Skip to content
Print This Post

Five of My Most Read Posts In Case You Missed Them the First Time – Monday Morning Interest Rate Update (August 22, 2016)

by Dave Larock

Last week was a quiet one for factors that affect Canadian mortgage rates.

We received the latest Canadian Consumer Price Index (CPI) data, for July, and it showed that overall inflation rose by 1.3% last month, down from 1.5% in June and still well below the Bank of Canada’s inflation target rate of 2%.

The U.S. Federal Reserve also released the minutes from its July policy meeting and while some of its members expressed a desire to raise rates sooner rather than later, most preferred to maintain the current wait-and-see approach. As of last Friday, the futures market was still betting that the Fed’s next raise won’t happen until mid-2017, so on balance, this latest release wasn’t a game changer.

With such a slow week on the news front I thought I would revisit five of my most read posts. These are worth a read if you missed them the first time around, and while some are a few years old, the topics are still relevant today: read more…

David Larock is an independent full-time mortgage planner and industry insider. If you are purchasing, refinancing or renewing your mortgage, contact Dave or apply for a Mortgage Check-up to obtain the best available rates and terms.
Share
Print This Post

Are Canadian Variable Mortgage Rates Headed Lower? Monday Morning Interest Rate Update (August 15, 2016)

by Dave Larock

Mortgage Rate ConceptOur economic data haven’t been very encouraging of late and that has caused many of the borrowers I speak with on a daily basis to speculate about whether our variable mortgage rates may be headed lower. While this is a reasonable view to hold under normal circumstances, in today’s post I’ll explain why I don’t think it will happen any time soon.

To briefly set the stage, our GDP growth rate hovers between 0% and 1%, our economy isn’t producing enough jobs to keep pace with the natural rise in our working-age population, and our average income growth is barely keeping pace with overall inflation growth, benign as it is.

Against this backdrop, the Bank of Canada (BoC) would normally be expected to drop its policy rate in an effort to stimulate economic growth, and lenders would quickly pass on that additional saving by lowering their prime rates, which our variable-rate mortgages are priced on. But today we live in anything but normal times, and if you choose a variable-rate mortgage with the expectation of future rate cuts, I think you will be disappointed.

To expand on this view, let’s look at the two key events that must both take place if variable mortgage rates are to fall from today’s levels.

Step one: The BoC must drop its overnight rate.

Here are three reasons why I think it won’t: read more…

David Larock is an independent full-time mortgage planner and industry insider. If you are purchasing, refinancing or renewing your mortgage, contact Dave or apply for a Mortgage Check-up to obtain the best available rates and terms.
Share
Print This Post

When All Else Fails, Pray for Rain – Monday Morning Interest Rate Update (August 8, 2016)

by Dave Larock

Mortgage Rate ConceptLast week we received the Canadian and U.S. employment reports for June, and they stood in stark contrast to each other – Canadian employment fell last month while U.S. employment surged higher.

In today’s post we’ll look at the lowights and highlights from both reports and I’ll explain how ongoing exchange-rate adjustments should help to narrow the employment-momentum gap between our two countries over time (albeit much more slowly than most expected).

Canadian Employment Lowlights for June

  • The Canadian economy lost an estimated total of 31,200 jobs in July. The consensus had expected about 10,000 new jobs after our June report showed a loss of 700 jobs but this did not materialize.
  • What’s worse, we lost 71,000 full time jobs in July, on top of the 39,000 full-time jobs that were lost in June. We added another 40,000 part-time jobs to help cushion some of this blow but that isn’t a trade that our policy makers would willingly make because it typically replaces higher-paying jobs with lower paying ones.
  • Goods-producing employment dropped by another 4,300 jobs in July, failing to recover from the 46,000 jobs this sector lost in June. As a reminder, goods producing employment has outsized importance because these jobs spur employment growth across the broader economy (a study by the Canadian government estimated that, on average, each new goods-producing job stimulates the creation of 2.7 other jobs throughout our broader economy).
  • Our unemployment rate rose from 6.8% to 6.9%, and would have risen to 7% had our participation rate not fallen from 65.5% to 64.5 (as a reminder, our participation rate measures the percentage of working-age Canadians who are either employed or who are actively looking for work). Our participation rate now sits at its lowest level since the turn of the century.
  • Our overall employment momentum has clearly stalled. We had a nice surge in March of this year, but at that time some savvy economists cautioned that employers were “hiring up” in anticipation of a rise in future demand that might not materialize. So far, that call has looked prescient.

