Bank says it will raise rates if economy continues to expand as expected

By Julian Beltrame, The Canadian Press

OTTAWA — The Bank of Canada has signaled that interest rates will likely rise later this year, as long as the still-fragile economic recovery continues to build.

For the sixth straight announcement date the central bank on Tuesday delayed the tightening regime it had begun almost a year ago to the day and kept its trendsetting policy interest rate at one per cent. But in an accompanying statement, the bank did alter its advisory on future action, indicating it will start moving rates closer to their normal levels if the recovery continues on track.

"To the extent that the expansion continues and the current material excess supply in the economy is gradually absorbed, some of the considerable monetary policy stimulus currently in place will be eventually withdrawn," it said.

"Such reduction would need to be carefully considered."

It's the first time the bank has signalled in an interest rate announcement that it will eventually have to raise rates, although governor Mark Carney has been warning Canadians in speeches and news conferences that higher rates are coming for more than a year.

Financial markets appeared to react to the new language — the loonie jumped nearly a cent to 103.28 cents US following release of the statement at 9 a.m.

But analysts also said nothing was carved in stone.

The bank's ambiguous phrasing in adding "carefully considered" to its signal of monetary tightening, said CIBC chief economist Avery Shenfeld, puts the odds of a move in July at less than 50 per cent. He predicted the bank will begin tightening in September — about where most economists were prior to the announcement — with the overnight rate being raised to 1.75 per cent by the end of the year.

Another analyst, Scotiabank's Derek Holt, said he was sticking to his prediction of an October restart date but recognized that Carney would feel the need to signal that ultra-low rates would not be around forever.

The markets were starting to think that the Bank of Canada had already given up on this year for moving rates north, and Carney wanted to disabuse investors of the notion, Holt said.

"In the last few weeks we'd seen markets move toward taking out any expected Bank of Canada moves at all this year and I think the bank was getting a little uncomfortable with that."

Holt said the bank seems to be as uncertain about how the recovery will unfold as is most of the world. Policy-makers, including Carney, have of late taken to setting off warning flares about rising risks to the world economy, although the tone in the bank's statement was less alarmist this time.

The bank statement Tuesday appeared to take a slightly darker view of the modest nature of the U.S. recovery and the European debt crisis than it did in April, while repeating its concerns about Japan's dual natural and nuclear disasters

But it continued to say that the global recovery is proceeding broadly as outlined in its last policy review, and so is Canada's. While supply chain disruptions emanating from Japan will cause Canada's second-quarter growth to fall sharply, the negative impacts will be short-lived.

"Although temporary supply chain disruptions are expected to restrain growth sharply in the current quarter, this is expected to be unwound in subsequent quarters," the bank reasoned.

As well, Carney remains convinced that inflation pressures caused by high commodity prices are a temporary phenomenon, at least in Canada.

"The bank expects that high energy prices and changes in provincial indirect taxes will keep total CPI inflation above three per cent in the short term," it says. "Total CPI inflation is expected to converge with core inflation at two per cent by the middle of 2012 as excess supply in the economy is gradually absorbed, labour compensation growth stays modest, productivity recovers and inflation expectations remain well-anchored."

The risk to higher inflation is that household borrowing grows, given low rates, but on the other hand, the bank says, the strong Canadian dollar should keep prices of imports in check.

Lawlessbrown.com

10 Ways to Upgrade Your Home’s Exterior

By: Paula Margulis

HGTV

Now that the snow has melted and seasonal debris has been wiped clean, does your sweet abode look a little worse for wear? It may be time to give your home’s exterior some TLC. Improving your home’s curb appeal can increase its value and help you enjoy the property in the warmer weather to come.

1. Landscaping
   Now’s the time to plan and plant the blooms that will flourish all season long. From seeding grass to fertilizing flowers, the sooner you get to it the sooner you can start enjoying. Don’t forget to include plants and shrubs that can dress up your home in fall and winter as well. Potted arrangements take things up a notch, adding yet another level of sophistication to your outdoor display.
   
   
2. Windows
   If you noticed drafty doors or windows this winter, now’s the time to replace them or outfit them with new and improved weather seals for better year-round efficiency. Shutters and other trims might benefit from a coat of paint or two as well.
   
   
3. The Front Door
   The front door gets its share of abuse all winter long. See if it could use a coat of paint, or maybe it’s time to replace it altogether. Upgrading the hardware, adding a knocker, replacing your house numbers or mailbox can also dress up your door.
   
