The Bank now expects the economic recovery in Canada to be slightly more gradual that what they had previously anticipated in July primarily due to a lack-lustred economic recovery in the United States due to high unemployment. In Canada, the Bank of Canada expects consumption growth remaining solid and business investment to rise strongly due to accommodative credit conditions. Quite interesting especially when we saw, yesterday, that gold hit an all-time high (currently $1,260 per ounce) due to renewed fears surfacing about European Banks. Inflation is still in line with the Bank’s expectations (and this is always good news).

Most economic commentators are of the opinion that the Bank of Canada will not increase the overnight rate for some time now. Time will tell and the next scheduled announcement is October 19, 2010.

Fix factual errors
Assessments are carried out by provincial agencies or municipalities. If you’ve spotted a factual error on your assessment—it claims you have a two-car garage when you don’t—you can often get this fixed by simply calling the assessor. If there are no clear-cut mistakes, but you still think you’ve been over-assessed, you will need to officially appeal your assessment.

Prepare your case
The more unique your house, the harder it is to value—and the better your chances of winning an appeal. “If you live in a cookie-cutter neighbourhood, assessments are usually pretty accurate,” says William Howse, a Toronto tax lawyer. “But as soon as you get anything unusual in features or lots, or get into pricier neighbourhoods, then the computer can have big problems.” An older or smaller house in an expensive area or proximity to a busy road, railway or school can provide a strong case for appeal.

Compare, compare, compare
Find comparable local homes that sold around your assessment date for less than your home’s assessed value. This will be evidence that your assessment is too high. You’ll need to show a minimum 5% difference between your assessed price and the selling price on three comparable houses to have a good chance of winning.

Chose wisely
Selecting the right comparison houses is the true art behind a successful appeal, says Howse. Pick comparables that are within 100 interior sq ft of your own house (30 sq ft for condos), and ensure the houses  are the same quality as yours. For a formal appeal hearing, Howse strongly recommends hiring a certified appraiser.

What are your odds?
Few homeowners challenge assessments, but of those who do, many are successful. Roughly 45% of Ontario property owners  who submitted evidence of over-assessment last year got their valuations reduced.

   1. Ireland - Debt/GDP: 997%
      The days of Ireland enjoying one of the fastest growing economies in Europe are over, at least for now. The story is all too familiar, as easy credit fueled a housing bubble that burst and damaged consumer confidence.

      After recording budget surpluses in the prior two years, the economy reversed course in 2009 and contracted 7%. This eroded tax revenues and sent the annual deficit to a record 14.3% of GDP. The European Union set a target for Ireland to reduce that figure to 3% by 2014, but the International Monetary Fund has indicated that the deadline will be missed. Moody’s has subsequently lowered its bond rating.

   2. Netherlands - Debt/GDP: 467%
      The national debt in the Netherlands has reached record levels as a result of the world financial crisis and recession. Much of the added burden was caused by significant government support for the country’s banking sector. The increase in debt per capita is second only to that experienced in Ireland.

      The Netherlands joined the eurozone with a hard guilder a decade ago, but its current debt would likely disqualify it for membership.

   3. United Kingdom - Debt/GDP: 409%
      Investment bank Morgan Stanley fears that Great Britain could face a severe debt crisis in the near future if it continues down its current path. According to the bank’s report, this is a case of not putting aside sufficient reserves when the economy was sound. During the peak of the boom, it still ran a budget deficit of 3% of GDP when other European countries were running surpluses exceeding 2%.

      Like many other countries, Britain bought time during the financial crisis by implementing massive fiscal stimulus and forcing the public to fund losses in the private sector. Without the restoration of fiscal credibility, there is a significant danger of a government bond sell-off, pound weakness and a flight of capital.