Not surprisingly, the Loonie fell sharply on Friday as financial markets digested the new and contrasting employment data from both countries. When the Loonie falls it makes our exports into U.S. markets more competitive, and that should, in theory, provide us with an effective stabiliser when our economic trajectory lags that of the U.S. for any length of time. But the follow through just hasn’t been happening. We had a nice surge in exports in January, but today that momentum is long gone – our total export sales have actually fallen in four of the last five months.

The lag between the cheaper Loonie and expanding export sales is not a complete mystery to our policy makers. The Bank of Canada has said that it can take up to two years for exchange rate movements to work their way through our economy in normal times. Today, we are not in normal times and we are still redefining our export sector after swaths of it were decimated at the start of the Great Recession, when U.S. demand dried up, when the Loonie soared above par with the Greenback, and when so many businesses closed their doors for good. This is going to take time.

Our policy makers have been clear about what they think it will take to get our economy rolling again – we need export growth to fuel the increased business investment that will increase the demand for labour, preferably of the more skilled varieties. But like it or not, our policy makers just can’t force our economy through this transition. read more…

David Larock is an independent full-time mortgage planner and industry insider. If you are purchasing, refinancing or renewing your mortgage, contact Dave or apply for a Mortgage Check-up to obtain the best available rates and terms.
Share
Print This Post

Why the U.S. Federal Reserve Won’t Be Hiking Its Policy Rate Any Time Soon – Tuesday Morning Interest Rate Update (August 2, 2016)

by Dave Larock

Mortgage Rate ConceptThe U.S. Federal Reserve met last week and decided to leave its policy rate unchanged, as was widely expected. The Fed also issued a brief accompanying statement, which gave us its latest assessment of how the U.S. economy is progressing. Here are the highlights from that statement:

  • The Fed sounded a little more upbeat about some of the recent data, noting that “near-term risks to the economic outlook have diminished”.
  • The Fed observed that “household spending has been growing strongly but business fixed investment has been soft”. I will expand on this key point below.
  • The Fed observed that “the labour market strengthened”, and that “economic activity had been expanding at a moderate rate”. It was encouraged that “job gains were strong in June”, but it also acknowledged “weak growth in May”. The Fed also noted that its dashboard of labour market indicators pointed toward some “increase in labor utilization in recent months”.
  • The Fed did not appear concerned about the effects of recent labour-market improvements on inflation, noting that “inflation has continued to run below the Committee’s 2 percent longer-run objective” and that “market-based measures of inflation compensation remain low”. The Fed added that “longer-term inflation expectations are little changed, on balance, in recent months”.

While the Fed sounded more upbeat about the U.S. economy’s recent progress at the margin, it still lacks compelling evidence that its ultra-accommodative monetary policies have helped to foster sustainable economic improvements. Looking at the pattern of Fed comments over the last few years, we continue to see its key phrases oscillate between dovish and hawkish tones in a pattern that is as inconsistent as the underlying data they are based on. And that uncertainty doesn’t stop at the Fed – it is pervasive among business leaders and makes them reluctant to invest in the kind of capacity improvements and expansion that so many of the world’s economies desperately long for. read more…

David Larock is an independent full-time mortgage planner and industry insider. If you are purchasing, refinancing or renewing your mortgage, contact Dave or apply for a Mortgage Check-up to obtain the best available rates and terms.
Share
Print This Post

Inflation in Canada Remains Benign – Monday Morning Interest Rate Update (July 25, 2016)

by Dave Larock

Mortgage Rate ConceptLast week was quiet on the economic front.

We received the latest Consumer Price Index (CPI) data from Statistics Canada and it showed that overall inflation was flat for the month, with the June CPI holding steady at 1.5% on a year-over-year basis. Benign inflation means that the Bank of Canada can continue to focus its monetary policies on promoting economic growth and on trying to encourage business investment in capacity enhancements and expansion.

