My dad's company - Thunderhill Construction!

A few weeks ago, the Globe and Mail wrote a story on my dad's company, Thunderhill Construction Limited. Working for my dad is actually how I got my start in real estate! Here's a copy of the article - the actual link is: http://www.reportonbusiness.com/servlet/story/RTGAM.20071113.wxsmallsuccession13/BNStory/specialSmallBusiness/home

Pass the torch without burning your business
Avoid classic mistakes like 'parental shadowing,' the 'clean-slate approach' and indecisiveness, experts say
GREG MCMILLAN
Special to The Globe and Mail
November 13, 2007 at 10:26 AM EST

Ron Solowka realized a long time ago that he wouldn't be working forever. As president of Thunderhill Construction Ltd., he knew the smart thing to do was to plan properly for the eventual passing of the torch to family members.
In textbook fashion, according to succession-planning experts, the Toronto-based general contractor is doing just that.
"I went through sort of the same thing with my dad. Only he thought he would be on the job forever and we really did not have a succession strategy," says Mr. Solowka, 57. "Rather than repeat the same mistake, we decided to go another way."
That meant adequately preparing his daughters Robin and Kyla to take the reins, using all the available techniques currently recommended for family business owners.
Twenty-six-year-old Robin started working part-time at Thunderhill while in her mid-teens and also took a family-business course at Ryerson University. In the past year, she has assumed a full-time position as the company's director of marketing and communications. Sister Kyla, 28, is the company's real estate and strategy consultant.
"I don't feel 100-per-cent confident that I can run the business at this point," Robin says. "I am currently going through the succession-planning stage. I think because of our involvement for the past 10 years, my father is realizing that we are bringing on board many new ideas and talents, especially in the management and operations end of the business," she says.
Robin says the transition has been building during the past couple of years, with the younger Solowkas being introduced to suppliers, sub-contractors and customers.
"We have recently been working with the lawyers and accountants to flesh out the issues of ownership, titles and roles, as well as future directions for the company," she adds.
Succession planning for family enterprises has changed dramatically over the years, says Mary Han, assistant professor of entrepreneurships and strategy at Ryerson University. In the past, such planning happened closer to the time when the founder was about to leave the business.
These days, increasing numbers of founder entrepreneurs "are empowering the next generation to be the strategic decision-makers and play a key role early on," she says.
Dr. Han says there are three areas family businesses should be wary of when planning for succession. "They should avoid parental shadowing, such as when the firm's strategies are locked in the past," she says. "They should also avoid a 'clean-slate' approach to the past where all traditions, legacies and its secret to success are discarded.
"Thirdly, they should avoid indecisiveness. Instead, members of a family business may need to pay more attention to being adaptive; by adapting the business to current competitive conditions, to new family dynamics and to a new ownership structure," Dr. Han says.
A 2006 survey from the Canadian Federation of Independent Business (CFIB) found that slightly more than one-third of independent business owners in Canada plan to leave their firms within the next five years. It also found that most owners of small businesses aren't adequately prepared for business succession: only 10 per cent have a formal, written plan; 38 per cent have an informal, unwritten plan - and 52 per cent don't have any plan at all.
The survey also found that accountants and legal advisers are the most common types of professionals used by small business owners to prepare a succession plan. Catherine Swift, chief executive officer of the CFIB, says it is also important to set up a family council to deal with all the emotional dynamics that will certainly arise.
A number of other factors should be in place to ensure a smooth succession, says Eileen Fischer, Tanenbaum Chair in Family Enterprise at York University's Schulich School of Business.
"If the founder was charismatic and high profile, it can be particularly hard for the successor to step into his or her shoes and gain the respect of all those who need to have it for the business to operate smoothly.
"Preparation and training of the successor is really important, but charisma is hard to compete with - and the only way of successfully dealing with this is often to have the parent back away completely, even if they still have energy and interest," she says.
Sometimes other stakeholders (such as key suppliers, distributors or investors) want to know the founding parent is still on the scene "because it's the parent they know and trust," Dr. Fischer notes. "This can put the successor in a difficult situation that requires real co-operation on the part of the parent if the transition is ultimately to work out."
Robin Solowka says her family is going about the process the right way. Although her father is still in charge, he is aiming to pass on more responsibility to her and Kyla in the next two years.
"I think because of our lengthy involvement in the business, plus our formal business education, it makes it easier for my father to have confidence in our abilities both on-site and in the office," Robin says.
When Mr. Solowka does retire, his daughters expect he will still provide guidance on issues or projects they might be unfamiliar with or unsure about. "But we have also made it clear that once he steps down from the role of president/CEO, his involvement in major decisions will be limited to just advice," Robin says.
Another challenge for any family enterprise is to keep the business and family dynamics separate. The Solowkas say this aspect is going well.
"It can be hard to separate business from family matters," Robin acknowledges. "We are fortunate to have open communication."
TIPS FOR THE HAND-OFF
Here are some hand-off tips from Eileen Fischer, Tanenbaum Chair in Family Enterprise at York University's Schulich School of Business:
Start discussions early, well before the succession is envisioned to happen.
Give at least as much attention to what the business needs as to what family members believe they need, but don't overlook either aspect.
Use external advisers or consultants to get an objective view on the potential successors and what they might require in terms of skills building, and to help facilitate transition.
Communicate, communicate, communicate. You can't afford to keep things "under the carpet" because both the business and the family can suffer if a decision is made without sufficient consultations.
Greg McMillan
Family business courses
Many Canadian universities offer courses and programs on family businesses. Here's a sampling:
Dalhousie University's School of Business, Halifax
John Molson School of Business, Concordia University, Montreal
Ted Rogers School of Management, Ryerson University, Toronto
Schulich School of Business, York University, Toronto
Ivey School of Business, University of Western Ontario, London, Ont.
School of Business, Wilfrid Laurier University, Waterloo, Ont.
Asper School of Business, University of Manitoba, Winnipeg
Haskayne School of Business, University of Calgary
University of Alberta School of Business, Edmonton
Sauder School of Business, University of British Columbia, Vancouver

