Top mortgage stories of the week:

• Toronto home sales fall 5.4% in June
• Bank of Montreal predicts Bank of Canada will stay on hold until July 2013
• New mortgage rules may dampen economic growth: Flaherty

This Week's Quotation:

“Success is the ability to go from one failure to another with no loss of enthusiasm. ” - Sir Winston Churchill

Economy:

• Consumer prices fell in May, and core measure rose less than expected
• Pace of hiring slows following huge gains in March and April

Toronto home sales fall 5.4% in June

Home sales in the Greater Toronto Area were down 5.4 per cent in June, compared to a year earlier, as downtown sales dropped while the surrounding areas held steady. The average selling price for all types of homes in the GTA, meanwhile, was $508,622, according to the Toronto Real Estate Board. That's up 7.3 per cent from last year, but is a decrease from the average price of $516,787 that was reported this May… Read more....

Bank of Montreal predicts Bank of Canada will stay on hold until July 2013

The Bank of Montreal predicted Tuesday that the Bank of Canada will keep its key interest rate low for longer than it expected. Economists at the bank are now predicting that the central bank will not raise its key rate until July 2013, six months later than their earlier prediction of January 2013… Read more....

New mortgage rules may dampen economic growth: Flaherty

Finance Minister Jim Flaherty says he realizes tightening mortgage rules could slow economic growth and cool the housing market, but that he's prepared to take the risk. Flaherty says he took action last week because there was no sign of a let-up in the hot condo market in major cities and because many Canadians can't seem to resist the lure of low mortgage rates… Read more....

Economy

Consumer prices fell in May, and core measure rose less than expected
Courtesy of RBC Economics

Canada's headline consumer price index (CPI) dipped by 0.1% in May 2012. On a year-over-year basis, the inflation rate fell to 1.2% from 2.0% in April. A 3.5% drop in gasoline prices in May was supplemented by a 5.1% decline in women's clothing prices, a 0.8% dip in passenger vehicle prices, and a 2.9% fall in natural gas costs. The declines in these components were partially offset by a seasonal increase in traveller accommodation costs (8.8%) as well as higher prices from electricity and vehicle insurance. On net, overall consumer prices were lower in May than in April thereby marking the first month-to-month decline since June 2011. The Bank of Canada's core measure rose 0.2% in the month, which was slower than the 0.3% expected and was 1.8% higher than in May 2011. Headline inflation in Canada is running at a slower pace than the Bank of Canada projected in its April Monetary Policy report. In the first two months of the second quarter of 2012, the headline inflation rate averaged 1.6%, which was below the Bank's 2.0% forecast. The core measure, however, continues to come in on the high side of expectations, and rather than slipping to 1.9% on average in the second quarter of the year, it looks more likely to average 2.1% (in April and May, the Bank of Canada's measure of core averaged 2.0%). The sharp decline in energy prices in May was largely responsible for undershooting the headline rate.

Pace of hiring slows following huge gains in March and April
Courtesy of RBC Economics

Employment gains slowed to 7,700 in May and the unemployment rate held steady at 7.3% as the labour force grew by 15,700. The goods-producing sector added 11,100 positions and the service sector clipped 3,400 from their payrolls. Public sector employment recovered 6,900 of the 19,200 jobs cut in April. Private employment fell by 22,500 denting the 128,400 jobs created over the previous two months. The number of self-employed increased by 23,300 in May after edging down by 8,400 in April. Manufacturing employment added 36,400 jobs. The construction industry cut 27,000 jobs. Service sector employers trimmed back 3,400 positions in May. Still, as of May, the number of employed in the services sector stood 15,000 higher than at the end of 2011. Average hourly wages for permanent workers were up 2.9% in May compared to a year earlier. The number of hours worked rose by 0.2%, an acceleration from April's flat reading. On a regional basis, gains were recorded in Alberta, New Brunswick and Quebec. Ontario lost 18,700 jobs in May though the unemployment rate held steady at 7.8%. The volatility in the labour data in recent months makes it more instructive to look at the underlying monthly trend which shows that the economy generated an average of 29,000 jobs per month in 2012. Furthermore, it means that there are 327,000 more people employed than at the previous peak.