Five-year Government of Canada bond yields fell one basis point last week, closing at 0.64% on Friday. Five-year fixed-rate mortgages are available in the 2.39% to 2.49% range, depending on the terms and conditions that are important to you, and five-year fixed-rate pre-approvals are offered at about 2.54%.

Five-year variable-rate mortgages are available in the prime minus 0.40% to prime minus 0.50% range, which translates into rates of 2.20% to 2.30% using today’s prime rate of 2.70%.

The Bottom Line: The U.S. Federal Reserve meets this week and while it is not expected to change its policy rate (the futures market is currently giving 97.6% odds that the Fed holds steady), its accompanying commentary still has the power to move markets. More on that next week.

David Larock is an independent full-time mortgage planner and industry insider. If you are purchasing, refinancing or renewing your mortgage, contact Dave or apply for a Mortgage Check-up to obtain the best available rates and terms.
Share
Print This Post

The Bank of Canada’s Latest Comments Bolster the Lower-for-Longer Rate View – Monday Morning Interest Rate Update (July 18, 2016)

by Dave Larock

Mortgage Rate ConceptThe Bank of Canada (BoC) left its policy rate unchanged last week, as was widely expected.

The Bank also released its latest Monetary Policy Report (MPR), which provides us with its views on the state of our economy and includes projections of where it thinks our economic growth will be headed over the next several years.

In the latest MPR, the BoC emphasized rising uncertainty as a central theme, both for businesses, when making investment decisions, and for central bankers, when trying to determine the optimal path forward. The Bank highlighted the unknowns surrounding Brexit as the main source of today’s uncertainty, but the worry list doesn’t stop there. Other current sources of uncertainty include: the U.S. presidential election, China’s debt bubble, Japan’s relentless quantitative easing, and the Italian banking crisis … just to name a few.

Here are the highlights from the latest MPR: read more…

David Larock is an independent full-time mortgage planner and industry insider. If you are purchasing, refinancing or renewing your mortgage, contact Dave or apply for a Mortgage Check-up to obtain the best available rates and terms.
Share
Print This Post

Why I Found Last Week’s Change To The Mortgage Qualifying-Rate Puzzling – Monday Morning Interest Rate Update (July 11, 2016)

by Dave Larock

Mortgage Rate ConceptLast week the Bank of Canada quietly changed its Mortgage Qualifying Rate (MQR) from 4.64% to 4.74%.

As a reminder, the MQR is used to qualify Canadian borrowers who are applying for either variable-rate mortgages or for fixed-rate terms of less than five years. (Here is a link to my post that explains in detail how the MQR works.)

While this is a relatively minor change, it still worries me. For starters, the MQR has been raised at a time when mortgage rates are falling, so this change has not been made, as it usually would be, in response to market forces. More importantly, this is the first lending-policy tightening since the federal Liberals won their majority last fall and as such, it gives us our first insight into how our new political leadership is likely to handle the mortgage file.

Regular readers of my posts will know that I have been supportive of the entire series of mortgage-rule changes that have made over the last several years. To me they have all been a matter of short-term pain to protect longer-term gains, but this change, minor as it is, is harder to rationalize.

Here are five questions/concerns that I have about last week’s MQR change: read more…

David Larock is an independent full-time mortgage planner and industry insider. If you are purchasing, refinancing or renewing your mortgage, contact Dave or apply for a Mortgage Check-up to obtain the best available rates and terms.
Share
Print This Post

Monday Morning Interest Rate Update (July 4, 2016)

by Dave Larock

Mortgage Rate ConceptI hope that my Canadian readers enjoyed a relaxing Canada Day long weekend, and I wish a happy Fourth of July celebration to our southern neighbours.

Today’s post will be short and sweet. Here is a five-second video which summarizes how the Brexit has progressed since last week. (Videos, like pictures, can be worth a thousand words!)

Five-year GoC bond yields fell six basis points last week, closing at 0.57% on Friday. Five-year fixed-rate mortgages are available in the 2.39% to 2.49% range, depending on the terms and conditions that are important to you, and five-year fixed-rate pre-approvals are offered at about 2.54%.

