Rate Hikes, Central Banker Straight Talk and New Mortgage Rules
Monday Morning Interest Rate Update for July 25, 2022
In the meantime, here are links to three of my most popular recent posts:
Five Thoughts on the Bank of Canada’s Jumbo Rate Hike – The Bank of Canada (BoC) hiked by 1.00% on July 13 and in this post I provide highlights from, and my take on, the Bank’s accompanying communications that were used to justify its jumbo-sized hike.
Straight Talk From Our Central Bankers – In this post I imagine what BoC Governor Macklem and US Federal Reserve Chair Jerome Powell would write in an unvarnished, no holds barred op-ed offering their candid assessments of the current economic situation and what they plan to do about it.
New Mortgage-Rule Changes: HELOCs & Reverse Mortgages – This post outlines the two recent mortgage-rule changes that were announced by our banking regulator and offers my take on a rising risk that it failed to address.The Bottom Line: The five-year Government of Canada bond yield continued to drop last week, and it has now fallen from its peak of 3.62% last month all the way down to 2.86% by close of business last Friday. Lenders are finally dropping their five-year fixed rates in response, and I expect that to continue in the week ahead.
Five-year variable-rate discounts held steady last week, and most five-year variable rates are still offered at a discount of about 1% below their five-year fixed-rate equivalents. That said, the BoC is expected to continue raising its policy rate by about 0.75% over the remainder of this year, so that gap will shrink more over the near term. (I continue to believe that we’ll see variable-rate cuts some time in 2023, as does the US bond futures market, which is currently pricing in 0.75% in rate cuts by the Fed next year.)