Excellent news as we wrap up summer, the Bank of Canada (BoC) has cut rates again this morning by another .25%.  This change affects Variable Rate Mortgage holders and anyone with loans attached to the banks Prime Rate.

Lots of news today.  Both in Canada and the US. Both the 5-year Gov’t of Canada bond yield and the 10-year US Treasury are down this morning on all this news (this affects the Fixed Rate Mortgage Market).  Good news on adjustable and variable rates in Canada and potentially (hopefully) fixed rates down the line.

Let’s start with Canada.  As expected, the Bank of Canada lowered to 4.25%, which translates into a 6.45% Prime.  Canada’s imports are down over $1 billion in July.  Less imports = less stuff, translates into less discretionary spending.  60% of Canada’s economy is the consumer and when they’re buying less, that translates into potential job losses down the line.

Monetary policy remains restrictive. While the target overnight rate is now 4.25%, core inflation is only roughly 2.4%. Real interest rates remain too high for the economy to reach its potential growth pace of about 2.5%. Weaker growth implies a continued rise in unemployment and excess supply in other sectors.

Now down south; the US released data showing that US job openings fell to their lowest level since January 2021, consistent with other signs of slowing demand for workers.  US job growth has been slowing, unemployment is rising, and job seekers are having greater difficulty finding work, fueling fears about a potential recession.  Federal Reserve policymakers have made it clear they don’t want to see further cooling in the labour market and are widely expected to start lowering interest rates at their next meeting in two weeks.

In other news, consistent with a global economic slowdown, oil prices have plunged to new 2024 lows. Weak oil prices are a sign of lower inflation, growth and mortgage rates.

Does this affect Fixed Rates?  Bonds rallied in the wake of the disappointing US data, taking the 5-year government of Canada bond yield down to a mere 2.89%, well below the 3.4% level posted when the Bank of Canada began cutting interest rates in June. This decline in market-driven interest rates reduces fixed-rate mortgage yields again resulting in lower fixed mortgage rates.

In summary, today’s cut in the overnight rate will be followed soon by a 25 basis point (.25%) reduction in the prime rate to 6.45%, reducing variable and adjustable mortgage rates as well.   This puts a Variable Rate Mortgage today somewhere around 5.65% to 5.45% depending on lender and product.

Looking forward…..The Bank of Canada has two more decision dates this year: October 23 and December 11. At those meetings, the Bank is widely expected to continue its quarter-point rate cuts, taking the overnight rate down to 4.0% at yearend and 2.75% next year.  This is welcoming news to all new and current mortgage holders.

And some more information for those that love this topic from our partners at First National Financial

We summarize the Bank’s rationale for this decision by summarizing its observations below, including its forward-looking comments for signs of what may happen next.

Canadian inflation

• As expected, inflation slowed further to 2.5% in July
• The Bank’s preferred measures of core inflation averaged around 2.5%
• The “share of components” of the consumer price index are growing above 3%, roughly at their historical norm
• High shelter price inflation is still the biggest contributor to total inflation but is starting to slow. Inflation also remains elevated in some other services

Canadian economic performance and outlook

• In Canada, the economy grew by 2.1% in the second quarter – led by government spending and business investment – and this rate was “slightly stronger” than forecast in July, but preliminary indicators suggest that economic activity was soft through June and July
• The Canadian labour market continues to slow, with little change in employment in recent months. Wage growth, however, remains elevated relative to productivity

Global economic performance and outlook

• The global economy expanded by about 2.50% in the second quarter, consistent with projections in the Bank’s July Monetary Policy Report
• In the United States, economic growth was stronger than expected, led by consumption, but the labour market has slowed
• Euro-area growth has been boosted by tourism and other services, while manufacturing has been soft
• Inflation in both regions continues to moderate. In China, weak domestic demand weighed on economic growth
• Global financial conditions have eased further since July, with declines in bond yields. The Canadian dollar has appreciated modestly, largely reflecting a lower US dollar. Oil prices are lower than assumed in July

Summary comments and outlook

In making today’s decision, the Bank noted that excess supply in the economy continues to put downward pressure on inflation, while price increases in shelter and some other services are holding inflation up. As a result, Governing Council is “carefully assessing” these opposing forces on inflation. Monetary policy decisions will be guided, therefore, by incoming information and the Bank’s assessment of the implications for the inflation outlook.