Five-year variable-rate mortgages are available in the prime minus 0.40% to prime minus 0.50% range, which translates into rates of 2.20% to 2.30% using today’s prime rate of 2.70%.

The Bottom Line: Investors continued to worry more about the return of their capital than they did about the return on their capital last week, and our mortgage rates should remain at or below today’s ultra-low levels for as long as fear and uncertainty are the market’s dominant themes.

David Larock is an independent full-time mortgage planner and industry insider. If you are purchasing, refinancing or renewing your mortgage, contact Dave or apply for a Mortgage Check-up to obtain the best available rates and terms.
Share
Print This Post

How the Brexit Affects Canadian Mortgage Rates – Monday Morning Interest Rate Update (June 27, 2016)

by Dave Larock

Mortgage Rate ConceptWell, that was unexpected.

Last Friday, voters in the United Kingdom surprised markets when a small majority voted in favour of leaving the European Union (EU). While the polls showed a tight race between the Leave and Remain sides, markets were giving about 70% odds to the Remain side pulling through. History has shown that on votes like this, with Scotland’s referendum on independence the most recent example, momentum tends to swing in favour of the status quo at the last minute when voters stand in the voting booth and face their moment of truth. While the Remain side did appear to gain some last-minute momentum, this time, it was too little, too late.

Here are five key observations relating to the Brexit, followed by my take on what last Friday’s vote result will mean for our mortgage rates: read more…

David Larock is an independent full-time mortgage planner and industry insider. If you are purchasing, refinancing or renewing your mortgage, contact Dave or apply for a Mortgage Check-up to obtain the best available rates and terms.
Share
Print This Post

The U.S. Federal Reserve Morphs (Once Again) from a Hawk Back into a Dove – Monday Morning Interest Rate Update (June 20, 2016)

by Dave Larock

Mortgage Rate ConceptThe U.S. Federal Reserve adopted a very different tone last week.

After sounding increasingly bullish about the U.S. economy’s prospects in the lead up to its latest meeting, the Fed decided to change direction by offering a much more cautious assessment of the current state of the U.S. economy.

In the end, the latest U.S. employment data left far too much uncertainty about the sustainability of the U.S. labour-market’s hard-won momentum in the minds of the Fed’s members. And that heightened uncertainty was reflected in both the Fed’s press statement and its accompanying forecasts.

Here are the highlights from the Fed’s latest statement, with my comments added:

  • “… the pace of improvement in the labor market has slowed … job gains have diminished“. The latest non-farm payroll report, for May, showed a sharp slowdown in S. employment momentum and that alone had convinced markets that any Fed policy-rate rises would be delayed. Most of the experts I read believe that the Fed’s ability to stimulate employment growth is very limited, but it’s clear that the Fed isn’t going to tighten monetary policy until it is satisfied that the U.S. labour market is returning to health.
  • “Growth in household spending has strengthened.” While it would be an encouraging sign if the recent uptick in consumer spending had been a by-product of rising incomes, this increase has instead been fuelled by a corresponding rise in household borrowing, which only gives the economy a sort of short-term sugar high.
  • “ … the drag from net exports appears to have lessened”. S. exporters had enjoyed some much-needed short-term relief as the U.S. dollar sold off against other currencies. That said, with an estimated $10 trillion in negative yielding government debt from other nations outstanding, any policy-rate increase by the Fed in the current environment would send the U.S. dollar surging higher and quickly eliminate any semblance of a U.S. export-manufacturing rebound. This rebound has outsized importance for overall U.S. labour-market momentum because manufacturing jobs stimulate job growth in other parts of the economy.
  • “ … business fixed investment has been soft.” The Fed believes, just as the Bank of Canada does, that a rise in business investment will provide the surest signal that the U.S. economy is on a sustainable footing. But just as in Canada, S. businesses are sitting on record levels of cash and are more inclined to invest in share buy backs than in productivity enhancements and capacity expansion.
  • “Inflation has continued to run below the Committee’s 2 percent longer-run objective … market-based measures of inflation compensation declined … [and] inflation is expected to remain low in the near term”. Low inflation rates allow the Fed to continue to focus its attention on the health of the S. labour market. If inflation were to take off, it could force the Fed to raise its policy rate, but even then, the Fed has indicated that it would tolerate above-target inflation over the short term if it felt that the broader economy still needed today’s ultra-accommodative rates. If you didn’t know it already, this is further evidence that this is not your father’s Fed.