   
4. Outdoor Lighting
   Aside from serving as an element of safety and security, lighting can also add great charm to your home and landscaping. Accent lights can highlight your home’s best assets and there are myriad styles on offer to help you achieve the look you want.
   
   
5. Walkways and Driveways
   Giving your driveway and walkway a facelift doesn’t have to be an overwhelming or expensive venture. In some cases, resealing or adding a simple coat of concrete paint will do. Still, if you’re willing to invest some time and elbow grease, adding new pavers can really help your property dazzle. There are many affordable, easy-to-install stone and concrete options that will add colour, texture and durability to your walk-up.
   
   
6. Porches
   Porches can be a bigger investment but are often well worth it when it comes to modernizing and enhancing your home. You might just need to repair or update, or perhaps it’s time to build again from scratch. Whatever option you’re looking at, make safety and durability your top priorities to get the most out of your investment.
   
   
7. Siding
   It may be a bigger endeavour, but updating the face of your home is the ultimate way to give it a fresh look and add to the value of your home. Whether you have siding (for example, vinyl siding, wood siding, cement fibre siding, aluminum siding) or masonry (brick veneer), inspect for maintenance and consider a good powerwash to uphold attractiveness and functional integrity.
   
   
8. Furniture
   No matter your budget, there’s a chair, loveseat or conversation set for your front porch. Adding furniture makes your entry even more inviting. Plus, who doesn’t love people-watching from the front porch on a warm summer evening?
   
   
9. Extras
   Look for outdoor-friendly accessories to truly make your porch an outdoor room. Curtains can add privacy to an open porch and cushions make furniture more comfortable. Add an outdoor rug and even artwork in durable frames or natural materials to finish your space.
   
   
10. Keep It Clean
    It sounds simple, but just maintaining a tidy property can itself add great appeal to your home. Keeping gutters and eaves clean, bushes pruned and property free of debris and rubbish will make you the envy of the block.

lawlessbrown.com

The Lost Art of the Love Letter

In the midst of the Royal Wedding Bliss and all the nostalgia surrounding the royal couple, it seems only fitting to share this lovely piece of penmanship that reminds us of what declaring your love for someone really meant.

The current age of the social networking generation has everyone messaging, texting, poking and updating in 140 characters or less. It seems that with all the high tech gizmos and gadgets we may have lost the fine art of penning a Love Letter and the raw emotions and feelings behind them.

I have a dear friend who allowed me the privilege of looking through some of her old cards and letters and we came across this lovely little note that has very evidently been treasured by its receiver "Miss Rebecca".

It reads as follows:


November 4th, 1856

Dear Miss Rebecca

I take the liberty of sending you these few lines to let you know my intentions. I have Admired your fine looks and genteel person you are the only one that I admire. All I ask is to share your love with me, but perhaps you are engaged with some other young man but if you are you will be kind enough to let me know and if not perhaps we may have the pleasure of meeting shortly. If you allow me to call to see you please send me an Answer as soon as you can.

No more at present but remain your sincere Lover
James Lynch


With just a few lines and well chosen words James has declared his love and intentions for Miss Rebecca. Quite simply this is one of the most beautiful notes I have ever read. I know that all though its a bit old fashioned, I don't know a single lady who would not swoon at such words.

Krista Lawless

RBC Specialist Fires Low Blows & Goes

Courtesy of canadianmortgagetrends.com

Banks have extensive policies governing what their representatives can tell the public. The alleged actions of RBC mortgage rep Corinne Schindler demonstrate why.

Schindler has reportedly been circulating this flyer, which grossly mischaracterizes mortgage brokers in relation to bank specialists. It’s a document that demonstrates a stunning lack of knowledge, professionalism and discretion.

The piece, which displays RBC’s logo and web address, has gone viral and caused a PR embarrassment at the nation’s biggest bank. Incensed brokers from across the country have demanded that RBC retract the misstatements on the specialist’s behalf.

Here is a sample of the distortions attributed to Ms. Schindler (our perspectives follow each line):

1. Brokers charge “set-up fees" and "other hidden costs"

· Truth: Broker fees are exceedingly rare on prime residential mortgages. When fees or borrowing costs are warranted, provincial regulations require full disclosure.

2. “Ask a broker what their compensation will be for completing your mortgage.”