New Land Transfer Tax Explained!

Here is an article that explains the new Toronto Land Transfer Tax, courtesy of the Toronto Real Estate Board:

October 23, 2007 -- Toronto City Council has approved a municipal land transfer tax that will be levied on top of the provincial land transfer tax. TREB worked very hard to oppose this tax and commends the efforts of REALTORS® on this issue. TREB took a strong position to oppose this tax as unfair in principle and refused to compromise. As a direct result of this strong position, City Council was forced to make a number of amendments to the City’s original proposal, including rebates for first-time buyers, a reduced rate, and grandfathering for existing transactions.

The following is based on currently available information. Some information from the City is available here.

What was approved by City Council?
A second land transfer tax, on top of the provincial land transfer tax, at the following rates:
Residential: (An easy-to-use residential calculator is available here):
0.5% of the amount of the purchase price up to and including $55,000, plus
1% of the amount of the purchase price between $55,000 and $400,000, plus
2% of the amount of the purchase price above $400,000
Commercial / Industrial / Etc.:
0.5% of the amount of the purchase price up to and including $55,000, plus
1% of the amount of the purchase price between $55,000 and $400,000, plus
1.5% of the amount between $400,000 and $40 million, plus
1% of the amount above $40 million

When does this take effect?
February 1, 2008.

Are existing transactions grandfathered?
Yes. Any transactions where the purchaser and vendor have entered into an Agreement of Purchase and Sale for the property on or before December 31, 2007, and closing after the TLTT takes effect on February 1, 2008, will be REBATED the full amount of the Toronto land transfer tax, regardless of how long after February 1, 2008 the closing date is. (Note: Media reports that closings must occur by Feb. 1, 2008 are inaccurate.) Agreements closing before February 1, 2008 do not pay the tax. Teranet will be collecting the Toronto land transfer tax for the City of Toronto. Once the City’s rebate policies are reflected in Teranet’s collection system, the rebate-eligible amount will be exempt at the time of registration. The City previously indicated that these arrangements would not be made until the “spring of 2008”, but has now indicated that changes will be made by February 1, 2008, when the Toronto land transfer tax takes effect. According to the City, purchasers who are eligible for a FULL rebate of the Toronto land transfer tax will not have to pay the tax (meaning that they do not have to pay the tax upfront and be rebated later). This means that purchasers involved in grandfathered transactions (Agreements of Purchase and Sale signed on or before December 31, 2007, closing on or after February 1, 2008) will not have to pay the Toronto land transfer tax. If your clients have concerns, they should check with their lawyer.

