The shutdown of Silicon Valley Bank sent shockwaves across global markets and triggered a reassessment of future rate moves by central banks, including that of the Bank of Canada.DADO RUVIC/Reuters
Getting caught up on a week that got away? Here’s your weekly digest of the Globe’s most essential business and investing stories, with insights and analysis from the pros, stock tips, portfolio strategies and more.
Silicon Valley Bank has collapsed – now here’s the good news
The collapse of Silicon Valley Bank, one of the world’s most prominent technology financiers, marked the second-biggest bank failure in U.S. history after Washington Mutual in 2008. The shutdown by California’s Department of Financial Protection and Innovation sent shockwaves across global markets and left governments and tech CEOs scrambling to limit the impact of SVB’s sudden failure. According to David Rosenberg, major banks are continuing to tighten their lending guidelines and boost their loan-loss provisions, and Americans should be prepared for a period of deflation. Meanwhile, bond markets have made a dramatic reassessment of future rate moves by central banks, including that of the Bank of Canada, writes Darcy Keith. For Canadians looking to buy a home, renew their mortgage or borrow money, Rob Carrick says that the demise of SVB is the break you’ve been waiting for.
Flair Airlines has four planes seized for non-payment
If you have a Flair Airlines flight booked for summer travel, you may want to double-check your boarding pass. The Edmonton-based discount carrier had four airplanes seized last week for non-payment of US$1-million to Dublin-based Airborne Capital Ltd., Eric Atkins reports. Working with bailiffs, the leasing company grounded four Boeing 737s: two at Toronto Pearson Airport, one in Edmonton and one in Waterloo, Ont. Flair leases six planes from Airborne – two 737s have not been seized – and another five from Bank of China Aviation. Flair recently paid its arrears to the Bank of China, but failed to come to an agreement with Airborne.
Canada’s real estate correction, in inflation-adjusted terms
February’s housing report from the Canadian Real Estate Association indicated this is the steepest house price correction at the national level in decades. The typical home in Canada has fallen by $132,000, or 15.7 per cent since last February – even worse when you factor in inflation. In inflation-adjusted terms, national house prices have fallen nearly $168,000, a nearly 20 per cent decline. Meanwhile, bigger mortgages and higher interest rates mean ownership costs eat up 60 per cent of average household incomes now, compared with 44 per cent then, according to RBC Economics. Jason Kirby takes a closer look in this week’s Decoder.
Tips for filing your income tax return
Tax season is upon us, and Canadians are urged to file earlier due to an impending strike involving 35,000 Canada Revenue Agency workers. With that in mind, Tim Cestnick offers six tips to help you file your tax return properly. You may be entitled to some new credit or benefits, such as the first-time homebuyer’s tax credit (the base amount was increased to $10,000) or the home accessibility tax credit (eligible expenditures increased to $20,000). You may also want to look into whether you qualify for the new Canada Dental Benefit. Ontarians who booked a staycation in the last year can claim 20 per cent of eligible accommodation expenses, such as hotel or campground stays, up to $200 per person on their taxes.
Volkswagen to set up EV battery factory in St. Thomas
German auto giant Volkswagen announced this week that St. Thomas, Ont., has been chosen as the site for its first battery factory outside Europe, after considering locations in both Canada and the United States. As Adam Radwanski reports, this helps solidify Canada’s effort to position itself as a major player in electric-vehicle manufacturing. While details of the planned investment, including the dollar amount, haven’t been disclosed, a 1,500-acre swath of land near London has been designated for industrial development. Other possible destinations such as Windsor have already reached their capacity to support such projects because of recent EV-related commitments by Stellantis NV and LG Energy Solution. The workforce in St. Thomas, which has struggled to replace hundreds of jobs lost when Ford closed its assembly plant over a decade ago, is not stretched as thin.
Why the U.S. wants to ban TikTok – and what it means for Canadians
The Biden administration has threatened to ban TikTok in the United States if the social media app’s Chinese owners, ByteDance, refuse to sell their stakes. White House officials have grown increasingly concerned about the safety of Americans’ data. But a nationwide ban would face significant legal and societal hurdles, since TikTok is popular with over 100 million Americans and an app has never been banned in the country. We look at the bill currently being considered by Congress, the response from TikTok, how this ban potentially affects American content creators – and whether this could happen in Canada too.