   4. Switzerland - Debt/GDP: 273%
      Generally regarded as having one of the world’s most stable economies, Switzerland has taken its budget crisis seriously. When the national debt began to escalate in the last decade, the Swiss voted to approve a constitutional amendment forcing the government to balance expenses and revenue during each economic cycle. While annual deficits may still occur, this has instilled discipline in the process and lowered the country’s borrowing costs as investors rushed to safety.

      This so-called “debt brake” was implemented in response to increasing debt stemming from a slowdown in economic growth. Deficits climbed as spending rose for unemployment benefits and tax revenues declined. While government expenditures were cut across the board, rising revenues have not been sufficient to pay down the incurred debt.

   5. Portugal - Debt/GDP: 228%
      With last year’s deficit coming in at 9.4% of GDP, the Portuguese government has instituted a growth and austerity program with the objective of reducing that number to 2.8% by 2013. These measures have sparked strikes in the public sector including postal and transportation services. Those events have been further propelled by unemployment above 10%, the worst in 40 years.

      The root problem has been low productivity and virtually no economic growth in the past few years. Portugal ranks last in GDP growth among countries that adopted the euro as a common currency. Demand for goods and services has stalled, along with innovation and business momentum. In addition, Portugal’s exports have been undercut by cheap labor in countries such as China. (For related reading, see The Economics Of Labor Mobility.)

   6. Austria - Debt/GDP: 214%
      The recession and government assistance to banks have contributed to the budget crisis in Austria. The finance minister has rejected the notion of higher taxes in favor of administrative reforms to cut spending. He has predicted that the annual deficit would grow from 3.5% to 4.7% of GDP between 2010 and 2012 before starting to decline. That peak would be the third-highest since 1976 when such data were first recorded.

      Rising unemployment has resulted in increased expenditures for unemployment compensation and other government benefits. In addition to the reduced payrolls, tax reforms have driven down overall tax revenues.

The Bottom Line
While the U.S. and Canada have large economies, their respective debt-to-GDP ratios are 93% and 62%. The U.S. gets most of the attention because of the size of the numbers that comprise the ratio - $13.5 trillion debt (June 2009) and $14.4 trillion GDP (2009 estimate).

By comparison, China and India have ratios of 7% and 20% respectively. Their economic growth rates have also exceeded the western nations over the past few years, thereby keeping their debt ratios relatively low. If the western nations don’t implement policies to reduce their debts, they run the risk of jeopardizing future economic growth and prosperity.

Article courtesy of Michael Sanibel, Investopedia.com

In a statement on the move, Mr. Carney and his rate-setting panel sought to emphasize that investors should not necessarily interpret the increase as the first in an uninterrupted series.

The Canadian economy, which on Monday posted a whopping 6.1-per-cent annualized growth rate for the first quarter – the fastest in more than a decade – is “unfolding largely as expected,’’ the bank said, led mostly by a hot housing market, higher incomes and a labour-market recovery that have helped fuel consumer spending.

Still, the central bank suggested that household spending and the economy will slow in the coming months as consumers deal with higher borrowing costs and try to limit or reduce their debt loads and as government stimulus spending fades. As a result, an “anticipated pickup in business investment will be important for a more balanced recovery,’’ the bank said.

Inflation, which the central bank has been watching closely for months, has been in line with policy makers’ projections to exceed 2 per cent this year and reflects a combination of strong domestic demand, slowing wage increases and “excess supply’’ leftover from the recession.

Given today’s rate increase look to the bond market yields increasing over the short term i.e. fixed rates will invariably increase.

The next scheduled date for announcing the overnight rate target is 20 July 2010.

Globe and Mail Update Published on Sunday, May. 30, 2010 8:10PM EDT Last updated on Monday, May. 31, 2010 7:07AM EDT

Nearing one of the biggest decisions of his tenure as Governor of the Bank of Canada on Tuesday, Mark Carney will be equipped with a mountain of information on the latest economic trends, produced by the central bank’s small army of economists and researchers. He will have huddled closely with his top lieutenants, discussing the state of financial markets and key factors affecting the economy, such as the housing sector or Europe’s current fiscal woes.