And has it has been doing for some time, the Bank said it “remains resolute” in its commitment to restoring price stability for Canadians.”

Feel free to contact me anytime directly to chat about all things mortgages at 604-729-7940

Today the Bank of Canada lowered it’s Overnight Target rate to 4.50% offering a little bit more relief to Canadian consumers suffering under the weight of high mortgage rates and other borrowing costs.  This puts us back to what the rate was in June 2023.

Here’s a few quick highlights I have summarized from a variety of our economists reporting this morning that led to the BoC decision today:

• The BoC commented that inflation would be less than 2% if it weren’t for the high mortgage interest and shelter costs – this is a good sign as we are getting closer to where they are comfortable
• Manufacturing sales in Canada plummeted -2.6%, another example of why lower rates will help a struggling economy
• Economic growth “likely” picked up to about 1.5% through the first half of 2024, however with population growth of about 3%,the economy’s potential output is still growing faster than GDP which means excess supply has increased
• Household spending is weak
• Unemployment rates are rising to 6.4% and taking job seekers longer to find work
• Residential investment is expected to grow robustly
• New government limits on admission of non permanent residents should slow population growth in 2025
• Shaves about $15 off monthly payments on your typical new 25-year amortized variable-rate mortgage, per $100,000 borrowed
• Next announcement is September 4, 2024

Fixed rates are still anywhere from .75% to .90% less than the Variable today so most are still choosing fixed rates which are not necessarily impacted by the Bank of Canada announcements.  Fixed Rates are driven by the bond market which did fall a bit further today so Fixed Rates are trending downward because of this.  Here is a snapshot of how the two have played out for the past 15 years.

Feel free to contact me anytime directly to chat about all things mortgages at 604-729-7940

This is often the most neglected topic that new graduates learn or focus on yet it can have the biggest impact on their entire future.  The choices made today will shape the financial landscape tomorrow.

Canadians are leaving money on the table by not negotiating their mortgage renewal rates.  Why?  Most likely because they do not have a professional representing them.

In the face of higher costs more Canadians are changing their grocery shopping habits, hunting for bargains, and switching to lower-cost brands — yet many are leaving money on the table when it comes to their single largest transaction, their mortgage.

According to a recent survey conducted by Mortgage Professionals Canada, homeowners are doing less haggling at renewal, despite most facing higher interest rates.  The study found that 41% of borrowers accepted the initial rate offered by their lender, up from 37% two years ago. Furthermore, just 8% say they “significantly” negotiated their rate at renewal, down by half since 2021, when 16% haggled aggressively.

Part of our job as your Mortgage Broker is to negotiate those rates on your behalf and there is no cost to you as the home owner.  Generally we will review what your bank is offering you, negotiate with them to ensure you are receiving the best rates in the market and if your lender does not come to the table, then we will arrange a new mortgage for you with a lender that wants your business.

I find it truly unethical that a bank rewards it’s customers for their past years of business by not offering them the best rates available and better yet, rates they are offering new customers.  It’s like they are punishing home owners for being loyal clients.  More often than not, banks are offering higher rates in hopes that you sign on the dotted line without negotiating and everyone just moves on.  Then if you do ask for a better rate, they get you to go find out what the competitors are doing and then “maybe, just maybe” they will match the rate.

Leave the haggling to us, let us shop the market and let us do the leg work to ensure you finding the best rate possible for your next mortgage term.  A bit more on mortgage renewals;

When renewing your mortgage, you have a few different options to consider;

1. Renewing your current balance and amortization (total time left on your mortgage) with your current lender into what ever rate they are offering you, and not making any changes at all.  This does not require re-qualification in most cases.
2. Renew with a *new* lender, keeping your current balance and remaining amortization the same, but shopping the mortgage with all lenders for best rates in the market.  This is the same process of a new mortgage and requires re-qualifying.
3. Refinance (means changing the mortgage amount and/or amortization) at best rates in the market which involves seeing a lawyer or notary. Most commonly done when accessing equity to renovate, consolidate debts or make another large purchase. This process requires re-qualifying.