What about Agreements of Purchase and Sale signed after December 31, 2007 with closing dates before February 1, 2008?
Purchasers with a Purchase and Sale agreement signed after December 31, 2007 with a closing before February 1, 2008 will not be required to pay the Toronto Land Transfer tax.

What about Agreements of Purchase and Sale signed after December 31, 2007 with closing dates on or after February 1, 2008?
Purchasers with a Purchase and Sale agreement signed after December 31, 2007 with a closing on or after February 1, 2008 will be required to pay the full Toronto Land Transfer tax.

Where does this apply?
The Toronto land transfer tax only applies to transactions within the City of Toronto. This does NOT apply to property transactions outside of the City of Toronto.

Are first time home buyers affected?
First time home buyers of new AND re-sale homes will receive a rebate of the Toronto land transfer tax of up to $3,725 (this equals a 100% rebate on homes purchased for up to $400,000). Teranet will be collecting the Toronto land transfer tax for the City of Toronto. Once the City’s rebate policies are reflected in Teranet’s collection system, the rebate-eligible amount will be exempt at the time of registration. The City previously indicated that these arrangements would not be made until the “spring of 2008”, but has now indicated that changes will be made by February 1, 2008, when the Toronto land transfer tax takes effect. According to the City, purchasers who are eligible for a FULL rebate of the Toronto land transfer tax will not have to pay the tax (meaning that they do not have to pay the tax upfront and be rebated later). This means that first-time home buyers where the total Toronto land transfer tax is $3,725 (the Toronto land transfer tax payable on a home purchased for $400,000) or less, will not pay Toronto land transfer tax (see exception noted below). If your clients have concerns, they should check with their lawyer.
Note: First-time home buyers with Toronto land transfer tax payable above the maximum rebate amount of $3,725 (those purchasing homes above $400,000) will be required to pay the total Toronto land transfer tax, and then receive the maximum rebate of $3,725 at a later date from the City. Once all changes have been made to Teranet’s collection system, in the spring of 2008, these buyers will only have to pay the balance of the Toronto land transfer tax above $3,725.
Who qualifies as a first-time home buyer?According to the City of Toronto, eligibility rules for the Toronto Land Transfer Tax first-time buyer rebate will mirror provincial rules, as follows:
The purchaser must be at least 18 years of age.
The purchaser must occupy the home as his or her principal residence no later than nine months after the date of the conveyance or disposition.
The purchaser cannot have previously owned a home, or had any ownership interest in a home, anywhere in the world, at any time.
If the purchaser has a spouse, the spouse cannot have owned a home, or had any ownership interest in a home, anywhere in the world while he or she was the purchaser’s spouse. If this is the case, NO refund is available to either spouse. Note: If a purchaser’s spouse owned an interest in a home BEFORE becoming the purchaser’s spouse, but not while the purchaser’s spouse, the purchaser may be eligible for some rebate.

Are Toronto Land Transfer Tax Rebates in addition to Provincial Land Transfer Tax Rebates?Yes. The provincial government also provides a rebate of the provincial land transfer tax for first-time buyers. See details of provincial land transfer tax rebate.

How can I get more information?
More detailed information will be provided once it is made available by the City. If you have questions, contact the City of Toronto at Access Toronto at 416-338-0338. Some information from the City is available here.

If you have questions, contact the City of Toronto at Access Toronto at 416-338-0338.

© 2007 Toronto Real Estate Board. All rights reserved.

Best Salon EVER!

