Canadian Inflation Ticks Higher But Remains Subdued

Monday Morning Interest Rate Update for October 26, 2020

by David Larock

Last Wednesday Statistics Canada confirmed that our rate of inflation ticked a little higher in September.

Our Consumer Price Index (CPI) increased by 0.5% on a year-over-year basis last month, up from 0.1% in August and higher than the consensus forecast of 0.4%. A sharp drop in gasoline prices (-10.7%) pulled down the overall number, and without it, our CPI would have risen by a full 1%.

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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 Stops Purchasing Canada Mortgage Bonds

Monday Morning Interest Rate Update for October 19, 2020

by David Larock

Canada mortgage rates

Last week the Bank of Canada (BoC) announced that it would end its Canada Mortgage Bond (CMB) purchase program, effective October 26.

This news didn’t garner much media attention, probably because it isn’t likely to have a significant impact on mortgage rates over the short term. But the BoC’s withdrawal of support is still noteworthy because it serves as a litmus test for current financial-market conditions.

The BoC’s latest action reminds me of the family board game Jenga. In that game, players start by building a solid tower of blocks, and then each player takes a turn removing a block until the tower collapses and the game ends.

The Bank’s gradual removal of emergency COVID-support mechanisms will follow a similar pattern, although hopefully with a very different result!

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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 Employment Surges (But We’re Not out of the Sugar Maples by a Long Shot)

Monday Morning Interest Rate Update for October 13, 2020

by David Larock

Canada mortgage rates

Last Friday Statistics Canada confirmed that our economy added another 378,000 jobs last month, well above the consensus forecast of 150,000.

Our employment data are notoriously volatile, to the point where Stats Can’s monthly Labour Force Survey is sometimes jokingly referred to as “the random number generator.”

That said, if the recent data are anywhere near accurate, there is no denying that our jobs recovery is evolving at a much more robust pace than previously expected.

Will it continue?

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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.

Will July’s Surge in Canadian Economic Momentum Continue?

Monday Morning Interest Rate Update for October 5, 2020

by David Larock

Canada mortgage rates

Last week Statistics Canada confirmed that our GDP increased by 3% in July on a month-over-month basis, following an increase of 6.5% in June.

In regular times, those would be jaw-dropping results. Today, not so much.

The collapse in our GDP earlier this year has been followed by positive surges in momentum since our economy re-opened. Against that backdrop, comparisons to pre-COVID statistics and trends aren’t helpful, but the latest data do provide useful insights into the current state of our economy.

Here are five highlights:

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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.

Five Must-Read Posts about Canadian Mortgages and Rates

Monday Morning Interest Rate Update for September 28, 2020

by David Larock

Canada mortgage rates

Last week was short on news relating to mortgage rates, so this week I’ll highlight five of my recent posts that are worth a read if you missed them the first time around.

To begin, now that mortgage rates have hit records lows, should you choose a fixed or variable rate? The post link below offers my latest take:

Fixed or Variable? Mortgage Rate Forecast: COVID-19 Edition

If you want to figure out what will happen with mortgage rates over the medium term, you need to know where inflation is headed. But that is easier said than done.

This next post explores the opposing views that inflationary pressures will remain subdued for an extended period or that inflationary pressures are poised to rise considerably:

Are We Headed for Too Much Inflation or Not Enough?

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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.

When Will Canadian Mortgage Rates Rise?

Monday Morning Interest Rate Update for September 21, 2020

by David Larock

Canada mortgage rates

Bank of Canada (BoC) Governor Tiff Macklem recently said that in these “unusual times” his Bank is willing to be “unusually clear that interest rates are going to be low for a long time.”

The question that follows naturally is: How long is a “long time”?

Are we talking five years?

Most Canadian mortgage borrowers are choosing between five-year fixed and variable mortgage rates today, so that is the time period of most interest to them.

Today’s five-year variable rates are still lower, but they only have to rise by a little to become more expensive than their fixed-rate equivalents. The BoC will need to keep its policy rate at its current level for most of the next five years for variable rates to win out.

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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.

Bank of Canada Re-Confirms Ultra-Low Mortgage Rates Are Here to Stay

Monday Morning Interest Rate Update for September 14, 2020

by David Larock

Canada mortgage ratesLast Wednesday the Bank of Canada (BoC) announced that it would hold its policy rate steady, as was universally expected.

In its policy statement, the Bank offered an updated assessment of the state of our recovery, and, by association, indicated where our mortgage rates are likely headed over the short and medium term.

Let’s start with a quick review to explain why the BoC’s words and actions are important to anyone keeping an eye on rates.

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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.

Employment Data Confirm Our Recovery Is Still in the Early Innings

Monday Morning Interest Rate Update for September 8, 2020

by David Larock

Last week was a quiet one in the lead-up to the Bank of Canada’s (BoC) meeting this Wednesday.

On Friday we learned that our economy recovered another 246,000 jobs in August, most of them full-time positions. A gain like that would normally push up our bond yields and, by association, our fixed mortgage rates, but at this point nobody needs to be reminded that these are not normal times.

Here are five quick thoughts on our current employment situation:

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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.

Are We Headed for Too Much Inflation or Not Enough?