In summary, the Fed is once again conceding that the current state of the U.S. economic recovery requires it to keep its monetary spigots fully open for the foreseeable future. While the Fed didn’t outwardly acknowledge this, it really can’t raise its policy rate at a time when the rest of the world’s largest economies are either cutting theirs or standing pat. There is simply too much risk that swimming against today’s prevailing global monetary-policy current would cause another spike in the U.S. dollar, reinvigorating a powerful headwind that could threaten the U.S. economy’s hard-won momentum by reducing its exports. Also, while the Fed did not make specific reference to Brexit concerns, that geopolitical uncertainty (among others) would also incline the Fed to keep dry what little powder it still has.

The Fed’s more dovish tilt was also evident in its accompanying Summary of Economic Projections, which provides the latest forecasts of its members. Here is a summary of how the most recent projections differed from previous versions: read more…

David Larock is an independent full-time mortgage planner and industry insider. If you are purchasing, refinancing or renewing your mortgage, contact Dave or apply for a Mortgage Check-up to obtain the best available rates and terms.
Share
Print This Post

The Next Mortgage-Rule Change That Our Government Should Make – Monday Morning Interest Rate Update (June 13, 2016)

by Dave Larock

Mortgage Rate ConceptLast week the Bank of Canada (BoC) issued its latest Financial System Review, giving us the Bank’s assessment of the “the main vulnerabilities and risks to the stability of the financial system”.

In this latest report, the BoC highlighted “the elevated level of household indebtedness and imbalances in some regional housing markets”, specifically Vancouver and Toronto. The Bank cautioned that “rapidly rising house prices and strong mortgage credit growth are increasing the share of highly indebted households” and warned that “it is unlikely that economic fundamentals will justify continued strong price increases.”  The Bank cautioned that prospective buyers in Vancouver and Toronto “should not extrapolate recent real estate performance into the future when contemplating a transaction.”

Not much to argue with there. Purchasers are having to take on more and more mortgage debt as homes in Vancouver in Toronto become more expensive, and the resulting higher debt levels make households more vulnerable to financial shocks. Also, the continued rise in house prices increases the risk that purchasers will base their decision to buy on unrealistic assumptions about the potential for additional gains.

Despite these concerns, the BoC gave no indication that it plans to raise interest rates to try to reign in the rise in household debt levels or to help cool regional housing markets. Instead, the Bank is hoping that the federal government will consider making more changes to its residential mortgage-lending regulations, which can be more specifically targeted at the areas of concern.

Federal Finance Minister Bill Morneau recently confirmed that the government is doing a “deep dive” on the issue, so more regulatory changes can be expected. The key question now is “what changes will our federal government actually make?” read more…

David Larock is an independent full-time mortgage planner and industry insider. If you are purchasing, refinancing or renewing your mortgage, contact Dave or apply for a Mortgage Check-up to obtain the best available rates and terms.
Share
Print This Post

Why the Latest U.S. Employment Data Should Put an End to Speculation About Imminent U.S. Rate Increases – Monday Morning Interest Rate Update (June 6, 2016)

by Dave Larock

Mortgage Rate ConceptOver the past several weeks investors had been increasing their bets that the U.S. Federal Reserve would raise its policy rate in the near future, with the odds of a Fed rate hike in July peaking at about 58% last week.

This speculation was fueled by increasingly hawkish comments from several Fed members who warned that the improving U.S. economy would soon be ready for another round of monetary-policy tightening.

I had been sceptical about whether the Fed would actually follow through on its warnings because we have seen many recent examples of Fed talk not translating into action. And I don’t think it was a coincidence that the Fed’s rate-hike warnings grew louder at a time when the bond-futures market was pricing in odds of no Fed rate increases until early 2017.

Over the past several years the Fed has repeatedly used hawkish rhetoric to keep investors from becoming complacent whenever the lower-for-longer view started to really sink in. For my money, this latest rate-rise talk was just the most recent example of the Fed using the power of its words to keep moral hazard risks at bay.

