Disappointing Employment Data Portend Less Inflation (and Lower Mortgage Rates)

Monday Morning Interest Rate Update for May 10, 2021

by David Larock

Canada mortgage rates

Last week’s employment data came in worse than expected on both sides of the 49th parallel, casting doubt on the market consensus narrative that labour costs, and, by association, overall inflation, will rise more quickly than both the Bank of Canada (BoC) and the US Federal Reserve are forecasting.

The Canadian economy shed 207,000 jobs last month.

Losses were expected after the reintroduction of lockdowns across the country, but the total came in higher than the consensus forecast of 175,000. Our economy has thus far shown surprising resilience coming out of lockdowns, but the more of them we have and the longer they last, the greater the odds that more permanent economic scarring will occur.

The US headline was the bigger story.

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David Larock is an independent full-time mortgage broker and industry insider who helps Canadians from coast to coast. 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.

Why the Bank of Canada Won’t Hike Before the US Fed

Monday Morning Interest Rate Update for May 3, 2021

by David Larock

Bank of CanadaIn its most recent policy statement, the Bank of Canada (BoC) moved up the timing of its next policy-rate increase to “sometime in the second half of 2022”, and the consensus wasted no time in warning variable-rate mortgage borrowers to lock in.

In last week’s post, I offered a different take.

I argued that our rates will likely stay lower for longer, and that the BoC’s statement was primarily designed to help cool our red-hot housing markets. I noted that the Bank left itself plenty of wiggle room by repeatedly emphasizing uncertainty throughout its forecast and by making clear that its ultimate timing would be outcome based, not calendar based. I also predicted that the BoC would not raise ahead of the US Federal Reserve and reminded readers that the Fed was not projecting its next rate hike until 2024.

In this week’s post, I’ll offer more detail on why I think the BoC will lag the Fed, and then provide an update on what the Fed said last Wednesday at its latest policy-rate meeting.

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David Larock is an independent full-time mortgage broker and industry insider who helps Canadians from coast to coast. 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.

The Bank of Canada Blinks

Monday Morning Interest Rate Update for April 26, 2021

by David Larock

The Bank of Canada (BoC) and the bond market have been in a fight about where inflation and interest rates are headed.

Until last week, the Bank predicted that neither would rise sustainably for years to come. BoC Governor Macklem told us to prepare for a “tough slog” and warned that it would be a “long climb back” to full recovery. Against that backdrop, last November, he said that “Canadians can be confident that borrowing costs are going to remain very low for a long time”.

Bond-market investors disagreed.

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David Larock is an independent full-time mortgage broker and industry insider who helps Canadians from coast to coast. 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.

An Important Week Ahead for Canadian Mortgage Rates (and Real Estate)

Monday Morning Interest Rate Update for April 19, 2021

by David Larock

Canada mortgage rates

These are tumultuous times for both Canadian mortgage rates and real estate.

The Bank of Canada (BoC) is currently in a disagreement with the bond market about our current inflation prospects. The Bank predicts that the recent run-up will prove transitory, but bond-market investors don’t agree. They expect inflationary pressures to intensify and have driven bond yields higher in anticipation.

Variable mortgage rates, which are priced on the BoC’s policy rate, have remained nailed to the floor, while fixed mortgage rates, which are priced on Government of Canada (GoC) bond yields, have spiked higher by about 0.50%.

There is similar disagreement about soaring real estate prices.

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David Larock is an independent full-time mortgage broker and industry insider who helps Canadians from coast to coast. 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.

The Stress-Test Rate Used for Uninsured Mortgages Is About to Rise

Monday Morning Interest Rate Update for April 12, 2021

by David Larock

Canada Mortgage Rates

Canadian residential real-estate prices have risen rapidly and broadly during the pandemic, and as prices have surged, so too have calls for our policy makers to step in.

Last week, the Office of the Superintendent of Financial Institutions (OSFI), our banking regulator, made its first move. As is customary, OSFI put out a request for input to “interested stakeholders” on a proposal that is scheduled to take effect on June 1, 2021.

Bluntly put, this consultation phase is a mere formality. OSFI is proposing a change in the same way that parents suggest that their young children brush their teeth before bed – one way or the other, it’s going to happen.

