A Strong Loonie And What It Means For The Economy

The canadian loonie just keeps gaining and gaining, up a modest 5.5% percent in 2010, from the gross 16% gain against the USD in 2009. This growth is in direct correlation with Canada's vast supply of natural resources and rising prices for crude oil and commodities. Canada and the US are major trading partners and the associated power of either currency cannot be overstated as the latter imports more oil from Canada than any other country.

Export:
The higher loonie is a burden for Canadian exporter's as it seems too expensive for company's looking to import. Thankfully with the current prices the demand for gas from the US is continous and dependable so there has not been a major negative impact on oil exports. On average 1,962,000 barrels per day in the first 10 months of 2010 were exported compared to 1,919,000 in 2009 during the same time frame.

Import:
Canadian companies that import raw materials, machinery and other American products benefit from the energetic loonie. Retailers in US imports have a multitude of options in lowering prices and increasing sales volume, or maintaining prices and increasing margins. This also works in reverse for American importers because they pay more for Canadian products.The stronger loonie is music to the ears for many American exporters who have had a tough go if it with the recession the last few years.

The stronger loonie provides canadian businesses that want to expand into the US more purchasing power as they're money now stretches farther than before in regards to investments. The sypnosis is that the key to a strengthened loonie is a stable and growing canadian economy and higher commodity prices that should hold in the future.

New Mortage Rule Changes And How They Affect You

So the big announcement Monday was that under federal rules all CMHC mortages will now be reduced from 35 years amortization to 30 years amortization. As well Canadians can now only borrow a maximum of 85% when refinancing their homes down from 90%.  So what does that really mean to the average consumer? Well for instance if you were planning on buying a home with a CMHC mortgage which basically means your are putting less than 20% down on your purchase this may affect you for the better. In the sense that while a longer amortization period lessens your monthly payments it really buries you overall with the amount of interest you have to pay over the life of the mortgage most especially in a 3 or 5 yr fixed interest term. You have a more difficult time building up equity and may be in for the long haul when it comes to being fiscally responsible in the future. It's really just another reason as to why Canada , Alberta primarily is much better off in the post recession time than our neighbours and many trading partners because we are much more fiscally responsible. While last year's interest rate hike slowed down the housing market and lagged the industry in general, Canada boasts  a less than 1% default rate on mortage loans and came out much better than other nations from the sub-prime crisis and the heart wrenching amount of foreclosures that are happening daily to date in the U.S.

All the best in 2011


http://www.theglobeandmail.com/report-on-business/economy/housing/flaherty-details-new-mortgage-rules/article1872599/