The Bank of Canada (BoC) isn’t expected to lower its policy rate when it meets this Wednesday, but the bond futures market is estimating an 80% chance of a cut at the Bank’s next meeting on June 5 (and is pricing in two more 0.25% decreases over the remainder of 2024). Rate cuts will be welcome news to variable-rate mortgage borrowers, many of whom have seen their initial rates increase by as much as 4.75% from their pandemic lows. If rate decreases are in the offing, the BoC will normally intimate that ahead of time because it knows that financial markets don’t like surprises. It may not do ..read more

Mortgage-related news made headlines again last week. Statistics Canada released our latest GDP data, our banking regulator announced a new set of guidelines for federally regulated lenders, and Prime Minister Trudeau proposed a new Renters Bill of Rights. Here are my takes. Our Latest GDP Data Stats Can estimated that our GDP increased by 0.6% in January on a month-over-month basis, well above the consensus forecast of 0.4%. Most of last month’s growth came from the public sector and was primarily attributed to the end of education worker strikes in Quebec. That said, Stats Can reported grow ..read more

Last week was chock full of news with implications for Canadian mortgage rates. Here are five key updates for anyone keeping an eye on Canadian mortgage rates: The latest Canadian Consumer Price Index (CPI) data Last week Statistics Canada confirmed that our overall CPI fell to 2.8% in February on a year-over-year basis. That was down from 2.9% for January, and below the consensus forecast of 3.1%. The Bank’s most closely watched measures of core inflation, CPI-trim and CPI-median, also declined to 3.2% and 3.1% last month. Shelter costs were once again the largest contributor. They increase ..read more

Last week the Bank of Canada (BoC) held its policy rate steady at 5%. That decision was widely expected, but the Bank’s continued use of hawkish language in its accompanying statement was not. The BoC will need to start cutting its policy rate soon if it still intends to skate where the puck is going. Our economy has weakened considerably of late and inflation pressures have continued to ease. Most of our remaining inflation pressure is coming from shelter costs, and most importantly within that component, from mortgage interest costs (which have increased by approximately 28% year-over-year ..read more

It will be a shock if the Bank of Canada (BoC) moves its policy rate when it meets this week. The first reason is procedural. The Bank meets eight times each year. At four of those meetings, its policy statement is accompanied by both a lengthy press conference and the release of its latest Monetary Policy Report (which provides an in-depth assessment of economic conditions at home and abroad). If the BoC is going to enter a new phase of its policy-rate cycle, it will almost certainly be at a meeting where it can provide its detailed rationale for doing so. (For reference, the Bank’s next two ..read more

Last Tuesday Statistics Canada confirmed that our Consumer Price Index (CPI) declined from 3.4% in December to 2.9% in January (year-over-year). That result was well below both the consensus forecast of 3.3% and the Bank of Canada’s (BoC) most recent projection for Q1 (3.2%). Interestingly, that downside surprise in our CPI followed an upside surprise in the US CPI just the week before. That US number came in at 3.1% for January versus the consensus forecast of 2.9%. Because of the different ways that our mortgage rates are determined, this divergence between the Canadian and US CPI numbers sh ..read more

Dog reading book with glasses. I hope that you 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, and in the meantime, here are links to five recent posts that outline key factors that are impacting Canadian mortgage rates: Is Canadian Employment Really as Strong as It Looked Last Month? In this post I explain why the latest employment data showed that our labour market is softening despite the stronger-than-expected headline result. Why a Recession Is Still the Most Likely Ou ..read more

Last Friday Statistics Canada confirmed that our economy added an estimated 37,300 new jobs in January, well above the consensus forecast of 15,000. This stronger-than-expected headline result supported the popular view that our economy will avoid a sharp slowdown, and it caused some market watchers to predict that it will now take longer for the Bank of Canada’s (BoC) first rate cut to materialize. I wondered if they were reading the same report that I was. The headline result was indeed an upside surprise, but the underlying details in the report were mixed at best. For example, all the gro ..read more

Last week continued a run of surprisingly strong economic data on both sides of the 49th parallel. Statistics Canada estimated that our GDP increased by 0.2% in November (month-over-month) and pegged its initial estimate for December at 0.3%. Both results came in higher than expected. Our GDP declined by 0.3% in Q3 (quarter-over-quarter), and the consensus had expected to see a continuation of that slowing trend. Instead, our Q4 GDP is now tracking toward 1%, and that uptick is bolstering the narrative that our economy will avoid recession, as well as speculation that the Bank of Canada (BoC ..read more

Almost everyone’s 2024 mortgage-rate forecast assumes the Bank of Canada (BoC) will cut its policy rate at some point this year, with opinions differing only on the number and timing of the cuts. BoC Governor Macklem has said that the Bank will start to cut when it is satisfied that inflation is “on a clear path” back to 2%. That criterion prompts an important follow-up question: Which measure of inflation will it focus on? Our overall Consumer Price Index (CPI) came in at 3.1% (annualized) in November, and our core CPI, which strips out volatile food and energy costs, was 2.8% (annualized) ov ..read more