Here are the highlights:

• Interest Rate Cut:
  • Bank of Canada cut interest rates by 0.25%, lowering Prime Rate from 5.2% to 4.95%, the seventh consecutive cut.
  • This brings the total rate cuts to -2.25% since June.
    
• Economic Indicators:
  • inflation up in Jan from 1.8% to 1.9%
  • inflation expected to uptick to 2.5% in March as reverse effects of GST break take effect
  • ​Trade conflict could lead to weaker GDP & higher prices
    
• Job Market:
  • Feb report was weak with no job growth
  • Unemployment holds at 6.6%
    
• Forecasts:
  • 5 of the 6 Big Banks forecast further rate cuts in 2025 (tariffs aside):
    • 0.25% – 0.75%
      
• Next Bank of Canada Meeting:
  • Scheduled for April 16th, 2025

The Bank of Canada has cut interest rates for the 7^th consecutive meeting, bringing down Prime from 5.2% to 4.95% & lowering all variable rate mortgages & lines of credit.  This brings the total number of cuts to 2.25% since they started in June.  Will we get more?

If you ask the big bank economists, the majority say yes, and if the trade war hangs around, we could more than expected.

And so why is that?  Don’t tariffs raise prices & inflation?  Isn’t that what the Bank of Canada was fighting so hard to fix?

Tariffs can certainly impact prices as the cost of imported goods & raw materials goes up, competition gets reduced & supply chains get disrupted.  The 2018 tariff war between the US & China impacted US inflation by the tune of 0.5%.

The bigger concern here at home, though, is the potential impact on growth. Canada has been dealing with a productivity crisis.  To fix that you need business investment & if you’re a business, you’re probably looking to take risk off the table right now & NOT make any major investments.  You’re probably concerned about the impact to consumer spending so are looking to cut costs right now & that can mean job losses, weaker GDP.

If the trade war sticks, our per capita recession will likely turn to AT LEAST a mild overall recession.  Recent falling equity prices & bond yields reflects that expectation.  The looming threat alone will result in weaker North American growth.

So yes, tariffs can lead to higher prices but the bigger concern is a recession, which would lead to lower rates.

That’s it for today.  If you or any friends or family have a mortgage coming up for renewal this year please get in touch so we can make sure you aren’t missing out on any opportunities. 

Here are the highlights:

• Interest Rate Cut:
  • Bank of Canada cuts interest rates by 0.5%, lowering Prime Rate from 6.45% to 5.95%, the fourth consecutive cut.
  • This brings the total rate cuts to 1.25% since June.
    
• Economic Indicators:
  • inflation FINALLY within the target range of 2-3% (Sept came in at 1.6%)
  • Employment  still declining on a per capita basis
  • GDP in the back half of 2024 expected to be 1.75%
    
• Job Market:
  • Canada gained jobs last month but still not keeping pace with population growth
  • Unemployment is 6.5%
  • ​Young Canadians & newcomers being most impacted by the poor job market
    
• Forecasts:
  • Big banks forecast further rate cuts:
    • December rate cut likely
    • Total of 1.25% cuts by the end of 2025.
      
• Next Bank of Canada Meeting:
  • Scheduled for December 11th, 2024

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 2^nd 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.

t 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%
  ​
• They have confidence inflation will hit their 2% target
  ​
• Growth has stalled in Canada with the economy in excess supply
  ​
• There are 4 remaining meetings in 2024, and economists predict an additional 0.5% (0.75% total) of rate cuts by the end of the year
  
• Lowering rates can be a tailwind for real estate prices as a 1% reduction in rates improves buying power by roughly 10%>
  
• For more updates and insights, follow @zupanmortgages on Instagram for daily content

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.