· Truth: Broker compensation is geared primarily to the term and secondarily to the rate. As with any incentive-based model, conflicts can exist, but no more so than with various bank rep models that pay more commission for selling a higher rate.

3. Brokers pick lenders "based on only the lowest rate, no other factors"

· Truth: Rates are commodities so successful brokers always prefer to leverage trusted advice and relationships. To build each, brokers become experts in their craft, which includes term selection, product comparison (from multiple lenders...key point) and strategic mortgage planning.

4. Brokers…"cannot fit your mortgage solution together with your overall financial plan."

· Truth: Needs assessments are a fundamental tool that brokers utilize. Brokers are trained to uncover future needs that financing might have to address.

5. "Brokers will not be there in a few months when you need to ask questions about your mortgage or change the terms of conditions"

· Truth: Referrals are a broker’s lifeblood and maintaining relationships is impossible without exceptional post-closing support.

6. “You have to be careful to deal with an institution that will give you a great rate term after term."

· Truth: Banks’ renewal models are designed to maximize profit. That’s done through selective pricing (i.e. not offering the best rate to everyone up front). It’s a fallacy that banks reward loyalty with great rates. (Here’s some relevant research).

********

After poking around at RBC, this piece appears to be Schindler’s own doing. This advertorial is definitely not in RBC’s marketing library we’re told. Moreover, RBC’s corporate materials are far more polished (i.e., generally no grammar or formatting issues, missing slogans, mistruths, etc.).

From what we hear, Schindler violated RBC compliance guidelines and sent it out without RBC’s or her manager’s consent.

In response to all this, RBC provided us with a comment:

“The opinions expressed in the document by the mortgage specialist do not reflect the positions, strategies or opinions of RBC. We are following up directly with this mortgage specialist to ensure future collateral accurately reflects the RBC brand.”

We have a better idea. How about no “future collateral” from this individual period?

Fiduciaries that mislead the public for personal gain are hazards and liabilities to their employers. Anyone who would author this sort of content should be sent packing because Lord only knows what she's telling clients in private.

---

Incidentally: We’ve been holding this story since last Wednesday, awaiting comment from RBC and trying to get Schindler’s side of the story to give her the benefit of the doubt. On the two occasions we did reach her, she hurried off the line, promising to call back. Needless to say, after multiple contact attempts, we never heard back.

www.lawlessbrown.com

Window closing’ on ultra-low mortgage rates

Tim Shufelt, Financial Post · Monday, Feb. 7, 2011

Amid the noise of volatile-but-improving economic indicators, mortgage rate hikes are likely to repeat like a chorus in the coming months.

Canadian banks are raising interest rates on mortgages, marking the beginning of a trend as they correlate with rising bond yields and expected monetary tightening.

That’s making a strong case for borrowers to lock into fixed rates before it’s too late, said Benjamin Tal, deputy chief economist with CIBC World Markets. “The window is closing.”

TD Canada Trust and CIBC both announced Monday hikes to their residential mortgage rates, the first increases since changes to the rules of borrowing were announced by the federal government last month. The other big banks where expected to follow the moves shortly.

Effective Feb. 8, the interest rate on the banks’ benchmark five-year closed fixed rate mortgage will increase 25 basis points to 5.44%. The country’s other major lenders are expected to soon follow suit.

Toronto mortgage broker Paula Roberts said rising borrowing costs will compel more of her clients to abandon ultra-low variable rates in favour of higher, fixed-rate mortgages.

That can be a tough decision for borrowers to accept higher payments, but not one that should strain a mortgagee’s finances, she said.

“If you can’t afford [your payments] ... that’s a problem,” Ms. Roberts said. “That’s why the government has changed the rules.”

In two stages over the past year the federal government announced changes to the conditions of mortgage lending — shortening the maximum amortization from 35 years to 30 years and requiring borrowers to qualify for a fixed-rate plan, even if they are opting for a variable rate.

Many who only qualify under the old rules, however, will try to secure mortgages before the shorter maximum amortization periods come into effect next month, Ms. Roberts said.

“There are going to be a lot of people that will enter into their agreements by March 18.”

Much of the momentum in mortgage rates can be attributed to a bond selloff and rising yields across the board. That effect is partly a reflection of building global inflationary pressures as well as a global economy that is proving more robust than expected.