That said, we’ll never know for sure because the latest U.S. employment report, released last Friday, was so bad that investors quickly reversed course and lowered the odds of a Fed rate hike in July all the way back down to 31% in less than a day.

Here are the highlights from the latest U.S. employment report, which was about as close to a stinker all round as we have seen in a long time: read more…

David Larock is an independent full-time mortgage planner and industry insider. If you are purchasing, refinancing or renewing your mortgage, contact Dave or apply for a Mortgage Check-up to obtain the best available rates and terms.
Share
Print This Post

Why the Bank of Canada Punted With Its Latest Policy Statement – Monday Morning Interest Rate Update (May 30, 2016)

by Dave Larock

Mortgage Rate ConceptThe Bank of Canada (BoC) left its policy rate unchanged last week, as was universally expected. The Bank also offered us some insight into our economy’s progress, or lack thereof.

Here are the highlights from the BoC’s latest statement, with my take on the meaning behind their messages:

  • “The global economy is evolving largely as the Bank projected in its April Monetary Policy Report (MPR)” but the Bank noted that “ongoing geopolitical factors [are] contributing to fragile market sentiment”. That “fragile market sentiment” concerns the Bank because our GDP tends to move in the same direction as overall global GDP over time, so heightened geopolitical uncertainty pushes the BoC into a cautious, read-and-react position.
  • The Bank offered a fairly positive assessment of where the U.S. economy is headed, discounting its weak first quarter and predicting it will experience “a return to solid growth in 2016”. There is much debate about what the U.S. economic data are telling us at the moment, but it is no surprise to hear that the BoC’s U.S. economic projections have an optimistic bent. It is worth remembering, however, that the Bank has consistently overshot with its U.S. economic projections.
  • The BoC noted that our economy’s “structural adjustment to the oil price shock continues, but it is proving to be uneven” and while the Bank acknowledged that oil prices are higher, it attributes the recent price rise to “short-term supply disruptions”. The Bank is of course referring to the fires in Fort McMurray, which it estimates will “cut about 1 ¼ percentage points off of real GDP growth in the second quarter”. The BoC’s most recent forecast for our economy called for second quarter GDP growth of 1%, so unless something unforeseen happens, it appears that the Bank is now calling for our economy to contract slightly in Q2.
  • The BoC cited concern that “business investment and intentions remain disappointing”. The Bank is hopeful that our economy will start to rebound in the third quarter, “as oil production resumes and reconstruction [in Fort McMurray] begins”, but hope is the operative word here because the BoC has been hoping that business investment will meaningfully increase since 2008.
  • The Bank notes that while the Loonie “has been fluctuating in response to shifting expectations of U.S. monetary policy and higher oil prices, it is now close to the level assumed in April.” The recent drop in the Loonie has reduced the odds that the BoC would have to lower its overnight rate to stem its rise.
  • “Inflation is roughly in line with the Bank’s expectations”. The Bank noted that overall inflation, as measured by the Consumer Price Index (CPI), “remains slightly below the 2 per cent target”, while core inflation remains “close to 2 per cent, reflecting the offsetting influences of past exchange rate depreciation and excess capacity.“ In different times the BoC might be more concerned about the fact that our overall CPI has risen in each of the past five months, and that our core inflation rate, which strips out more volatile CPI inputs like food and energy, came in above 2% for the second consecutive month. But in our current economic environment, the BoC’s primary focus is on growth, not inflation. As such, inflation would have to rise much higher before it would likely alter the Bank’s near-term policy plans.

I think that the BoC effectively decided to punt the ball to the U.S. Fed with its latest statement. There was nothing in last week’s announcement to tip either bond yields, or more importantly, the Loonie off of their current trajectories. Our economy remains in read-and-react mode where the combination of global geopolitical uncertainty and the U.S. Fed’s next policy-rate decision in June will determine where both are headed over the near term. The Bank has basically decided to wait and see how the Fed’s June meeting plays out before using its words and, if necessary, its actions, to counteract any unwanted volatility.

Five-year Government of Canada bond yields rose by two basis points last week, closing at 0.79% on Friday. Five-year fixed-rate mortgages are available in the 2.39% to 2.59% range, depending on the terms and conditions that are important to you, and five-year fixed-rate pre-approvals are offered at around 2.69%.

