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Market Forecast

• May11

  Market Update

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  Ottawa’s ominous talk about dangerously high household debt-to-income levels has either paid dividends or was over-stated. It depends on who you talk to.
  
  Finance Minister, Jim Flaherty, and Bank of Canada Governor, Mark Carney, have spent months cautioning Canadians to dial down their borrowing as the average debt-to-income ratio climbed to a troubling 153%. And recently Carney told the Commons Finance Committee that the growth of that debt has slowed from upwards of 10% a year, down to about 4%, for the past two years.
  
  But Brian Hurley, head of private mortgage insurer Genworth Financial, has a somewhat different view. He looks back to 2007 when home price appreciation started to flatten. Quoted in a recent interview with an industry website, Hurley said, “We don’t see them (homeowners) stretching on the debt service levels like Ottawa is warning us about. We don’t see that coming through in our portfolio; as a matter of fact we see some good self-discipline there.”
  
  The bottom line: with consumer spending pegged to account for half of Canada’s economic growth for the next two years, household debt will continue to remain Ottawa’s top concern for the domestic economy.

   

  We are not expecting any major changes in the Central Bank rate nor the Bond Yields that would alter the stability of the current rates until late 2012.

   

  We are concerned with the current discussions regarding interference with the Mortgage  Term Renewal Qualifications and  Changes to CMHC programs being discussed by the Government Finance Department.

   

  More to come,

   

  Paul and Trevor

   

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