“In my opinion, the bond market will not be the place to be over the next six months, and if that’s the case, you will see mortgage rates continue to rise,” Mr. Tal said.

In addition, anticipation of increases to the Bank of Canada’s benchmark lending rates is building, also contributing to rising yields, which puts pressure on fixed-income mortgages.

If there was any lingering doubt that the Bank will soon raise rates, last week’s jobs report erased them. The report showed Canada added four times more jobs than expected in January.

“[It] creates a fairly powerful story for the Bank of Canada, which is clearly concerned on the domestic front,” said Camilla Sutton, chief currency strategist at the Bank of Nova Scotia. “I think there’s a material change.”

So do investors. The probability that the central bank will boost its key policy rate by May, as measured by overnight index swaps, jumped to almost 75% after the jobs data. http://www.financialpost.com/news/Window+closing+ultra+mortgage+rates/4239243/story.html#ixzz1DMwQzyWP

lawlessbrown.com

Release: Department of Finance tightens CMHC rules

TD Economics

• For the second time in twelve months, the Department of Finance tightened rules on residential mortgages to help slow the pace of household debt accumulation. Changes include shortening the amortization period to 30 years (which had already been shortened from 40 to 35 years in 2008), withdrawing CMHC insurance of home equity lines of credit (HELOC), and a reduction in the maximum refinance percentage from 90% loan-to-value to 85%. Changes to the amortization period and the refinancing ratio will take effect March 18 and the HELOC change will take effect April 18, 2011.

lawlessbrown.com

Building Your Brand with Social Media

Susan Gunelius

Tapping the vast audience of the social Web is a low-cost way to catapult a small-business brand onto the global arena. Building your brand using social media allows you to develop new (and strengthen existing) relationships, which often leads to everything from brand awareness, loyalty and word-of-mouth marketing.

While perhaps initially daunting, the trick is to break the process into manageable pieces. From creating your online destinations to connecting with influencers, following these five steps will get you on your way to building your brand and boosting your business.

1. Create branded online destinations.

This is the first step to raising brand awareness and loyalty. Companies with the most successful social media branding surround consumers with online experiences that allow them to select how they interact with the brand.

Consider using popular, free options like blogs, Twitter, Facebook, LinkedIn, YouTube, and so on. Of course, for small-business owners without the manpower to effectively manage too many destinations, you should consider testing each of these to determine which social media service you're most likely to stick with over the long haul. This will become your core destination. All your other online destinations should link back to the core.

2. Establish entry points.

One of the most important aspects to accomplishing this with your branded online destinations is to continually publish meaningful content that adds value to the reader's experience. The goal is to publish useful information that people will want to talk about -- and then share with their own audiences. This creates additional ways for people to find your branded destinations and it can lead to higher rankings from search engines like Google.

Here's one way to think about it: If you have a website with 10 pages of content, there are 10 ways for search engines to find your site. If you attach a blog to that website and write a new post every day for a year, you will have 365 more ways for Google to find your site, and your brand.

I call this the compounding effect of blogging. You cannot buy that kind of access to a global audience.

3. Locate your target audience and bring them back with you.

Where does your target audience already spend time? You need to spend time in those places, too, and engage in the conversations happening there. Get started by conducting a Google search for keywords that consumers would be likely to use when searching for a business or products like yours. Follow the paths that those consumers would follow and you're likely to find them.

Join relevant online forums and/or blogs, and write posts, publish comments and answer questions. Once that audience understands that you're there to genuinely offer useful information and not to self-promote, you can start leading them to your own branded destinations -- particularly your core branded online destination.

4. Connect with influencers.

As you search for your target audience, you should identify online influencers in those communities and get on their respective radars. To do so, leave comments on their blogs, follow them on Twitter and retweet their content. You can even email them to introduce yourself.

The key is to make sure they know your name and understand that you add value to the online conversation. This also exposes you to their audiences.

5. Give more than you receive.

Success in social media marketing depends on being useful and developing relationships. If you spend all of your time promoting then no one will want to listen to you. It's not a short-term tactic, rather a long-term strategy that can deliver sustainable, organic growth through ongoing, consistent participation.

A good rule of thumb is to apply the 80-20 rule to your social media marketing efforts. Spend no more than 20 percent of your time in self-promotional activities and conversations, and at least 80 percent on non-self-promotional activities. In time, you'll see your business grow from your efforts. And it starts with leveraging these fundamentals.

lawlessbrown.com