Renewal Timeline:

• 6 months before – we update your file with your current employment and financial situation so that once we are within the 4 month timeline to hold rates, we have all accurate information on file to make the process easier
• 6 months before – we start discussing if there are any potential changes you want to make to your current mortgage as well as your current cash flow
• 4 months before – we can hold a new rate for you with the best lender and rates in the market. This is important as the rate market is so volatile that there can be drastic differences (nearly 2%) by securing a rate early vs leaving it to the last minute.  Even though we have a rate held for you, we will continue to then monitor all other banks and if rates come down lower than what we have held with any other lender, we will secure that rate as well so you are protected
• 2 months before your maturity date, we will ask you to obtain or we will request on your behalf, what your current lender is going to offer you so we can compare it to what we have held for you
• 30 days before your maturity date you should have made your decision with what route to go as it does take time to either switch your current mortgage to the new lender or refinance your mortgage.  Leaving it to the last minute leaves you at risk of missing on out on previous rate holds or having to accept whatever your current lender offers you
• Reminder: we have room for negotiation with either a new lender or your current in getting the most competitive rate for you
• If we did NOT arrange your current mortgage and would like our help with your upcoming renewal, please reach out to our office

1. Full product and lender review across all banks
2. Expert advice and individual mortgage strategy developed based on your personal situation
3. Rate negotiation on your behalf
4. Zero cost for our services
5. Full VIP service at our office rather than be treated like a number
6. Accessibility, we are available by phone, text or email 7 days a week

CLICK HERE  to book a call to discuss your upcoming mortgage renewal.  Remember to do this at least 4 months in advance of your mortgage maturity.

If you want to receive regular updates about the mortgage market, join hundred of homeowners who trust our newsletter to keep them informed by CLICKING HERE.

Home owners and real estate and mortgage professionals have all been waiting patiently for the past two years for some relief in interest rates and June 5, 2024 may be our lucky day!

Last Fridays reporting on GDP (gross domestic product) came in at a disappointing number for the Bank of Canada (BoC) at 1.7% with an expectation of 2.2%  This signals a weakened economy in simple terms. This along with all other data collected over the past few months such as inflation and employment, is what we have been waiting for to have enough of an impact to trigger our first rate drop.

Keep in mind, this weeks rate announcement if it does drop, will only affect the Variable Rate mortgage holders or anyone with a loan attached to Canada’s prime rate of 7.20%.  We may see that come down to 6.95%  if we are all lucky.  After Friday’s announcement on GDP, 75% of economists are predicting a rate cut, up from 66% last Thursday.

The Fixed rates are affected by the Bond market which did see a drop in as well with Friday’s news so we could potentially see fixed rates being affected tomorrow as well but we will report more on that on June 5th.

So many home buyers are waiting on this announcement before making any sort of move but what some are forgetting is that the minute we see a slight reduction in rates, the market will pick up steam and offers become more competitive and often end up over asking.  So if you are waiting to see, be reminded that there is no time like the present as today you could be the only offer yet as soon as rates drop, there will most likely be many more home shoppers out there costing you a lot more in purchase price than the slight difference in rate.

Here’s a few quick reminders;

• If rates drop by .25% next week, it means about $16 per month for $100,000 in mortgage
• Most home buyers and home owners are choosing the 3 year fixed rate right now as it’s over 1% less than the current Variable Rate so they will not be impacted by the next announcement
• Getting  Pre-Approved and Pre-Qualified is your best attempt at a smooth offer without any delays or extensions needed. Always be prepared and get the process started in advance of looking at properties

Stay tuned for tomorrows full details once the BoC announces it’s next move.

Our partners at Spagnuolo Real Estate Lawyers has provided some clarity to the recent changes announced for Property Transfer Tax in BC and First Time Home Buyers.  Here is an outline below:

PTT Exemptions: Based on Completion Date or Contract Date? The Completion Date appears to be the only thing that matters. There does not appear to be any exclusion of contracts entered into prior to April 1, 2024 or any other conditions related to the date of the contract. It appears that a property will qualify for the First Time Home Buyers or Newly Built Home Buyers exemption so long as the fair market value of the property does not exceed $835,000 or $1,100,000 effective April 1, 2024.

