Did you know that there is more than one way to compute the interest on a loan?

Normally, interest rates on all fixed-term mortgage loans are computed semi-
annually. However, for mortgage loans with a variable rate, some lenders use a
semi-annually capitalized variable rate, while others use a monthly compounded
variable rate.

This difference in the calculation changes the payment by only a
few dollars per month but, over a long period of time, it can significantly affect the
overall cost of your loan.

For example: for a $250,000 mortgage amortized over 25 years, the customer
will pay $3.40 more per month if the lender capitalizes monthly, an increase of
$1,020.

Do some digging; might as well keep this money in your pocket. Your
advisor knows where to go and who to deal with in order to save you money.

Canadian banks are chopping their mortgage rates across the board by up to a third of a percentage point as the cost of borrowing in the bond market falls.

The popular five-year closed mortgage gets the biggest cut.

At TD Canada Trust, a five-year closed mortgage drops three-tenths of a percentage point to 5.55 per cent. At the Royal, the five-year closed term falls three-tenths of a point to 5.49 per cent. At BMO, a five-year loan also falls to 5.49 per cent, but that represents a drop of .36 of a percentage point.

These are all posted rates. The big banks typically offer discounts of at least a full percentage point on most closed mortgages.

BMO and RBC say they're offering a special rate of 4.19 per cent on their five-year mortgages. A few smaller financial institutions such as First Calgary Savings are currently offering five-year loans for just under four per cent.

At the big banks, most other mortgage terms were trimmed by smaller amounts. A one-year closed mortgage falls a fifth of a percentage point to 3.70 per cent at BMO and RBC. A 10-year closed mortgage drops a fifth of a percentage point to 6.70 per cent at TD and to 6.75 per cent at the other two.

Analysts say low mortgage rates have helped to turn around the Canadian housing market in recent months. Real estate statistics for July show that the number of resales across the country surged more than 18 per cent from a year earlier to a record high. The average MLS sale price in July was up 7.6 per cent from July 2008.

The Bank of Canada is widely expected to keep its key overnight lending rate unchanged at its current record low of 0.25 per cent when it makes its next interest rate policy announcement on Thursday.

Real estate prices rose again in August and were approaching their levels of a year ago, numbers released Wednesday by the Greater Vancouver and Fraser Valley real estate boards showed.

Market watchers, surprised by the strength of the rebound, said it appeared buyers were cashing in on record-low mortgage rates while they last.

Sales set records in July and stayed hot in August. The question now is whether the market can keep up the pace.

“Before I would call this a complete recovery I would want to see a couple of months of data,” Robyn Adamache, a market analyst with Canada Mortgage and Housing Corp. said in an interview.

Adamache added that there now are five months worth of data showing an upward trend, but “it remains to be seen whether this was just a one-shot deal where everybody was pre-approved for their [low-rate] mortgages and they basically jumped into the market, and whether or not [the market] can be sustained for the rest of the year.”

However, Adamache said on balance, Metro Vancouver’s average property prices, since their trough last March, have climbed back to within three percentage points of their peak.

She estimated that from peak to trough, average prices fell some 15 per cent.

Record-low mortgage rates, which fell as low as 3.65 per cent on five-year fixed-rate mortgages before rising again after June 1, played a big role in the market.

“If I had to put [market performance] on one thing, I would have to say interest rates,” Carolyn Heaney, Vancouver area manager of mortgage development for the Bank of Montreal, said in an interview.

Heaney said her mortgage lenders had a lot of clients who had been approved for mortgages with the low rates, and had 90 days to buy homes and close their purchases before their pre-approvals expired.

“There were certainly a lot of people who jumped off the fence in order to keep their rates,” she said.

Kevin Lutz, B.C. mortgage manager for RBC Financial Group, said that despite the recession, a bit of consumer confidence has been returning to the market. Lutz said the past few months have seen buyers cram almost a year’s worth of buying activity into a short period.

In the area of Metro Vancouver covered by the Real Estate Board of Greater Vancouver (REBGV), that translated into 3,441 sales through the Multiple Listing service, a 120-per-cent increase from last August, when the region saw 1,568 sales.

Prices in Metro continued to edge up with the benchmark price (the average price of the typical property sold) for detached homes hitting $732,656 in August. That was just 0.7 per cent below last year’s benchmark price for detached homes.

Some communities saw detached-home prices rise above their levels of a year ago. On Vancouver’s west side, for example, the benchmark of $1.4 million in August was three per cent higher than in the same month a year ago.

The $685,746 benchmark for detached homes on Vancouver’s east side was 3.2 per cent higher than a year ago.

New Westminster, Pitt Meadows and the Sunshine Coast also saw detached home prices higher than a year ago.

“It has been surprising,” REBGV president-elect Jake Moldown said. “I don’t think if you had talked to any of us in January that we would be expecting sales levels to be where they are today.”

