Bank of Canada keeps target for the overnight rate at 4 1/2 per cent

The Bank of Canada today announced that it is maintaining its target for the overnight rate at 4 1/2 per cent. The operating band for the overnight rate is unchanged, and the Bank Rate remains at 4 3/4 per cent.

Near-term prospects for economic growth outside North America appear to be slightly stronger than anticipated in the July Monetary Policy Report Update (MPRU), while near-term economic prospects for the United States are weaker than expected. It now seems likely that the adjustment in the U.S. residential housing sector will be more pronounced and protracted, exacerbated by recent developments in financial markets. On balance, this implies weaker demand for Canadian exports than had been expected at the time of the July MPRU.

In Canada, total and core CPI inflation in July, at 2.2 per cent and 2.3 per cent respectively, continued to be above the inflation target but generally in line with the Bank's expectations. The Canadian dollar has also largely traded in the range assumed in the July MPRU. At the same time, the pace of economic growth in the first half of this year was above the Bank's expectations. It now appears that the Canadian economy is operating further above its production potential than was estimated in July. Domestic demand remains robust, buoyed by a continuing strong labour market and higher-than-expected increases in home sales and prices. However, recent developments in financial markets have led to some tightening of credit conditions for Canadian borrowers, which should temper growth in domestic demand.
Against this background, the Bank judges that the current level of the target for the overnight rate is appropriate. However, there are significant upside and downside risks to the outlook for inflation. On the upside, there is a possibility that household demand in Canada could be stronger than anticipated, while on the downside the ongoing adjustment in the U.S. housing sector could be more severe and spill over to the U.S. economy more broadly. In addition, there is uncertainty about the extent and duration of the tightening of credit conditions in Canada and, hence, about the tempering effect this will have on growth in domestic demand.

The Bank will continue to closely monitor evolving economic and financial developments. A full update of the Bank's outlook for growth and inflation, including risks to the projection, will be set out in the Monetary Policy Report, to be published on 18 October 2007.

Information note:
The Bank of Canada's next scheduled date for announcing the overnight rate target is 16 October 2007.

TransUnion report, the impact of your credit score on the true cost of your mortgage

Personally I think it is just as much an issue of lack of education on the part of the clients Lenders as it is lack of knowledge on the part of the respondents. Regardless the "price matrix" as a result of your Credit Score can cost the YOU thousands of dollars in extra interest charges. Here is the Canada News Wire release:

TORONTO, July 18 /CNW/ -- Do Canadians really know how much a mortgage will cost them? With the summer home buying season now in full swing, TransUnion recently commissioned GfK Roper Public Affairs & Media to survey consumer perceptions and attitudes about mortgages. The findings indicate that 45 per cent of Canadians underestimate the lifetime cost of a mortgage.

Only one-fifth of respondents correctly answered that due to interest payments, the average Canadian homeowner will ultimately pay in the range of 151 to 200 per cent of the original loan amount over the course of a 25-year mortgage.

"By the end of a 25-year term, if you a have a traditional fixed-rate mortgage at 6.43 per cent, you'll actually pay close to $200,000 on top of your $200,000 mortgage, just in interest," says Tom Reid, director, Consumer Solutions at TransUnion.ca. "That's a significant cost that could be reduced by tens of thousands of dollars if you have a higher credit score in hand when you go to secure your home loan."

Perceptions Similar across Demographics, with Education Proving the Exception

Surprisingly, home ownership makes no difference for mortgage loan knowledge. Only one in five home owners (20 per cent) gave the correct answer for true mortgage costs, identical to the 20 per cent among those who rent or live at the home of their parents. Similarly, 19 per cent of men and 20 per cent of women correctly identified the 151-200 per cent figure.

However, education level does seem to make a significant difference. Among those who completed no more than grade school, just 5 per cent chose the correct response, rising to 15 per cent among those who completed high school and to 25 per cent among those with at least some college education. Still, even among the most educated Canadians, just one in four gave the correct response.

"Reviewing your credit profile and score frequently and taking steps to maintain or improve your credit standing puts you in the driver's seat when shopping for a loan," adds Reid. "All else being equal, the higher your credit score, the stronger your position to negotiate lower mortgage or home equity rates. That's a fact you can bank on."

For more information on your credit score and how it will impact your mortgage contact:

Ontario Mortgage Team
Mortgage Intelligence Inc.
Leading the way to a better mortgage

web: www.OntarioMortgageTeam.com