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Now that you’re all caught up, prepare for the week ahead with The Globe’s investing calendar.
The collapse of Silicon Valley Bank and Signature Bank could reverse interest rate trends in U.S. and Canada, potentially bringing down mortgage costsZoon Media
Here are The Globe and Mail’s top housing and real estate stories this week, with the lowest mortgage rates available in Canada today, commentary from our mortgage expert and one home worth a look.
What housing crash? What Canadian markets look like for the spring
Prospective home buyers held their breath in anticipation last year as real estate prices declined across the country, hoping to enter the market as prices would plunge. But the housing crash didn’t happen. A year after the Bank of Canada started raising interest rates, houses remain unaffordable, mortgages cost more, and homeowners are holding on to their properties, making real estate listings scarce. Erica Alini and Rachelle Younglai look at what to expect from the market this spring.
The collapse of Silicon Valley Bank could reverse interest rate hike trends
The U.S. Federal Reserve was widely expected to raise interest rates at its next meeting on March 22, but the sudden failure of Silicon Valley Bank (SVB) – the largest collapse of a U.S. bank since the 2008 crisis – has investors slashing their bets, Mark Rendell reports.
The bank’s failure is sharpening the tensions between fighting inflation and managing risks of financial instability, leading markets to believe the Fed will hold off on further interest rate increases to stabilize the economy.
Why the SVB collapse is the best news for mortgage renewals and homebuyers
The failure of SVB could ripple through the economy, but for now, fear is manifesting itself through a rush of money into government bonds. The rush to the market is raising prices and bringing down interest rates on bonds.
The cost of fixed-rate mortgages is heavily influenced by interest rates in the bond market, which makes this the best news in a while for anyone renewing their mortgage or buying a house, writes Rob Carrick. Plus, the fear of economic instability triggered by the bank’s failure could push central banks to lower interest rates sooner than anticipated.
Mortgage specials start arriving, just in time for spring
This week’s market news could lead mortgage rates to go on sale, writes Robert McLister.
Canadian home sales are up slightly as prices continue to fall in February
Home prices in Canada fell in February for the 12th month, but sales volume is rising slightly in a potential sign that buyers are adjusting to higher interest rates, reports Rachelle Younglai.
The Home Price Index, which adjusts for pricing volatility, reached $704,300 last month, a 1.1-per-cent fall from January and a 16-per-cent loss from last February, when values hit their record high, according to the monthly report from the Canadian Real Estate Association (CREA.)
Decoder: The hit to Canadian house prices is deeper than it seems
While February’s housing report contained signs that the market may be stabilizing, it also cemented this as the steepest house price correction at the national level in decades, reports Jason Kirby.
According to CREA data, the typical home price in Canada has fallen by $132,000 since February 2022, and the drop is actually worse once inflation is factored in. In real, or inflation-adjusted terms, national house prices have fallen nearly $168,000, a more-than-19-per-cent decline.
Home of the week: A Calgary home for the tech lover
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Home of the Week, 530 Crescent Rd. NW CalgaryZoon Media
1 of 30
The Crescent area of Calgary, just a 15-minute walk to downtown, offers stunning vistas and a mix of more traditional and newly built homes. The lot size is 28.9-by-120 feet, and the entire house is oriented toward the view: a modernist building with 13-feet high windows – made in Belgium – and outdoor spaces with built-in fireplaces.
On the very back of the house is a screened-in back deck and an office workspace. Sitting in the office, you can turn around and look straight through to the front terrace and beyond. “The idea was, wherever you are, you have a view to the downtown,” the owner said.
What do you think is the asking price for this house?
a. $995,000
b. $1,899,000
c. $3,550,000
d. $2,350,000
a. The asking price is $3,550,000.
Canadians who have been able to keep a stockpile of cash are better prepared for the impending recession.Denis Pepin/Getty Images/iStockphoto
Getting caught up on a week that got away? Here’s your weekly digest of The Globe’s most essential business and investing stories, with insights and analysis from the pros, stock tips, portfolio strategies and more.
Are you financially ready for a recession?