But for all the deliberate information gathering and shared input at the central bank, Mr. Carney wastes no time as he calls the shots, say those who have worked with him.

“As an academic, I found it a bit difficult to keep comments to just three minutes,” says Angelo Melino, a University of Toronto professor who was the bank’s special adviser in 2008 and 2009, through the chaos of the financial crisis. “[Mr. Carney] is very business-like and quick moving. He would no doubt listen, but was very willing to challenge you as well. If you said something that didn’t quite fit together, or fit with his views, he’d have no qualms about responding. He was very much in control.”

Eight times a year, the Bank of Canada issues a decision to hold, raise or cut interest rates it charges for short-term loans to banks. The decision is a product of intensive research and collaboration at the bank’s Ottawa headquarters at 234 Wellington St.

Rate-related discussions ramp up on the Wednesday before the announcement. The governing council, now comprised of Mr. Carney and deputy governors Jean Boivin, Pierre Duguay, John Murray and Timothy Lane, is briefed on four major topics: risks and the likely path for the economy; the bank’s business outlook survey and regional views; credit and money conditions; and market expectations on interest rates.

Research has been assembled by some of the bank’s 200 economists and address every aspect of the economy – from GDP reports to car sales, housing starts, employment, trade and retail sales. Bank staff crunches numbers on how alternative scenarios – higher rates, tighter credit or rising oil prices – would play out. Temporary factors are considered, like strikes, weird weather or special car promotions.

Backgrounders are distributed on dozens of issues: whether Canada’s housing market is overvalued, inventory cycles in China, oil forecasts or U.S. auto sales, to mention a few.

“An enormous amount of effort goes into where we are – trying to figure out what’s going on in the economy because of the lags in the information they receive,” Mr. Melino says. “That’s something the bank wants to do better. During normal times it’s not that important but during a crisis, Christ, finding out where you are is really, really important.”

On Friday morning, over coffee, water or juice in the bank’s board room, the council meets with the monetary policy review committee, which includes six special advisers, chiefs of four economics departments, communications officials and financial markets directors in Montreal and Toronto. Up to 22 people attend, BoC spokeswoman Stephanie Bento says.

The meeting lasts about an hour and a half. They discuss any recent developments in financial markets or the global economy, changes in the labour and real-estate market. They talk about the market, and how it might react to various decisions. They discuss how key messages should be communicated.

Then each person in the room airs his or her views and makes a recommendation on interest rate strategy.

Mr. Carney, 45, landed as Governor in 2008. Since then, a string of long-tenured deputies such as Paul Jenkins, David Longworth, Sheryl Kennedy have left. At the end of July, Pierre Duguay will do likewise. A younger guard, including Tiff Macklem who rejoins the bank as senior deputy governor on July 1, has taken the reins.

By all accounts, it’s a place where Mr. Carney is top dog. His tenure has been marked by increased transparency – the bank now publishes four full-blown monetary policy reports a year, for example – and with that also comes heavier workloads.

The bank has also boosted scrutiny in several areas in recent years, such as risk management and global developments.

Europe will be a key focus this time round, says Sheryl King, who was an economist at the central bank for eight years and is now head of economics at Merrill Lynch Canada.

“They’re going to be looking at possible channels of contagion. Is Europe going to be weaker? Are banks safe, are they liquid? The issue becomes if it’s not contained there, does it spread elsewhere? Everyone’s thinking back to 2008 … those are the types of things they’ll be taking into consideration.”

She describes the tone of these briefings as “cordial,” where people are deferential to the chain of command. Though she left the bank before Mr. Carney’s arrival, her sense is “the Governor’s view is the dominant one, and there’s little dissent once he airs it.”

Your credit worthiness is assessed two ways:

1. Beacon score, and
2. A detailed history.

Credit scores range from 350 (low) to 850 (high), with 750 being the median. The numerical score is calculated on previous payment history, current indebtedness, credit history length, number and frequency of new credit inquiries and, types of credit held.  Two so-called “Beacon killers,” are payments more than 30 days late (even small amounts) and maxed-out credit cards. The detailed history adds personal information, banking information and specifics on accounts and payments.

