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A New Year, A New Economic Outlook, and a New Special Offer

With the holiday spending behind us and the new year just getting started, now is the time when many people are focusing on putting their best “financial foot” forward!  As you finalize your 2014 financial goals and determine how to best achieve them, you’ll want to consider the economies in both Canada and the U.S. and the trends of the dollars.

U.S. economy—Update

Third-quarter 2013 annualized U.S. gross domestic product (GDP) growth was revised upward to 4.1% from 3.6%, reflecting faster consumer spending growth and modestly firmer business investment.  The final revision showed a slightly more favorable composition in the drivers of the quarterly increase although it was still a sizeable inventory build that provided the biggest contribution.  Retail sales, industrial production, and durable goods orders all showed strong increases in October and November.  Similarly, the real trade deficit narrowed in this period to stand well below the third-quarter average, which is consistent with net exports giving a lift to the economy’s growth rate in the fourth quarter.  All of this good news was accompanied by somewhat modest employment growth.  Expectations are the economy will be able to maintain the above-potential growth exhibited in the second half of 2013.

Canada's economy—Update

Real GDP increased by 0.3% in October, which was faster than expected and set the stage for a second consecutive above-potential quarterly increase.  Growth in the second half of 2013 was running much faster than the close to 2% pace recorded in the first half of the year and above the 2.1% average pace forecasted by the Bank of Canada in the October Monetary Policy Report.  This reflects signs of strength in business investment and consumer spending as well as a firming in housing starts. The stronger than expected gains in these spending components more than made up for the soft performance in the trade sector in both October and November.  Disappointingly weak exports and imports in the two-month period set up for net exports to act as a drag on growth in the fourth quarter.

The Canadian Dollar versus the U.S. Dollar

Even with the economic news surprising on the side of strength, the Canadian currency’s tumble took on speed in early 2014, losing 1.2% against the U.S. Dollar is the first five trading days of the year, falling to the lowest level since October 2009 against the U.S. Dollar. Fundamentally weakening commodity prices outside of energy, reduced rate hike expectations, and the significant slowing in foreign purchases of Canadian bonds supported the Canadian Dollar’s losses.  Despite the fact that the Canadian Dollar took a drubbing in early 2014; the improvement in the economic data flow and steady Bank of Canada policy will likely put an end to the rapid pace of decline.

Source: RBC Economics Research     Read more RBC Economics Research 

U.S. MORTGAGES

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The Canadian dollar and U.S. dollar exchange rate is expected to remain volatile in 2014, however U.S. mortgage rates remain low. Considering the impact of the exchange rate is an important aspect of your decision to finance. RBC Bank has a dedicated team of cross-border mortgage financing specialists who will provide expert advice, and guide you through the entire process and navigate common challenges for Canadians purchasing a home in the U.S. We offer three types of Adjustable Rate Mortgages (ARM), all with NO prepayment penalty.

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Call 1-800-ROYAL® 5-3 (1-800-769-2553) to speak with a Cross-Border Banking Specialist today.

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1 A full and complete mortgage loan application must be submitted and your rate must be locked no earlier than November 25, 2013 and no later than February 28, 2014. A complete application includes income and asset documentation, credit information, property address and collateral value. This offer is subject to change or withdrawal at any time and without notice. Nothing herein is or should be interpreted as an obligation to lend. All loans are subject to approval, including verification of acceptable income, creditworthiness, and property valuations. Minimum and maximum property values and maximum loan-to-value ratios apply. Homeowner’s insurance is required for all loans and lines and flood insurance is required if property is located in a Special Flood Hazard Area. Escrows may be required. There are closing costs associated with these products.

Example: 3-Year ARM calculation assumes a $250,000 loan amount, 2.375% discounted interest rate, 2.463% APR (2.625% interest rate or 2.752% APR before the discount) with 25% down payment, amortized over 360 months = $971.64 monthly payment. $32.49 monthly savings totaling $11,696.40 over 30 years or $1,169.64 over 3 years. If the down payment is less than 20%, mortgage insurance may be needed on the loan. This could increase the monthly payment and the interest rate. Rates subject to increase after consummation. The APR used in this example does not necessarily reflect today's current rates.

Example: 5-Year ARM calculation assumes a $250,000 loan amount, 2.750 discounted interest rate, 2.840% APR (3.00% interest rate or 3.13% APR before the discount) with 25% down payment, amortized over 360 months = $1,020.61 monthly payment. $33.40 monthly savings totaling $12,024 over 30 years or $2,009.40 over 5 years. If the down payment is less than 20%, mortgage insurance may be needed on the loan. This could increase the monthly payment and the interest rate. Rates subject to increase after consummation. The APR used in this payment example does not necessarily reflect today's current rates.

Example: 7-Year ARM calculation assumes a $250,000 loan amount, 3.375% discounted interest rate, 3.468 APR (3.625% interest rate or 3.76% APR before the discount) with 25% down payment, amortized over 360 months = $1,105.25 monthly payment. $35.46 monthly savings totaling $12,556.80 over 30 years or $2,929.92 over 7 years. If the down payment is less than 20%, mortgage insurance may be needed on the loan. This could increase the monthly payment and the interest rate. Rates subject to increase after consummation. The APR used in this payment example does not necessarily reflect today's current rates.