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David Larock is an independent full-time mortgage broker and industry insider who helps Canadians from coast to coast. 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.

What Can Be Done About Rising House Prices?

Monday Morning Interest Rate Update for April 5, 2021

by David Larock

Canada mortgage rates

The Bank of Canada (BoC) is facing increased pressure to accelerate its rate-hike timetable to slow house-price appreciation and stave off housing bubble risks.

Its promise to keep rates at ultra-low levels for years to come has combined with the growing belief that house prices will rise forever to form a potent, intoxicating mix.

Buyers are also haunted by the warning that they must buy now or be priced out forever, and would-be sellers who hold on to their properties are quickly rewarded with more gains.

There are other COVID-related factors that are helping to push prices higher.

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David Larock is an independent full-time mortgage broker and industry insider who helps Canadians from coast to coast. 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.

A Recap of Recent Posts

Monday Morning Interest Rate Update for March 29, 2021

by David Larock

Canada mortgage rates

Last week was a slow one for mortgage-rate news, so today I offer a recap of three recent posts.

In them, I explain why fixed rates have been rising while variable rates have been falling, and I also provide background on the current battle between bond-market investors and central banks.

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David Larock is an independent full-time mortgage broker and industry insider who helps Canadians from coast to coast. 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.

Central Bank vs. the Bond Market: Round 2

Monday Morning Interest Rate Update for March 22, 2021

by David Larock

Canada mortgage rates

In last week’s post I explained that the bond market and the Bank of Canada (BoC) are currently in a fight about future inflation.

In one corner we have bond-market investors driving up Government of Canada (GoC) bond yields (and the fixed-mortgage rates that are priced on them) over fears of rising inflation. To wit, both the five-year GoC bond yield and average five-year fixed mortgage rates have surged about 0.50% higher over the past few weeks.

In the other corner, the BoC is predicting that the current inflation run-up will prove transitory, and it just doubled down on keeping its policy rate (which our inflation variable mortgage rates are priced on) at 0.25% until sometime in 2023.

Last Wednesday, the US Federal Reserve took its turn pushing back against the mainstream narrative.

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David Larock is an independent full-time mortgage broker and industry insider who helps Canadians from coast to coast. 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.

The Fight Between the Bond Market and the Bank of Canada

Monday Morning Interest Rate Update for March 15, 2021

by David Larock

Canada mortgage rates

The five-year Government of Canada (GoC) bond yield that our five-year fixed mortgage rates are priced on has moved steadily higher of late in response to the consensus belief that inflation has turned the corner and will now rise sustainably.

It increased from 0.40% to 1.04% over the past month, and, not surprisingly, five-year fixed mortgage rates have risen by almost the same amount.

Today’s consensus inflation narrative is underpinned by improving US vaccination rates, the approval of new massive US stimulus programs, and better-than-expected economic data on both sides of the border. These factors are fueling the belief that growth is about to take off, and that, by association, inflation, and rates, have bottomed.

In the lead-up to the latest Bank of Canada (BoC) meeting, which took place last Wednesday, mainstream economists predicted that the improving backdrop would force it to adopt more hawkish language. Specifically, they expected the Bank to hint that it would soon begin to taper its quantitative easing (QE) programs, and to move up the expected timing of its next policy-rate increase.

The BoC had other plans.

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David Larock is an independent full-time mortgage broker and industry insider who helps Canadians from coast to coast. 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.

Fixed or Variable Mortgage Rate – Which One Should You Choose?

Monday Morning Interest Rate Update for March 8, 2021

by David Larock

Canada mortgage rates

Five-year fixed mortgage rates have reversed course and risen by about 0.25% recently, while five-year variable mortgage rates have continued to inch lower.

The rather sudden widening of the gap between these two options makes now a good time to revisit the age-old fixed vs. variable question.

Let’s start with a quick look back at how we reached this point.

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David Larock is an independent full-time mortgage broker and industry insider who helps Canadians from coast to coast. 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.

Fixed Mortgage Rates Rise on Inflation Fears – But Are These Concerns Warranted?

Monday Morning Interest Rate Update for March 1, 2021

by David Larock

Canada mortgage rates

The inflation trade pretty much exploded last week.