Repairing your bruised credit may not be easy, but over time it can be done. Here are three strategies I recommend:

1. Pay all bills on time – late payments hurt ratings.
2. Keep credit balances below 75% of the maximum.
3. Avoid applying for additional credit; too many applications in a short period signals financial difficulties.

You can pull your own credit bureau without it negatively impacting your credit score: https://www.econsumer.equifax.ca/ca/main

Even with the somewhat stronger than expected global economic growth and whilst the extra-ordinary stimulus from monetary and fiscal policies continues to support and aid many countries the recovery in the major industrialised countries is still expected to be somewhat subdued. There is still considerable uncertainty as to the durability of the world-wide economic recovery.

In Canada, however, the economic recovery is proceeding at a quicker pace with GDP expected to be around 3.70% for 2010 and then slowing to 3.10% in 2011 and 1.90% in 2012. The Bank anticipates no problems on the inflation front and sees the Total CPI inflation to be slightly above the 2.00% target over the coming year but returning to below the target of 2.00% in the second part of 2010. This is rather significant for rates: their upward movement would be slowed down by this.

Given the afore-going, the Bank has decided to remove their conditional commitment of freezing the overnight lending rate t 0.25% and will continue to watch the economic growth (both locally and globally) and inflationary pressures before deciding on the timing and the extent of reducing their monetary stimulus i.e. increasing the overnight lending rate.

Note, this is not all doom and gloom. The bond market has reacted rather strongly to the expectation that the Bank will increase the overnight lending rate (starting in July) and this has led to a rather significant increase in bond rates over the last 2 weeks i.e. the fixed rate mortgages have increased. However, overall the rates are still low. The next scheduled date for the announcement of the overnight lending rate is June 1, 2010.

MONTREAL - Younger Canadians are expected to lead the way with home buying this year as they take advantage of low interest rates, new jobs and what they consider “good prices,” a bank survey says.

The survey for the Royal Bank suggested that 15 per cent of Canadians between the ages of 18 and 24 were very likely to buy, almost double from eight per cent in 2009.

It’s a marked shift in the attitudes of younger Canadians, who have tightened their budgets over the past few years to cope with tough jobs markets and the recession.

“Our poll found that 35 per cent of younger Canadians, between the ages of 18 and 24, are intending to buy a home due to good real estate prices,” Marcia Moffat, RBC’s head of home equity financing in Toronto, said Monday.

The national average price for a home was $328,537 in January, according to the Canadian Real Estate Association.

Thirty-one per cent of 18 to 24-year-olds surveyed in the online poll said they would buy a house because of a new job. The survey also found 22 per cent in that young age group wanted to buy a home because they considered interest rates were good.

CIBC World Markets senior economist Benjamin Tal said more young people are getting into the real estate market, taking advantage of low interest rates, lower down payments and more years to pay off their mortgages.

Tal said he estimates the young people getting into the market as a bit older, between the ages of 22 and 28.

“Basically parents are begging their kids to buy now because they remember when they were paying 12 to 15 per cent mortgage interest,” Tal said.

“So there’s a sense of urgency to get into the market and young people are a part of it.”

Tal described the coming real estate market of the next three or four years as “boring.”

“I think that what we are doing now is that we are basically stealing activity from the future.”

The RBC survey also suggested that overall attitudes are changing as more Canadians return to shopping for homes as the economy recovers, even though it’s considered a seller’s market.

“Confidence in the housing market is back, essentially,” RBC senior economist Robert Hogue said.

Royal Bank said the study found more Canadians are “very likely” to buy a new home in the next two years.

Ten per cent of the 2,047 people of all ages surveyed for the study said they planned to buy a home within two years - up from seven per cent two years ago.

