Rate Update – Tiff Keeps The Printing Press Running
December 9, 2020Rate Update – Perception Vs Reality
March 16, 2021
An economy interrupted.
That was the theme of the Bank of Canada (BOC) message today as the Governor kept the prime lending rate as is and gave the markets the crystal clear guidance that it will continue to provide extraordinary fiscal stimulus to keep the economy afloat.
With the BOC still buying up government bonds at a rate of $4 billion a week, the bond market is being provided with the fuel to ensure interest rates stay low, providing consumers with the confidence to keep spending.
Meanwhile, looming on the horizon is the fact that the BOC is about to own over 50% of the government’s debt. Our team has a conference call this week with Chief Economist Dr. Sherry Cooper, who will provide insight into what that means for mortgage rates in the future.
To find out how today’s BOC meeting will impact your mortgage, scroll down below.
Key Points From The Bank of Canada Announcement
- Prime remains unchanged
- Inflation not expected to return until 2023
- BOC financial stimulus to continue to Q3 2021
How Your Mortgage Is Impacted
- Bond yields are at all time lows due to the QE measures
- Fixed rates range bound – for now.
- Rate holds available to Victoria Day
A New Year, A New Start, A New Hope
Happy New Year!
With our first post of the year, I’d like to welcome you and your family into 2021 and wish you a year filled with happiness. As the quote says, it’s an inside job – which bodes well given the current quarantine measures.
2021 is off to an incredible start.
The housing market has come back from its Christmas vacation and resumed its torrid pace.
The US has a new president who understands the basic fact that you can’t run a country like a corporation.
AND The sun is staying in the sky longer and longer!
So with that in mind, here is what our team feels you need to keep an eye out for in 2021.
Variable Rate Discounts – The Canary in the Coal Mine.
As I prepared for writing this update last night, I looked back over the past three interest rate cycles I noticed a pattern that goes like this:
When fixed rates decrease and then stay flat for 6 to 8 months, shortly thereafter variable discounts start to increase and do so over a 6 month period. At that point ( 1 year from the beginning of the cycle ) fixed mortgage rates start a gradual increase, usually topping out 6 to 8 months after that.
The reason why variable rate discounts is an effective leading indicator for fixed rates is because banks tend to increase their variable rate discounts as the probablility of a prime increase grows. Conversely, this indicator will also signal that fixed mortgage rates have peaked and about to start the trend lower when the prime rate discounts start decreasing.
What this means is keep an eye out for the banks heavily marketing variable rate products as the red flair going off, signalling the begining of the end of these historic mortgage rates.
A Strong Housing Market in 2021
Barring any lockdowns, expect the pace to continue in 2021. We are starting to see multiple offers across the townhome, duplex and detached home segments. For condos that offer more space (two bedrooms) we are seeing competition heat up.
Forecasts from BMOs chief economist David Rosenberg show that we’ll see a 8% to 10% average gain in 2021. Keep in mind these are national numbers, so that could be significantly more here in Vancouver.
If you are considering a purchase in 2021, give my team a call now. We will connect directly to your realtor ( or refer you to one of our select realtors ) and layout a financing strategy so you can execute with Ninja like speed!
2021 – The Year of Reflection and Reimagining
The Chinese characters for crisis is made up the words danger and opportunity, and as we embark on our journey into 2021 I’m hearing more frequently from my clients the willingness to explore the opportunities that are available to them. I would even go as far as to say the level of confidence is much greater than during the financial crisis of 2008/2009, which is something I find surprising given the current circumstances.
From moving out of the city to downsizing to buying a vacation home, more and more of our clients are making radical life changes that are allowing them to realign with what is truly important to them. This is important because I feel the overall theme of what everyone is striving for is financial stability, which leads to stability in the housing market. Something that is being confirmed in the financial strength of the applications we are seeing, regardless of life stage or real estate buying stage.
What I’m really trying to say is lifestyle changes vs low interest rates are fueling the current rise in the housing market, and because of that, I feel there could be a longer run on this upward trend in the real estate market.
The bottom Line :
So where do I feel mortgage rates are going in the next two months?
I think we can expect to see some minor rate increase 5 bps to 10bps for the following reasons:
- The Banks will want to put some meat on the bones before they offer their “Spring Rate Specials.”
- Money moving from bonds to the stock market due to the actions of President Biden’s efforts to pull the US out of the Trump administration’s abyss.
- False starts based on positive employment numbers. It’s going to be a bumpy recovery until we can see a way to return to a regular economy.
Overall I feel we midway through the bottom of the interest cycle with possibly another 2-3 months to go before we see bigger moves of 25bps or more.
As I mentioned, keep an eye out for the variable rate specials; that will be the time to decide if you should grab the cheap money and run!
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