Investors bet that we’re going to get more inflation than our policy makers expect, and they drove up bond yields in response.

The Government of Canada (GoC) five-year bond yield that our five-year fixed mortgage rates are priced on surged from 0.67% at the start of the week to 0.88% at Friday’s close (and it was at only 0.43% when February began). Lenders responded by raising their five-year fixed rates anywhere from 0.15% to 0.25% (so far).

This bond yield surge is a global phenomenon that is primarily underpinned by the belief that US inflation is about to sustainably rise (which I also wrote about in last week’s post). If that happens, the US will export its rising inflation through trade, and it will permeate the globe.

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David Larock is an independent full-time mortgage broker and industry insider who helps Canadians from coast to coast. 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.

Canadian Fixed Mortgage Rates Are About to Rise

Monday Morning Interest Rate Update for February 22, 2021

by David Larock

Canada mortgage rates

The five-year Government of Canada (GoC) bond yield surged higher last week, and that means that our five-year fixed mortgage rates are on the way up.

In fact, I’m surprised they haven’t risen already.

In today’s post I’ll explain what is pushing rates higher and offer advice on how borrowers who are currently in the market for a mortgage can navigate the current environment.

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David Larock is an independent full-time mortgage broker and industry insider who helps Canadians from coast to coast. 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.

Happy Family Day

Monday Morning Interest Rate Update for February 16, 2021

by David Larock

I hope that everyone enjoyed the Family Day long weekend.

I used the holiday yesterday for its stated purpose, so there won’t be a new post this week. I’ll be back next Monday as usual.

In the meantime, here are links to five of my recent posts covering key mortgage-related topics:

  1. What’s in store for fixed and variable mortgage rates in 2021?
  2. Why is the Bank of Canada hinting that it may cut its policy rate again?
  3. What would happen to mortgage rates in a worst-case pandemic scenario?
  4. The obvious flaw in the Bank of Canada’s newfound optimism.
  5. How mortgage rates will be impacted by the race between the virus and the vaccines.

The Bottom Line: The Government of Canada bond yields that our fixed mortgage rates are priced on held steady last week. As such, our fixed mortgage rates were mostly unchanged, with one lender announcing a small cut.

Variable mortgage rates were unchanged last week.

David Larock is an independent full-time mortgage broker and industry insider who helps Canadians from coast to coast. 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.

Lockdowns Trigger a Job Loss Spike (and Bond Yields Rise Anyway)

Monday Morning Interest Rate Update for February 8, 2021

by David Larock

Canada mortgage rates

The consensus predicted that our economy would shed 40,000 jobs last month, largely as a result of lockdown measures reintroduced in Ontario and Quebec. Instead, we lost 213,000.

That’s on top of the 53,000 job drop in December, when infection rates put an end to the impressive employment recovery that had run through the summer and fall.

Overall employment has now dropped by 858,000 over the past twelve months, and Statistics Canada estimates that 529,000 of those losses were COVID-related.

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David Larock is an independent full-time mortgage broker and industry insider who helps Canadians from coast to coast. 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.

The Path for Mortgage Rates Will Depend on Who Wins the Race Between the Virus and the Vaccines

Monday Morning Interest Rate Update for February 1, 2021

by David Larock

Canada mortgage rates

Canadian mortgage rates are at rock-bottom levels, and the only debate today is over how long they will remain there.

The Bank of Canada (BoC) recently offered a more optimistic economic forecast that was tied to the earlier than expected arrival of vaccines. It cautioned that our recovery will still be drawn out and uneven, but less so if we are able to meet the vaccination timetable that our federal government is committing to.

Vaccination rates are critical now because our economy will continue to be hampered by varying stages of lockdown until we achieve herd immunity, which will occur when 20 million (or so) of us have had our shots. Our federal government is promising that every Canadian who wants a vaccine will have access to one by September, and that is also when it expects us to reach that goal.

If vaccination rates hold the key to our recovery, and if the BoC’s forecast is underpinned by our federal government’s planned vaccination timeline, then tracking actual vaccination rates relative to that timeline will provide us with a useful gauge of how our economic momentum is lining up with the Bank’s projections.

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David Larock is an independent full-time mortgage broker and industry insider who helps Canadians from coast to coast. 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.
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