The RBC study also found that 91 per cent of Canadian homeowners believe a home is a good investment, the highest level in 12 years.

“At this stage last year, there was doom and gloom all around and it definitely affected the housing market,” Hogue said.

One-quarter of those surveyed, 26 per cent, said they expect their home to be their primary source of income when they retire.

However, the surge in optimism doesn’t necessarily mean that Canadians have forgotten about past economic troubles.

The survey found they are still more cautious when it comes to mortgages. Forty-four per cent of those surveyed who plan to buy a home in the next two years said they would take a fixed-rate mortgage.

Also on Monday, the latest new homes numbers showed that the annual rate of housing starts were up in February.

The Canada Mortgage and Housing Corp. said that the seasonally adjusted annual rate of housing starts reached 196,700 units in February, an increase from 185,400 in January 2010.

Senior CMHC economist Bill Clark said the market is seeing a lot of “catch-up” and consumers in Ontario and B.C. are likely trying to avoid the harmonized sales tax before the summer.

“So if you roll all of that together it’s really sort of one big recipe for housing starts to go up,” Clark said.

The report showed the gain was concentrated in the multiple starts segment, particularly in Toronto.

Urban starts increased nine per cent to 179,100 units in February.

Urban multiple starts increased by 19.1 per cent to 89,900 units, while single urban starts increased by 0.5 per cent to 89,200 units.

The annual rate of urban starts increased 28.6 per cent in Ontario in February, 14.3 per cent in Atlantic Canada, 10.8 per cent in the Prairies and by eight per cent in British Columbia.

In Quebec, urban starts fell 14.1 per cent.

Rural starts were estimated at a seasonally adjusted annual rate of 17,600 units in February.

‘The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1/4 per cent. The Bank Rate is unchanged at 1/2 per cent and the deposit rate is 1/4 per cent.

The ongoing global economic recovery is being driven largely by strong domestic demand growth in many emerging-market economies and supported in advanced economies by exceptional monetary and fiscal stimulus, as well as extraordinary measures taken to support financial systems. The level of economic activity in Canada has been slightly higher than the Bank had projected in its January Monetary Policy Report (MPR). The economy grew at an annual rate of 5 per cent in the fourth quarter of 2009, spurred by vigorous domestic spending and further recovery in exports.

The underlying factors supporting Canada’s recovery are largely unchanged - policy stimulus, increased confidence, improved financial conditions, global growth, and higher terms of trade. At the same time, the persistent strength of the Canadian dollar and the low absolute level of U.S. demand continue to act as significant drags on economic activity in Canada.’
In Benjamin Tal’s (CIBC Senior Economist) Weekly Market Insight, he points out that any move by the Bank of Canada ahead of the Federal Reserve poses significant risks for Canada. Below, is an extract of some of the pertinent points which I thought you would find of interest:

‘This is a risky move given that both in 1992 and 2002 the Bank moved independently of the Fed, only to reverse the decision a few months later. The most likely scenario is that the Bank will move by 50-75 basis points and then will pause until 2011 and continue to hike alongside the Fed. The reason for the limited hike in 2010 is that the ongoing recovery in the Canadian economy will not be linear. The first two quarters of the year will be strong, reflecting fiscal stimulus from both sides of the border, a rebounding inventory cycle and strong credit growth in Canada. These factors, however, will fade in the second half of the year, with overall GDP growth expected to average less than 2% vs. more than 3% in the first half.

As for inflation, the Bank of Canada is projecting core inflation to reach its target rate of 2% by mid-2011. But the core rate has already reached 1.9% last month. Is the Bank of Canada wrong? The short answer is no. The 1.9% advance in the core rate reflects a very soft base period (rates are calculated on a year-over-year basis and January of 2009 saw a notable decline in prices). This means that the coming months will see a much lower inflation rate. The reality is that the underlying inflation rate in Canada is well below 1.5%. So we still have a lot of time until we reach the Bank’s target.’