However, he said with price adjustments and low interest rates combining to reduce mortgage payments, a lot of first-time buyers have jumped into the market, helping set off a chain reaction of upward movement.

In the Fraser Valley, realtors recorded their second busiest August on record, with agents racking up 1,786 sales through the MLS in August, up 96 per cent from 910 sales in the same month a year ago, when the market was sliding rapidly.

For the period of June through August, the board said valley realtors saw 5,857 MLS sales, which outpaced the same period of 2007, but is still far from matching 2005’s 6,866 sales for June, July and August.

Fraser Valley realtors saw the benchmark price (the average price of a typical property sold) for single-family homes creep up 3.8 per cent over the past three months to $483,839 in August, not quite erasing the losses of the past year. That price was still 3.5 per cent below last August’s $501,317 benchmark.

TD Bank Financial Group (TSX:TD) reported a decline in third-quarter profits Thursday and warned of trouble ahead as difficult economic conditions weakened the performance of some of the bank's U.S.-based operations.

"It's unlikely that this level of earnings can be maintained," admitted TD chief executive Ed Clark in a conference call Thursday.

"But we do have an excellent business that continues to perform well and produce solid returns on capital with very tight risk management."

TD's financial performance was "great" in the quarter, given the ongoing economic weakness around the world, said Clark.

"There probably aren't many people on this call frankly, including me, who thought we'd be having this kind of performance in the midst of a recession," he said.

"At the beginning of 2009, I would have found it hard to believe that by the third quarter I'd be talking about year-over-year increase on our earnings per share, even after issuing shares last year, but it certainly looks like we're going to be there."

The Toronto-based bank reported a profit of $912 million or $1.01 per share for the quarter ended July 31, down from year-earlier profits of $997 million or $1.21 per share.

The bank said adjusted earnings rose 17 per cent to $1.3 billion or $1.47 per share from $1.1 billion or $1.35 per share reported a year ago. The adjusted results beat the estimates of analysts surveyed by Thomson Reuters, who predicted earnings would come in at $1.23 per share.

TD said total quarterly revenue rose to $4.66 billion from $4.32 billion, while provision for credit losses declined to $557 million from $656 million.

TD's Tier 1 capital ratio, a key metric measuring the amount of money held in reserve, stood at 11.2 per cent at quarter's end.

Clark gave credit to governments and central banks around the world for responding "both quickly and appropriately" to the global economic crisis, but said there are concerns about the extent of the recovery.

"We have never been tested by conditions this tough, but we were up to it," he said.

"It seems like we're through the bottom, but there's clearly a debate going on about the strength of the subsequent economic recovery."

Results got a boost from TD's wholesale banking operations, where profits soared nearly 90 per cent to $327 million. Net income also improved five per cent in the Canadian personal and commercial segment, which recorded profit of $677 million.

Earnings in wealth management were dragged down by weak market conditions, while loan losses drove profits in U.S. personal and commercial banking down to $172 million.

Clark said TD didn't anticipate the resilience of the Canadian resale housing market.

"The structure of Canadian housing and mortgage markets provides an enduring strength for the economy and for our business," he said.

The bank also announced Thursday that Clark had advised of his intention to exercise up to 390,000 options for TD common shares, which represents 13 per cent of his outstanding options.

Clark intends to donate approximately 10 per cent of the pre-tax net proceeds to charity, and to sell the remaining acquired shares.

TD shares were up just over $2 in late Thursday trading at $62.62.

Canada's annual inflation rate slid to the lowest level in 56 years last month, dropping more than expected for the second straight month to set overall prices 0.9 per cent lower than last year, Statistics Canada reported Wednesday.

The fall on a month-to-month basis was even more dramatic, as prices in July fell 0.3 per cent from the previous month, reversing the similar monthly increase registered in June.

Still, economists say there is little concern that deflation - a broadbased and persistent decline in prices that could inflict further damage on the economy - is setting in in Canada, as it did in Japan during the 1990s.

That's because only three of the major components tracked by Statistics Canada are experiencing deflation and most of that is based on falling gasoline prices.

In July, consumers paid 4.1 per cent less at the pump than they did the previous month, and 28.3 per cent less than they did last July.

"Regular unleaded gasoline prices at self-service stations averaged 97.4 cents per litre in July 2009 compared with a record high of just under $1.37 in July 2008," the agency noted.

But analysts expect the impact of gas prices on inflation is due to reverse next month, which could cause the current deflationary trend to reverse course. The influence of gas prices has mirrored the downward spiral in oil prices, which peaked at US$147 a barrel last July before plunging over the following year.

"We don't have a deflation or an inflation problem in Canada," said Meny Grauman, an economist with CIBC World Markets.

Statistics Canada also pointed out that excluding the energy component, inflation remains a healthy 1.8 per cent in Canada. Core inflation is also close to where the Bank of Canada would like it, at 1.8 per cent, only slightly below the desired two-per-cent target.

