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Bank of Canada JUMBO cut – 0.5%
/in Misc. /by adminHere are the highlights:
Big news out of the Bank of Canadathis morning. Tiff & his merry band of bankers have followed the US Fed with a 0.5% rate cut. That brings a total of 1.25% since June & isn’t to be the last.
While a jumbo cut is welcomed news to borrowers, the not so great reality is that they wouldn’t be doing that if things were rock & rolling.
In the release The Bank noted subdued GDP growth in the 2nd half of this year, slightly better for next, but well below the expected 3% global growth. Declining consumption on a per person basis & soft labour market with unemployment running at 6.5% are clear signs the stifling interest rate environment are too restrictive.
Inflation has finally subsided to fall within the acceptable range with last month’s print coming in at 1.6%, but don’t count inflation totally out for dead. Commodity prices picked up surrounding the US FED’s somewhat surprising jumbo rate cut last month & bond yields overall being higher than the summer.
There is 1 more rate meeting to close out the year coming up in Dec. The market is expecting another 1% in cuts by the end of next year.
The next Bank of Canada meeting is December 11th, 2024
Bank of Canada Cuts Rates 0.25% – Sept 2024
/in Misc. /by adminInterest Rate Cut:
-Bank of Canada cuts interest rates by 0.25%, lowering Prime Rate from 6.7% to 6.45%, the third consecutive cut.
Economic Indicators:
-inflation has slowed to lowest level in 3 years at 2.5% annualized
-Employment declined for the second consecutive month
-Q2 GDP grew by 2.1% annualized with population growth at 3.2% (population growth continues to inflate economic growth).
Job Market:
-Canada has been losing jobs
-unemployment at 6.4%
-recent job reports typical of recession.
Population Growth:
-Canada now ranks among the fastest growing countries for population growth
-Our population grew by a record 1.3million people last year, pressuring infrastructure & house supply
Forecasts:
-Big banks forecast further rate cuts:0.25% – 0.5% in cuts for this year.
-Total of 1.25% – 1.75% cuts by the end of 2025.
Next Bank of Canada Meeting:Scheduled for October 23, 2024
This was widely expected after July’s inflation dropped to the slowest level in 3 years at 2.5% annualized & employment declined for a second consecutive month.
The sole blip of good news this summer was the better than expected GDP print for Q2. The economy grew at an annualized pace of 2.1% for the quarter BUT this was all due to continued record population growth. We increased the number of Canadians by 3.2% while the economy grew 2.1% – losing ground!
There has been A LOT more interest in variable rates over the summer for obvious reasons. Prime has dropped by 0.75% since June. What hasn’t changed though is being able to secure roughly 1% lower rates going fixed.
With inflation very close to target & the economy slowing, more rate cuts are sure to come BUT how many & the pace is the big question. This is a nuanced discussion that I LOVE having so if your mortgage is coming up for renewal this year, or you’re looking to buy, get in touch today!
The next Bank of Canada meeting is October 23rd.
For more updates and insights, follow @zupanmortgages on Instagram for daily content.
Bank of Canada CUTS RATES 0.25% – June 2024
/in Misc. /by admin
Ladies & gentleman, for the first time in 4 years, the Bank of Canada has CUT INTEREST RATES 0.25%. Cigarette anyone? Man, that was not a ride I think anyone wants to go on ever again.
What I find interesting is if you read the release & leave out the part about cutting rates, you’d never guess based on their description they’d be cutting rates. It’s not exactly a stinky description of our domestic & global economy but for variable rate mortgage holders & those with upcoming renewals, this is a big sigh of relief. Side note, but 76% of all mortgages in Canada are going to be renewed in the next 2 years & that was certainly on the Bank of Canada’s radar. I’m seeing more & more mortgages getting renewed with payment jumps of $1k, $2k / month, and that just takes away money you can spend elsewhere in the economy to keep things flowing.
Overall, the Bank sees inflation easing enough that they have confidence it will hit 2% (what could go wrong?) & with growth floundering & the economy in excess supply, they’re making life just a little bit easier. We have 4 remaining meetings in 2024. Big Bank economists are hovering around 0.5% in additional rate cuts by the end of the year for 0.75% total. No guarantees there but that at least gives an idea of what we might see.
So what happens now? Do we see real estate pick up as buyers who’ve been on the sidelines, hoping to buy before rates really drop, start moving to action? 0.25% makes little difference in what people qualify for but if rates get down by, say, 1% by early next year that improves buying power by roughly 10% so all else being equal that’s a tailwind for prices. It’s going to be a bumpy road down, I am sure, but this rate relief is a welcome treat & is sure to spring my oilers to victory. We’ve been focusing more content on our Instagram page @zupanmortgages. Look us up if you don’t already follow, give us a share & let me know how you’re liking the content as we do our best to keep you up to date.
Bank of Canada Interest Rate Announcement – April 2024
/in Misc. /by admin
No change by the Bank of Canada this morning’s interest rate announcement.
It wasn’t that long ago (leading into Christmas) that this rate meeting was expected to be the first cut. A month into the year & that timeline was quickly kicked out to where it stands now – summer.