As I was reading the local paper this morning, I came across a full page ad for this crazy salon called Hairosmith. Being a diehard Aerosmith and Steven Tyler fan, I was immediately interested, and happy to see that there was a 50% off holiday special on all services if you bring in a new unwrapped toy for a girl or boy. I called, booked an appointment for noon and headed in to downtown Bowmanville.

Now, if I wasn’t already convinced that this was the place for me, the Aerosmith album covers adorning the wall above the styling chairs was the icing on the cake (and the Bailey’s coffee didn’t hurt, either!). Tammy (owner/operator) was friendly, warm and HILARIOUS and I can honestly say that I left with the best haircut I’ve ever had, in addition to several new jokes for my repertoire.

If you are looking for the epitome ;) of a fantastic hairstyle and a night at Yuk Yuk’s, then Hairosmith is the place for you.

Check out Tammy’s website, then go book your appointment – you’ll be glad you did!

http://www.hairosmith.ca/

Land Transfer Tax Refund Program

News Release December 13, 2007 Government of Ontario Ministry of Finance

ONTARIO EXPANDS LAND TRANSFER TAX REFUND PROGRAM

First-time buyers of resale homes to benefit from new tax measure
The McGuinty government is giving all first-time homebuyers a break on land transfer tax by proposing to expand the Land Transfer Tax Refund Program to include purchases of resale homes, Finance Minister Dwight Duncan announced today.
"Expanding this Land Transfer Tax refund is an important part of our government's commitment to helping Ontarians buying their first home," Duncan said.
Effective midnight tonight, first-time buyers of resale homes, as well as newly constructed homes, would be eligible for a refund from the provincial government of up to $2,000 of the Land Transfer Tax paid.
The expanded Land Transfer Tax Refund Program for First-time Homebuyers is part of a package of new tax initiatives announced in the 2007 Fall Economic Outlook and Fiscal Review that would provide $1.4 billion in provincial tax relief for business and people over three years. The government is making strategic investments in people, communities and infrastructure to strengthen Ontario's economic advantage and help manufacturers and other sectors challenged by current economic conditions.
For more information please visit: http://www.gov.on.ca

January 2008 Rate Drop Predicted!

Surprise rate cut the 'lesser of two evils'

It is a rare day indeed when the Bank of Canada delivers a surprise interest rate cut and financial shares take a dive. Fear of further subprime rot, apparently, continues to outweigh the prospect of lower costs and more attractive dividend returns.
Rot was firmly in the bank's mind yesterday as it cut its overnight target rate to 4.25% from 4.50%, opening what could be a wider and deeper front in the defence against the global credit crunch.
The Bank of England may also cut rates on Thursday, the drumbeat for lower European Central Bank rates grows ever louder, and a 50 basis point reduction from the Federal Reserve next week is now a possibility.
The fact that a cut may cool the European currencies, as it did forcefully for the loonie yesterday, pushing it down US1.22¢ to US99.98¢, may be a temptation too hard to resist.
"This did send a shock in the financial community, particularly in the foreign exchange community here, because it said the G7 is open and willing to cut rates even if inflation remains a concern," said Michael Woolfolk, senior currency strategist at the Bank of New York. "(The) Bank of Canada and perhaps others are willing to take the lesser of two evils. They're willing to cut interest rates and tempting threats to price stability, perhaps fanning the flames of inflation, in order to maintain orderly market conditions and maintain market confidence."
In its statement yesterday, the bank said "upside risks to the bank's inflation projection remain," given strong domestic demand and weak productivity growth.
But downside risks have increased, it added.
"Global financial market difficulties related to the valuation of structured products and anticipated losses on U.S. subprime mortgages have worsened since mid-October, and are expected to persist for a longer period of time," the bank said. "In these circumstances, bank funding costs have increased globally and in Canada, and credit conditions have tightened further."
There was further evidence of that particularly in Europe yesterday as interbank lending rates rose to multi-year highs and European and U.S. officials said easing the global credit squeeze would be long and slow.
Canadian dollar rates were fixed at 5.06% in London before the rate cut, up 36 basis points since mid-November when credit fears intensified.
"As we head into year-end, we are witnessing a resurgence of risk aversion and continued impaired liquidity across the credit spectrum," said Anthony Ryan, assistant U.S. treasury secretary for financial matters, said at a conference in Paris.
"This may put a question mark over our hopes that Europe could 'decouple' its cyclical evolution from the evolution of financial markets and certainties in the U.S. outlook," added Christian Noyer, a member of the European Central Bank's governing council.
Of course, the Bank of Canada had complete cover for yesterday's cut: inflation has significantly receded. Total and core inflation, at 2.4% and 1.8% respectively in October, were below the Bank's expectations, "reflecting increased competitive pressures related to the level of the Canadian dollar," the bank said.
Retail price cuts in response to the loonie's charge over par are obviously having an impact on inflation in the bank's thinking.
It added it expects inflation over the next several months to be lower than was projected in its October monetary policy report. Furthermore, there is an increased risk to Canadian exports as the outlook for the U.S. economy weakened, the bank said.
The BOE may have a similar luxury to cut with consumer price inflation comfortably below 3% but the famously inflation-averse ECB may not. Inflation in the eurozone has hit 3.0%.
Still, "the BOE and ECB could just as easily surprise markets on Thursday with 25 basis points rate cuts of their own," Mr. Woolfolk said.
Most economists now see the bank cutting again at its January announcement though many expect this to be a mild rate-cutting cycle with just a couple of cuts next year.
Then again, a week or two ago few were forecasting a 50 basis point cut from the Fed next week; now it appears firmly on the table.
© Financial Post 2007