Monday Morning Interest Rate Update for August 31, 2020

by David Larock

If you want to know where mortgage rates are headed, inflation holds the key.

If inflationary pressures remain low, the Bank of Canada (BoC) will keep its policy rate at its current 0.25% level for the foreseeable future and our variable mortgage rates, which are priced on the BoC’s policy rate, will remain at today’s rock-bottom levels for years to come. Against that same backdrop, our Government of Canada (GoC) bond yields, which our fixed mortgage rates are priced on, will either hold steady or continue falling.

If inflationary pressures build, GoC bond yields will increase, and the longer the bond, the more its yield will rise in response to changes in the outlook. Rising bond yields would increase lender funding costs which would, in turn, push fixed mortgage rates higher. Under this scenario, the BoC would likely be more patient than the bond market and allow inflation to run a little hot while determining whether the uptick would be sustained. But at some point, the Bank would start raising its policy rate to keep inflation on or around its 2% target, and variable mortgage rates would increase in lockstep.

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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.

Don’t Appreciate the Mortgage Stress Test Yet? Give It Time

Monday Morning Interest Rate Update for August 24, 2020

by David Larock

Canada mortgage rates

Our policy makers have a love-hate relationship with our residential real-estate sector.

On the one hand, the sector has provided our economy with a consistent boost over a period when business investment and export growth have disappointed. But on the other hand, too much residential real-estate investment can be detrimental because the elevated debt levels associated with it can sap growth over time.

Balancing real estate’s risk/reward trade-off has been a tricky proposition for our regulators.

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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 Theory on Why CMHC President Evan Siddall Went Rogue Last Week

Monday Morning Interest Rate Update for August 17, 2020

by David Larock

Canada mortgage rates

Mortgage rates continued to fall last week and the mortgage stress-test rate that is used to qualify mortgage applications also fell from 4.94% to 4.79%.

This marks the first drop in the mortgage stress-test rate since COVID began. By comparison, actual five-year fixed and variable mortgage rates have fallen by about 1% from their COVID-induced peak.

The disjointed relationship between real mortgage rates and the stress-test rate is a rich topic for discussion, but I am going to leave that for another day. Instead, in this week’s post I want to focus on a strange and controversial letter that CMHC’s outgoing President Evan Siddall sent to 100 lenders last week.

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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 Forecast: COVID-19 Edition

Monday Morning Interest Rate Update for August 10, 2020

by David Larock
Canada mortgage rates

 

Canadian mortgage rates have been on a wild ride of late.

It started in late February when five-year fixed rates were available at about 2.75% and five-year variable rates were offered in the 2.90% range. Most borrowers were opting for the stability of a fixed rate against that backdrop, which had been in place for some time.

Then the crisis hit, and the Bank of Canada (BoC) slashed its policy rate by 0.50% three times in March, dropping it from 1.75% all the way down to 0.25%.

Variable mortgage rates initially fell in response, but then as the severity of the crisis became more evident, they started moving up instead of down. Here is a brief explanation of how and why that happened:

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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.

Dave Is Currently Dockside

Monday Morning Interest Rate Update for July 27, 2020

by David Larock

I am off communing with nature on a summer break.

My next Monday Morning Interest Rate Update will be published on August 10. In the meantime, here are some of my recent posts that may be of interest (pun intended):

  • This post provides links that will be useful to anyone who is actively looking to purchase a property.
  • This post offers my take on the Bank of Canada’s latest policy-rate announcement and its surprising reassurances that mortgage rates will stay low for years to come.
  • This post outlines a step-by-step process that existing fixed-rate borrowers can use to determine whether they can save money by refinancing.

My assistant, Melanie Haggerty, will be available in my absence, and I will update the rate table below next Monday.

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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’s Surprising Admission That Ultra-Low Mortgage Rates Are Here to Stay

Monday Morning Interest Rate Update for July 20, 2020

by David Larock

Toronto mortgage rates

COVID-19 is redefining the world as we know it.

Jobs. Trade. Rules for basic human interaction. They are all now in flux.

The Bank of Canada’s (BoC) unorthodox announcement last week was the latest proof.

Once again it kept its policy rate nailed to its 0.25% floor, as expected, and that left variable mortgage rates unchanged. But the Bank also made clear for the first time that borrowers could count on rates staying low for years to come.

The BoC has a well-earned reputation as a conservative central bank. It didn’t engage in any quantitative easing (QE) during the 2008 financial crisis, unlike so many of its counterparts, and since then it has been slower to cut rates and quicker to raise them. That’s what made last week’s Monetary Policy Report (MPR) and accompanying press conference commentary so surreal.

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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 Our Record Employment Gains Aren’t Impacting Mortgage Rates

Monday Morning Interest Rate Update for July 13, 2020

by David Larock
Canada mortgage rates

 

Our economy added 290,000 new jobs in May, which was a record monthly gain.

That record didn’t last long.

Last week, Statistics Canada confirmed that we more than tripled that total in June by adding another 953,000 jobs.

In normal times, that number of job gains would send bond yields soaring as the bond market priced in rising inflationary pressures and imminent Bank of Canada (BoC) policy-rate rises.

I’m sure you don’t need to be reminded that these are not normal times.

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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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