The recession we’re heading into may be the most unfair in history. Never has there been such a clear dividing line between those who can arm themselves with savings and those who can’t afford to, writes Rob Carrick. During pandemic lockdowns, many Canadian households were able to stockpile cash, while others eked by and never built cash reserves or have since spent those savings. Keeping a stockpile of cash protects you against the interrupted incomes and job losses that are inevitable in recession as employers react to a weakening business environment.
Higher payments are coming for homeowners with variable-rate mortgages
If you’re a Canadian homeowner with a variable-rate mortgage, you may not be sleeping very soundly these days. With soaring interest rates, banks are contacting many clients to inform them that they’re reaching their trigger rate, signalling higher monthly costs for a growing number of homeowners and a longer payback period. As Salmaan Farooqui reports, the vast majority of Canadian variable mortgages have fixed payments, meaning that payments stay the same even as interest rates rise moderately. But because interest rates have climbed dramatically this year, variable mortgages are starting to hit what’s known as the trigger rate – the rate at which the monthly payment would not be enough to cover the interest owed. So with the Bank of Canada widely expected to announce another outsized rate increase before the end of the month, is it time to switch to a fixed-rate mortgage? Erica Alini explores the pros and cons of locking in a fixed rate versus riding it out.
Renters: Be prepared to compete – and pay more
Bidding wars and bully offers are no longer reserved for homebuyers. After seeing falling rent prices during the pandemic, competition is intense in the Greater Toronto Area’s red-hot rental market as the region continues to struggle with a severe housing shortage – and if you do happen to come out on top, be prepared to pay a premium. According to Urbanation data, a record 36 per cent of GTA condos were leased for above the listing rate in the third quarter, and on average, those condos were rented for a $129 monthly premium over asking, also a record high. The average condo was leased for $2,733 a month, an increase of 18.6 per cent from a year ago. Will this trend continue or can renters expect some relief any time soon? Matt Lundy looks at the data in this week’s Decoder.
Inflation continues to decelerate – but not fast enough
Canadian inflation slowed slightly in September, but not as much as financial analysts were expecting, paving the way for another outsized Bank of Canada rate hike on Oct. 26. The consumer price index rose 6.9 per cent in September from a year earlier, Matt Lundy reports. That was down from 7 per cent in August and marked the third consecutive month of deceleration. Gasoline prices fell 7.4 per cent, but grocery prices rose 11.4 per cent. To tamp down inflation, the central bank is universally expected to deliver another large rate hike – perhaps taking the policy rate to 4 per cent, the highest since 2008, as more economists are now predicting.
Real estate influencers are fuelling Canada’s housing crisis
A growing number of real estate investors are using social media to fund real estate deals, which has helped fuel the investing craze in Canada that revved up when home prices soared and COVID-19 restrictions led people to spend more time online. As Rachelle Younglai and Jessica Burgess report, over the first year of the pandemic, investor buying of residential properties doubled in Canada. By the middle of last year, investors accounted for more than a fifth of the country’s home purchases. But when things go wrong with real estate, they can really go wrong. With rising interest rates and cooling housing markets, promoters may not be able to deliver the profits they promised their investors, which has, in turn, upped the pressure on them to further raise rents, worsening the country’s affordable-housing problem. Regulators don’t seem to be paying attention, and without enforcement, promoters are raising capital with little to no legal scrutiny.
Liz Truss is gone but the U.K. crisis lives on
Liz Truss resigned on Thursday after a brief, chaotic tenure marked by economic and political turmoil, becoming the shortest-serving Prime Minister in British history. Britain’s financial markets were plunged into turmoil on Sept. 23 after then-new finance minister Kwasi Kwarteng announced billions of pounds of unfunded tax cuts. The Bank of England was forced into emergency bond-buying to stem a sharp sell-off in Britain’s £$2.3-trillion government bond market that threatened to wreak havoc in the pension industry and increase recession risks. Mr. Kwarteng was soon fired and his replacement, Jeremy Hunt, scrapped “nearly all” of the economic plan and scaled back Ms. Truss’s vast energy support program, in a historic U-turn to try to restore investor confidence. “The experience in the U.K. underscores that, in an environment of tightening monetary policy, there will be rising tension between various macroeconomic objectives,” Mark Carney, who was Bank of England governor from 2013 to 2020 and a former Bank of Canada governor, said just hours after Mr. Truss’s resignation.
Now that you’re all caught up, prepare for the week ahead with the Globe’s investing calendar.