Older homes need love too!

Michelle and I have a beautiful listing for sale right now in North Oshawa, just North of Parkwood Estate. It is absolutely fabulous and is dripping with original hardwood, doors, hardware and trim. We are coming into a slower season with the holidays coming up, so I thought I'd give this special house a little extra push here on the blog - if you want to check it out, simply click on http://www.629carnegie.com/ and see how gorgeous it is for yourself! Oh, and tell your friends - you'd have to pay an absolute fortune to find a home like this in Toronto - for those who appreciate classic beauty and elegance, this may be a dream come true. They sure don't make'em like this anymore!

Interest Rate Changes

Interest Rate Changes

The information contained in this report has been prepared by The Canadian Real Estate Association drawn from sources deemed to be reliable, but the accuracy and completeness of the information is not guaranteed. In providing this information, The Canadian Real Estate Association does not assume any responsibility or liability. Copyright© 2007 The Canadian Real Estate Association. All rights reserved.

Bank rate holds steady in September Spillover from sub-prime loans
The Bank of Canada kept its benchmark overnight lending rate steady at 4.5 per cent on September 5th. The trend-setting Bank rate, which is set 0.25 percentage points above the overnight lending rate, remains at 4.75 per cent.
In a marked departure from recent statements made by the Bank in recent months, the announcement included no mention of the need for further interest rate increases to reign in inflation. Instead, the Bank emphasized a marked increase in uncertainty about the prospects for Canadian economic growth.
The Bank indicated that economic growth in the first of the year was stronger than expected, and that “it now appears that the Canadian economy is operating further above its production potential than was estimated in July.” Such statements are normally accompanied by a message that interest rates will need to rise to prevent economic growth from fueling inflation. However, the Bank also identified that spillover from the U.S. sub-prime mortgage market meltdown into the broader financial market “have led to some tightening of credit conditions for Canadian borrowers, which should temper growth in domestic demand.”
The Bank also said that the ongoing adjustment in the U.S. housing sector “could be more severe and spill over to the U.S. economy more broadly.” It also identified “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 decision by the Bank of Canada to hold interest rates steady was widely expected,” said CREA Chief Economist Gregory Klump. “By making no mention of the need for further interest rate increases, the Bank has signaled it will stay on the sidelines until financial market vertigo subsides, and the outlook for economic growth becomes clearer.” The next rate announcement is scheduled for October 16 th .
When the Bank decided to raise interest rates steady on September 5th, the advertised conventional five-year conventional mortgage rate stood at 7.24 per cent – up 0.29 per cent over the peak reached last year. Competition among mortgage lenders remains stiff, which continues to help many borrowers negotiate discounts of one per cent or more off advertised rates.