Five-year variable-rate mortgages are available in the prime minus 0.30% to prime minus 0.40% range, which translates into rates of 2.30% to 2.40% using today’s prime rate of 2.70%.

The Bottom Line: The BoC is now projecting that our economy will contract slightly in the second quarter of this year, largely as a result of the economic disruption caused by the fires in Fort McMurray. Despite this, the Bank’s overall position comes across as cautiously optimistic while it waits to see how global geopolitical uncertainties play out, and most directly, to see what effects the U.S. Fed’s June policy-rate decision will have on the Loonie and on our overall economic momentum.

David Larock is an independent full-time mortgage planner and industry insider. If you are purchasing, refinancing or renewing your mortgage, contact Dave or apply for a Mortgage Check-up to obtain the best available rates and terms.
Share
Print This Post

All Eyes on the Bank of Canada This Week – Tuesday Morning Interest Rate Update (May 24, 2016)

by Dave Larock

Mortgage Rate ConceptThis post will be shorter than normal because I spent the long weekend enjoying our gorgeous weather with family. (And I hope you did too!)

All eyes will be on the Bank of Canada (BoC), which will issue its latest policy announcement this Wednesday. The Bank is not expected to move rates but it will offer insights into our current economic circumstances. Specifically, I’ll be interested in hearing what the Bank has to say about the continued volatility in our employment momentum, the effects of the Fort McMurray fires on Alberta’s already beleaguered oil patch, and most importantly, the impact that the surging Loonie is having on our still nascent manufacturing-sector recovery.

Five-year Government of Canada bond yields rose by nine basis points last week, closing at 0.77% on Friday. Five-year fixed-rate mortgages are available in the 2.39% to 2.59% range, depending on the terms and conditions that are important to you, and five-year fixed-rate pre-approvals are offered at around 2.69%.

Five-year variable-rate mortgages are available in the prime minus 0.30% to prime minus 0.40% range, which translates into rates of 2.30% to 2.40% using today’s prime rate of 2.70%.

The Bottom Line: I expect that the BoC will offer a cautious overall view at this Wednesday’s meeting in the hope that its dovish language will help stem the Loonie’s rise against the Greenback. No doubt that BoC Governor Poloz’s would deny that this was his motive, but regular readers of this post know better.

David Larock is an independent full-time mortgage planner and industry insider. If you are purchasing, refinancing or renewing your mortgage, contact Dave or apply for a Mortgage Check-up to obtain the best available rates and terms.
Share
Print This Post

How China’s Future Might Affect Our Economy and Mortgage Rates – Monday Morning Interest Rate Update (May 16, 2016)

by Dave Larock

Mortgage Rate ConceptWhat happens in China matters to our economy. And more so than you might think.

While we don’t sell much to China directly, its demand drives the prices of commodities, and our economic momentum tends to rise and fall alongside commodity-price changes.

In the years following the Great Recession, China’s voracious appetite for commodities gave our economy a powerful boost, which helped offset the loss of export demand from U.S. markets. But Chinese GDP growth rates of 10%+ are long gone, and even China’s current stated GDP growth rate of about 6.5% is open to question.

China’s slowing growth hasn’t come as a surprise to its policy makers. They are trying to transition their economy from one that is primarily driven by infrastructure spending and export-manufacturing, to one that is fuelled by domestic consumer spending and is focused on the rapid expansion of the country’s service-based sectors.

This is a monumental task for the world’s second largest economy, and the economic disruptions that are inevitable with such a transition increase the potential for social and political instability. China’s leaders value stability above all else and they have relied on a massive expansion in corporate debt to buffer against potential disruptions. But this has triggered a sharp rise in non-productive debt that provides only stop-gap relief, and that may well exacerbate instability risks over the longer term by delaying painful (but much needed) changes, and by limiting China’s future flexibility.

Here are some highlights to give you a sense of the scope and scale of China’s unprecedented levels of debt expansion: read more…

David Larock is an independent full-time mortgage planner and industry insider. If you are purchasing, refinancing or renewing your mortgage, contact Dave or apply for a Mortgage Check-up to obtain the best available rates and terms.
Share