Flipping Tax: Pre-Sale Contracts. Based on current guidance, a pre-sale purchaser is deemed to acquire the pre-sale as of the date of the pre-sale contract. Accordingly, if a person enters into a pre-sale contract, completes the purchase and sells within two years of the original pre-sale contract, they will be subject to the BC Flipping Tax. The two year window does not get extended by the actual close of the unit at the Land Title Office. More details on this will emerge when legislation is introduced. They would also be hit if they assigned the pre-sale contract within two years of signing the pre-sale.

Here are more details on their website: CLICK HERE FOR THEIR KNOWLEDGE CENTRE

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Our calculators on our App My Mortgage Toolbox have been updated so head over to our page to download the app if you haven’t already.  You will see a calculator that has a comparison of today’s PTT vs the new exemption.  CLICK HERE TO DOWNLOAD OUR APP

On Wednesday, the Bank of Canada (BoC) left rates unchanged, noting it still remains concerned about the risks of inflation, even as the Consumer Price Index (CPI) came in at 2.9% in January. It also reiterated its pledge to continue its policy of quantitative tightening.  Although inflation came in under expectations and data is leading towards rate cuts, they are not quite ready to do so.  Most analysts are predicting we will not see a rate drop until June of this year and some are expecting that we will see two rate cuts by the end of 2024.  If that was the case, then that would be a rate reduction of .50% to Prime.  Currently Prime rate is at 7.20% so we could see it dropping to 6.70% by year end. Time will tell.

The bond market has dropped this week which has a direct impact on Fixed rates so  you will be happy to hear we are seeing some relief on those rates as well.

Here are some of the economic insights from one of our great lender partners First National Financial.  They have summarized the Bank’s comments below.

Canadian inflation

• Shelter-price inflation remains elevated “and is the biggest contributor to inflation”

• Underlying inflationary pressures persist: year-over-year and three-month measures of core inflation are in the 3% to 3.5% range, and the share of CPI components growing above 3% declined but is still above the historical average

Canadian economic performance and employment

• The Canadian economy grew in the fourth quarter by more than the BoC expected, “although the pace remained weak and below potential”
• Real GDP expanded by 1% after contracting 0.5% in the third quarter
• Consumption was up a modest 1%, and final domestic demand contracted with a large decline in business investment
• A strong increase in exports boosted growth
• Employment continues to grow more slowly than the population, and there are now some signs that wage pressures may be easing
• Overall, the data point to “an economy in modest excess supply”

Global economic performance and bond yields

• Global economic growth slowed in the fourth quarter of 2023
• U.S. GDP growth also slowed but remained “surprisingly robust and broad-based,” with solid contributions from consumption and exports
• Euro area economic growth was flat at the end of the year after contracting in the third quarter
• Inflation in the U.S. and the Euro area continued to ease
• Bond yields have increased since January while corporate credit spreads have narrowed
• Equity markets have risen sharply
• Global oil prices are slightly higher than what was assumed in the January Monetary Policy Report (MPR)

Outlook

The Bank’s statement this month was relatively short and its forward-looking comments limited, except its observation that it expects inflation to “remain close to 3% during the first half of the year before gradually easing.” However, it noted that its Governing Council is still concerned about risks to the outlook for inflation, particularly “the persistence in underlying inflation.” Governing Council wants to see “further and sustained easing” in core inflation and said it continues to focus on the balance between demand and supply in the economy, inflation expectations, wage growth, and corporate pricing behavior.

Once again, the Bank repeated its mantra that it remains “resolute” in its commitment to restoring price stability for Canadians. So for the timing being, the policy rate will remain at 5.0% where it’s been since July of 2023.

Next Rate Announcement

On April 10, 2024, the Bank returns with another interest rate announcement including updated economic commentary.

If you want to discuss the market with us, book a call with Trish by CLICKING HERE