The rise in mortgage interest rates since June likely encouraged many prospective buyers with pre-approved mortgages to get into the market before their lower pre-approved rates expired, and caused resale housing activity to accelerate. Once higher interest rates start to bite, resale housing activity will gradually ease back from the strong pace seen in the first half of the year.”
An increase in interest rates was factored into the CREA MLS® 2007 market forecast issued in August. “Sales broke all previous records in the first half of 2007, which will push annual MLS® home sales activity to new heights this year and reach the second highest level on record next year. Prices are also forecast to continue rising over the next two years,” Klump added. (CREA 05/09/2007)

Correcting three prevalent myths about heritage properties

Here's an interesting article from the lastest OREA "Edge" newsletter:

Correcting three prevalent myths about heritage propertiesHeritage properties are becoming an area of focus for some Ontario real estate salespeople and brokers. In Brampton (at time of writing), for example, there are no fewer than 400 listed heritage properties on the municipal inventory.
As sure as the sun will come up tomorrow there are three myths about heritage properties that prevail. Unfortunately, as the market for heritage homes increases this will do more harm than good, so it serves the industry well to clear them up.
Dr. Robert Shipley of the University of Waterloo looked into one of the most pervasive of the myths– that a ‘Heritage designation of a house results in reduced value and makes it harder to sell.’ Shipley investigated the sales of 2,707 properties designated under the Ontario Heritage Act over the past 20 years which were located in 24 communities across Ontario.
Did he find the myth to be true? Absolutely not, what he did find was that heritage designation actually helped to maintain and even improve market value. Here’s what he found:
Some 74% of individually designated properties equaled or bettered the average property value trend in the community.
The rate of sales among individually designated properties was equal to, or greater than, the general rate of sales of properties within their communities.
Designated properties tend to resist downturns in the ambient market.
On top of this, the owners of designated buildings can benefit from expert advice from municipal heritage committees and preservation staff, and they may also be eligible for financial incentives such as grants, special loans and tax relief.
At a time when we are all conscious of waste management, the second myth, that ‘It is cheaper to demolish and start anew than to restore a heritage building’ can be a real puzzler. Dr. George Gorgolewsky at the School of Architectural Science at Ryerson University says, “It’s not cheaper from an environmental point of view, given that 35% of the contents our landfill sites is building material waste.”
From a construction standpoint, historic preservation has several advantages over new construction. For example, structural costs on an old building usually made up five to 12 percent of the total project costs, half the average expenditure for new construction. And, Charles K. Hoyt, writing in the Architectural Record said, “many older buildings have unique and desirable signature features, such as ornate windows and finishes, high ceilings, etc. that would be prohibitively expensive to create in new buildings.”
This brings us to the third and last myth about heritage properties: ‘Old technology is not as efficient as modern replacements.’ Paul Howley, a Stratford builder, who does work on heritage buildings, disagrees. “Old houses were designed to last a long time,” he said. They are well designed, well constructed, and structurally sound. And often the retrofit with modern materials is only an improvement for the short term. “When people rip out beautiful old sash windows and replace them with vinyl windows, they are not getting much improvement.” And, he said, the modern materials used often won’t last as long as if you properly maintain and repair the old material.
Trade in heritage properties may increase as cities resolve to preserve their legacy. So before the sun sets on another day let’s resolve not to deal in myths about them. Can we afford to do otherwise?
Robert Hulley is President of the Brampton Branch of the Architectural Conservancy of Ontario and a retired former real estate and mortgage broker and appraiser.

Timmins or bust.....

Zeb and I just got back from a road trip to Timmins for his work. I came along for the ride in an attempt to take some time off! Is it ever a loooooong drive!! Our cottage is on the Eastern tip of Algonquin and that takes about 3 1/2 hours to get to - from there we had to drive another 9 hours north to finallly reach the home town of Shania Twain and incidentally the birth place of my dad as well! There's not much to report back about Timmins - maybe because we were only there for one night. When my Dido (grandfather) first came to Canada way back in the 1940's one of the first places he worked was in a goldmine in Timmins - I tried to find it - it was called Porcupine Mine - but had no luck. What I did manage to do was take a picture of a huge Buffalo and a huge cow. Neither of which were actually in Timmins, but it's the best I could do :)

Durham Region Trivia

Here's some Durham Region Trivia for you!