If I had to guess, I would bet on the rate cuts starting LATER in the year. Higher for longer continues to be the name of the game here.
While the latest jobs data in Canada showed a declining employment rate (6th straight monthly decline) & rising unemployment at 6.1% (7 year high), it also showed an increase to avg hourly wages to 5.1%, which is INFLATIONARY & an issue considering the softening job market.
With the rise in commodity prices & oil over the past few months, it’s very apparent how sticky inflation is proving to be.
Remember 3 years ago when central bankers were talking off inflation as being transitory & one time booms? The Bank doesn’t expect inflation to hit the 2% target until next year.
Two weeks ago the Carolyn Rogers at the Bank of Canada came out warning of a NATIONAL CRISIS with productivity. Productivity is a measure of economic output per unit of work (or to simplify, GDP per working body) & part of the speech highlighted how weak productivity makes their job of controlling inflation much harder.
We NEED more competition. We NEED to up business investment. When productivity is weak, rising labour costs show up in higher prices.
On the home affordability front, provincial & federal authorities are rolling out measures to try to help affordability, but it’s really a bloody mess here across the country. THE issues driving high rents, house prices & mortgage rates are inflationary government spending & population growth many multiples above historical averages. There is a massive supply / demand imbalance with housing. You can’t flip a switch & magically create millions of homes, certainly not with waning business investment.
On the interest rate front, over the last 2 weeks we started to see the better promo pricing with fixed rates coming in higher as bond yields continue to bounce around. There’s about a 1% difference between the popular 3 year fixed in the low 5%s & a variable in the low 6%.
Interest rates are still relatively high. More mortgages are coming due to renewal & feeling the pinch of higher payments. If you want to get ahead of your renewal & get a sense of what you might expect, get in touch today. Every dollar counts.
Bank of Canada Rate Announcement – March 2024 – NO CHANGE
/in Misc. /by adminThe Bank of Canada left rates unchanged at this mornings rate announcement. No major changes to rate cut expectations as consensus is still slating that for June. There just hasn’t been enough weakness to justify rate cuts & inflation, while coming down, is still not at 2%.
GDP for last year was revised upward to 1.1%, avoiding an official recession, but let’s face it, that has everything to do with the record level of population increase we’ve seen. You bring in enough bodies, you can juice up demand enough to paint a rosier picture then is reality.
Mortgage delinquencies in Canada, though still quite low, have risen by more than 50% year over year with Ontario rising 135% & BC 62% over that time frame. As more mortgages come up for renewal & face the reality of significant payment increases, more Canadians face greater financial stress.
CPI inflation eased to 2.9% for January but housing related costs are the overwhelming biggest driver of those price increases.
The market is still pricing in 0.75% in rate cuts by the end of this year. Maybe we get that, but it’s prudent to plan for cuts to start later than expected as that can continues to get pushed out into the future.
If you, or any friends or family, have a mortgage coming up for renewal in the next year, get in touch. There are specific scenarios where we can find significantly lower rates than what your current lender is offering & these days, every dollar counts.
Bank of Canada Dec 2023 – NO CHANGE
/in Misc. /by adminGood morning,
The Bank of Canada has left rates unchanged at this morning’s interest rate announcement. This wasn’t much of a surprise as inflation has continued to decelerate, , unemployment ticking up & real GDP contracting, all in spite of the positive input of strong population growth. The government of Canada bond yields, which fixed rates are priced on, have been coming down for the last 3-4 weeks.
What’s really stood out over the past month were comments by Bank of Canada Governor Tiff Macklem. Addressing the parliamentary finance committee, speaking about inflation, he commented that the central bank could begin cutting interest rates before inflation is all the way back to target. Cutting rates BEFORE inflation is back to 2%.
Why does this matter? Central bankers often use statements to guide markets (remember the, “rates will stay low for a very long time” comment in summer 2020 attempting successfully to get everyone to borrow & spend to juice the economy during covid?).
After basically 2 years of emphasizing the importance of getting inflation to 2% & all the rate hikes to get there, why the shift? Why, at this point, start opening the door for rates coming down? Does the Bank of Canada see a future where it is going to be a very long time before inflation hits 2% with an economy that needs help before then? Is it a positive thing that rates could be coming down if inflation is high?
The short answer is no. If rates are coming down while inflation is above target that suggests a pretty dire economic picture.
The reality is we’re in a higher cost of living regime. When you borrow, you’re pulling demand from the future & the government of Canada total debt surged by 84% in the past 5 years. 54% of that debt is coming due to renew in the next 3 years. You’re either paying for that through growth, higher taxes, or cutting government spending.
Now, don’t go buck wild on that comment. Tiff also said loosening monetary policy is still a ways off, but markets reacted on that nonetheless & are still pricing in cuts as soon as April.
To counter all that, it should be noted real GDP for Q2 was revised up from a 0.3% drop to 1.4% growth. The upcoming months were also ones where inflation was coming down at this time last year so it wouldn’t be a surprise to see higher surprises with inflation reports, but for the time being rates are settling down into the Christmas season.
That wraps 2023 for rate announcements. Have a very happy holiday season & see you in 2024.