Scotiabank economist Adrienne Warren predicted the July number will be the low point of the cycle and that annual inflation will return to positive territory in October.

Although most consumers would welcome widespread price decreases, economists say a prolonged deflationary cycle could have the effect of further undermining activity if consumers and businesses decide to hold off spending in hopes of realizing bigger savings in the future.

Still, Canadians were seeing many bargains when they went shopping last month.

Besides lower pump prices, the cost of purchasing a car was 4.3 per cent lower than last year, shelter prices fell two per cent, mortgage interest costs were 0.1 per cent lower, and clothing and footwear cost 2.1 per cent less than last July.

The key contributor to inflationary pressure continued to be food prices, which were five per cent higher in July on an annual basis.

But Warren noted the year-long strong buildup of food prices also appears to be slowing and will likely result in inflationary pressures being kept in check even after the impact of gas prices has worn off.

Food prices had risen 5.5 per cent in June, and 6.4 per cent in May.

"There is some evidence now that there's a market share price competition among the major grocery store chains, and consumers are a little more price conscious," she said.

As well, car insurance rose 5.1 per cent last month, tempering the overall descent in the gas-price dominated transportation component.

Regionally, eight provinces experienced negative inflation last month, with British Columbia heading the pack with a minus 1.6-per cent reading.

Saskatchewan was the only province with positive inflation, at 0.9 per cent, while prices were flat in Manitoba.

Canadian housing starts fell unexpectedly in July, dropping 4.1 percent from June and breaking a two-month run of gains, largely because of a drop in construction of multifamily dwellings.

Canada Mortgage and Housing Corp said on Tuesday that starts fell to a seasonally adjusted annualized rate of 132,100 units in July from a downwardly revised 137,800 units in June.

Analysts had forecast a rise to 145,000 starts. June starts were previously reported at 140,700 units.

The fall in July was attributed to a 9 percent decrease, to 61,000 units, in starts on urban multiple dwellings such as condos and apartment buildings. Single family homes dipped 1.1 percent to 52,500 units.

The figures paled against the buoyancy of recent data for existing home sales and building permits, but economists were encouraged that the July number was still above the average for the second quarter.

"In the second quarter, starts averaged a 127,900 annualized pace so July's data shows a modest improvement from that level," said Dawn Desjardins, assistant chief economist at Royal Bank of Canada.

"Canada's housing market is showing signs of emerging from its slump with the July level of housing starts putting the economy on track to record a quarterly increase for the first time since early 2008."

Rona Inc , Canada's biggest home-improvement chain, said on Tuesday that soft housing starts in the second quarter were partly to blame for its weak quarterly profit. It also said it remained cautious about recovery in the housing sector.

Starts increased 16.6 percent in Quebec in July, but fell in other regions. Urban starts dropped 17 percent in the Prairies, 15 percent in Ontario, 10 percent in British Columbia, and 1.4 percent in Atlantic Canada.

Rural starts were estimated at a seasonally adjusted annual rate of 18,600 units in July.

Wells Fargo & Co., the fourth- biggest U.S. bank by assets, will no longer offer residential mortgages and home-equity loans in Canada.

Wells Fargo’s Canadian unit stopped accepting applications for the loans yesterday at its branches and through its HomePlan broker network, Wells Fargo Financial Corp. Canada President Rick Valade said in an e-mailed statement. The company also informed brokers in a statement on its Web site.

“Wells Fargo continuously reviews its operations and makes appropriate changes to its business model,” spokeswoman Erin Downs said in a statement. “In response to recent analysis of our operations and the current market environment, at this time, we made the decision to stop originating consumer real-estate loans products in Canada.”

“We’ve seen a pattern of a number of namely U.S.-based lenders that have exited the field as things have become difficult in the market,” said Jim Murphy, head of the Canadian Association of Accredited Mortgage Professionals. “It’ll mean less choice, less options for Canadians.”

Lenders that still offer so-called alternative mortgages to Canadians include Home Capital Group Inc. and Equitable Group Inc., as well as some Canadian banks, Murphy said.

Wells Fargo will honor existing mortgage commitments and will continue offering personal loans in Canada, the company said. The Canadian unit is a C$5.5 billion ($5.1 billion) business with 130 branches across the country, where it has operated for more than 60 years, according to the Web site.

Wells Fargo follows other mortgage providers including General Electric Co. that have stopped lending to Canadian homebuyers, including those who may not qualify for typical bank mortgages since the 2007 collapse of the U.S. subprime market.

Wells Fargo is the biggest U.S. mortgage originator, with more than 20 percent market share, according to Inside Mortgage Finance. Mortgage originations by San Francisco-based Wells Fargo surged to $129 billion in the second quarter, up 28 percent from the first quarter, according to company filings.