Please click on the link below to listen to a conversation with Warren Mosler. Topics include: Demand leakage (how to fix end-demand), Fed Policy (QE is counterproductive) and overall market/econ outlook for US, Europe and China.
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Daily Archives: June 21, 2012 @ 5:30 pm (Thursday)
Canada Tightens Mortgage Rules: Equivalent to 100bp Rate Hike
too many new homes being built?
;)
Karim writes:
Canada Tightens Mortgage Rules: Equivalent to 100bp Rate Hike
- Long expected but well overdue, Canadian FM Minister Flaherty announced yesterday a series of rule changes yesterday that tighten rules for home mortgages in Canada
- The most significant is shortening the longest amortization period from 30yrs to 25yrs. In terms of monthly payments, this has the same impact as a 100bp rise in mortgage rates. About half of all mortgages have 30yr terms.
- They also lowered LTV from 85% to 80% and tightened standards even more on mortgage loans in excess of $1mm.
- This should definitely be viewed a form of tightening that will delay BoC rate hikes, and may even allow the Bank greater leeway to ease rates if they want to.
- Standard behavior in the past is for borrowers to lock in terms before new rules go into effect. But with the broader message here that household debt levels are dangerously high, and more measures may be forthcoming to cool down the housing market, it wouldn’t be surprising if new mortgage activity isn’t as great as in years past.
- The most basic market impact is for lower short-term rates and a weaker C$ based on likely narrower rate differentials to the U.S. going forward.
UK Daily | U.K. Manufacturing Demand Strengthened in June, CBI Report Shows
As suspected, signs that UK deficit spending is looking large enough to support a bit of growth. Now watch for the proclamations about how austerity works…
UK Headlines:
U.K. Manufacturing Demand Strengthened in June, CBI Report ShowsCML Says U.K. Gross Mortgage Lending Rose 24% in May From April
U.K. Retail Sales Rise More Than Forecast After April Slump
German, French private sector output data
With exports sagging it’s looking to me like:
Germany is going to need more public or private sector deficit spending to support sales and employment, while the French deficit may be large enough to stabilize their economy, albeit at far too low levels of output and employment.
Steepest drop in German private sector output for three years
June 21 (Markit) — Flash Composite Output Index at 48.5 in June from 49.3 in May, Flash Services Activity Index at 50.3 from 51.8, Flash Manufacturing PMI at 44.7 from 45.2, and Flash Manufacturing Output Index at 44.9 from 44.6. Reduced business activity reflected a marked fall in manufacturing production in June. Meanwhile, service sector activity was close to stagnation during the latest survey period. The latest drop in incoming new work reflected reductions in both the manufacturing and service sectors. Manufacturers indicated a steep and accelerated downturn in new export business during June, with the pace of reduction the fastest since April 2009.
Rate of decline in French private sector output eases in June
June 21 (Markit) — Flash Composite Output Index rises to 46.7 in June from 44.6 in May, Flash Services Activity Index climbs to 47.3 from 45.1, Flash Manufacturing PMI rises to 45.3 from 44.7, and Flash Manufacturing Output Index increases to 45.2 from 43.6. Slower falls in activity were recorded in both the manufacturing and service sectors during June. This mirrored similar moderations in the respective rates of decline in new business. Panellists indicated that clients remained hesitant in committing to new contracts amid an uncertain economic climate, although some respondents noted greater numbers of client enquiries and sales of new products.