Oshawa:
The city is also home to Windfields Farm, a thoroughbred horse breeding operation and birthplace of Canada's most famous racehorse, Northern Dancer.
The name Oshawa originates from the Seneca native term for "crossing of a stream".

Whitby:
During the Second World War, Whitby was the location of Camp X, a secret spy training facility established by Sir William Stephenson, the "Man Called Intrepid".

Ajax:
The town was named after the British light cruiser HMS Ajax. Streets in the town are named after the ship's crew.
In 1941, the largest defence industry in North America was located in this area to provide supplies for the Allies in World War II.

Here's an article concerning sub prime lending and the effect that the US market is having/is predicted to have on the Canadian market. It's quite an interesting read - for those of you interested, I've pasted it here!


Financial market turmoil could lead to lower interest rates, economists say
By ROMINA MAURINO
2007-08-10 14:19:00

TORONTO (CP) - Current turmoil in financial markets may keep Canadian interest rates at low levels as the Bank of Canada hesitates to curb lending in such a volatile environment, economists say.
"If anything, the turmoil might actually, possibly, lead to lower interest rates than would have otherwise been the case," Doug Porter, a senior economist with BMO Capital Markets, said Friday.
"I'm not saying the Bank of Canada is necessarily going to go and cut interest rates, but they're potentially less willing to rise interest rates amid this volatility."
Financial experts are watching North American stock markets closely after this week's stiff losses, while central banks around the world scramble to ease concerns about a looming credit crunch.
Over the past two days, the Bank of Canada has made more than $3 billion available to Canadian banks at low interest rates. And the U.S. Federal Reserve has contributed US$19 billion in a bid to calm jittery investors.
Like many economists, those at BMO had been expecting the Bank of Canada to raise rates in September to dampen inflationary pressures, possibly again in October and in early 2008.
"That series of potential rate increases is being put at least in some question because the bank may not be all that enthusiastic about raising interest rates when the financial markets are going through so much trauma," Porter said.
"By extension, there's potentially some good news here for borrowers."
TD deputy chief economist Craig Alexander said he still expects the U.S. economy to continue to grow at a fairly slow pace of around 2.5 per cent and believes the Fed is unlikely to cut rates in the near future.
But, he added, "a lot if it depends to what extent financial markets continue to be worried."
"If markets come down, if the fear of the fallout from the subprime (mortgage) market subsides, then the most likely scenario is the central banks won't cut rates," he said.
"If, on the other hand, the fear remains in the market, and this does lead to a tightening in credit, then I do think the central banks stand ready to cut rates in order to ensure the financial system remains healthy and to offset the potential fallout."
The subprime market, in which lenders provide mortgages to higher-risk borrowers, has led to a slump in U.S. housing, foreclosures and the collapse of companies that lent too freely.
It accounted for about 20 per cent of the U.S. mortgage industry but made up only about five per cent of the market in Canada. Still, the problems in the United States have made getting credit more difficult in Canada as well.
Alexander said the most direct impact of market upheaval will be on individual portfolios because the repricing of global markets will affect returns of financial products like mutual funds.
But, he said, it has also caused bond rates to come down, which is "actually good for people who are renewing their mortgages or from a borrowing point of view, because the long-term interest rates are coming down."

I'm going to be listing my grandpa's house for sale this week. Very strange experience - to walk through the house that I grew up in, so many memories, and know that I have to put a "For Sale" sign on the lawn and negotiate the sale of it. My dad and grandpa built it together back in 1969 - they say it's "built like a tank" - maybe I should use that in the marketing.... "Beautiful 1969 Tank Sidesplit!" Hahaha!

And so it begins...

I have decided that too many outrageous, hilarious and just plain interesting things happen on a daily basis as I traverse the road of real estate. The time has come to share my stories!