a part of your affordability ratios.

You have probably noticed a theme emerging. We are required to provide a 90 day history of all funds being used for the down payment on a home to make sure that all funds have been legally sourced. If you have a large deposit going into your account, the lenders will need to know where in the heck it came from.

The minimum down payment for a purchase is 5% and you will also need to show you have an additional 1.5% of the purchase price available for the closings costs which include the legal fees, property tax adjustments, title insurance and others.

So there you have it in a pretty synopsis. Have a great week!