CMHC 2024 Housing Market Outlook
April 4, 2024
Rate Update – The Beginning of The End?
June 5, 2024
Once again, the Bank of Canada continues to keep the prime at its current rate. Governor Tiff offered further guidance on when he feels we’ll arrive at our final destination- the promised land of 2% inflation. Below are some key points from the press release.
The Good:
- Investors are showing confidence that we are not going into a recession by investing in stocks and corporate bonds.
- Inflation in advanced economies is showing signs of slowing.
- Wage inflation is easing in Canada.
- Price pressures ( inflation ) are easing across a broad range of goods and services.
All of the above have been thorns in Tiff’s side. Now that things are easing up, it gives him the comfort level to take his foot off the economic break sooner rather than later.
The Bad:
- Inflationary government spending continues to counteract the Bank of Canada measures.
- Mortgage costs and rents are still a significant contributor ( estimated at 27% ) to core inflation.
- The US inflation figures this AM just took away any chance of the Federal Reserve lowering their prime rate in July.
It must be frustrating when your boss tells you to fix a problem that he continues to create. I feel for Tiff and Jerome. I wonder if they call each other to commiserate their lot in life. Here is a link to a great article that talks about Justin’s buy now and pay later budget approach.
Tiff has made it clear that he will take advantage of this situation and clean up the Bank of Canada’s balance sheet by selling all the bonds he bought during the pandemic. He’s also waiting for a clear sign that inflation is heading in the right direction. Economists feel he is open to a rate cut but wants to see inflation reasonably tamed South of the border before he starts decreasing rates.
So where does that leave us for rates?
If you had talked to an economist yesterday, they would have said expect a prime rate cut in June; as of this morning, they will probably say July. Fixed rates, however, will anticipate where the economy is going and decrease before the BOC’s first move. The banks are hesitant to get ahead of themselves, which is why they are doing a lot of “one-off” pricing on mortgages. We are now at the point where we are asking the bank’s treasury department daily for the best rate for our clients. It’s a laborious task; however, it’s yielding excellent results!
What Trends Are We Seeing In The Market?
From a real estate perspective, buyers are currently in a state similar to Grinder and Cooler, the Grouse Mountain Grizzlies… they’ve been in hibernation all winter, but they are showing signs of waking up. When Tiff finally decides to drop the prime rate, you can be guaranteed there will be a charge of hungry buyers coming to the market. Click here If you haven’t read the CMHC Housing Market Outlook.
From a rate perspective? We’ve seen the banks drop their 3 – 5 year fixed rates by close to 1%. Though we are still above the 5 year fixed rate that we saw in 2008 (when Government of Canada bonds were in the same yield range), as soon as the banks feel inflation is contained, another 0.5% to 0.8% will be rapidly deployed.
The common question we are asked is whether we should consider a 3-year fixed or a 5-year fixed or, if the prime is poised to drop, look at a variable mortgage. We’ve done a few different calculations, and you will be surprised to find which is better. That said, mortgage strategy is more than just looking at interest savings. It’s an artful blend of financial advice and life planning. Bottom line, call us if you are coming up for maturity and we can determine what mortgage strategy will meet your current and future goals.
What is our Latest Mortgage Advice?
Looking to upgrade your home or move up? Harness the power of your current mortgage!! I can not stress this enough. I mentioned this in my previous blog post. If you combine your extra purchasing power with today’s buyers market, you could literally make yourself a quarter million dollars richer 5 years from now! I’m super passionate about this. Call me to expand on this point!
Do you have a target on your back? Sorry for the dramatic statement, but we are seeing it more and more. If you’re a senior executive in your late 40s to mid-50s, there is a strong chance you might be packaged off. We are starting to see this more and more in our portfolio. If your Spidey Senses are tingling, give us a call to do some mortgage planning NOW while you have an amazing income. After you’re packaged, it’s an entirely different ball game.
Bottom Line:
The economic environment resembles driving back home after a long weekend in Whistler. The past two years have been like coming down the hill into Britannia Beach. You’ve been hard on the brakes to make sure you don’t go too fast. Where are we right now? We’re currently stuck in traffic around Lions Bay in that 60 zone that funds the West Vancouver Police Department’s annual budget. Hopefully, soon, we’ll be nearing the crest of that spectacularly beautiful panoramic corner around Eagleridge, with smooth driving all the way home. Let’s keep our fingers crossed that the Nanaimo Ferry doesn’t come in!
The next Bank of Canada meeting is June 5th, 2024
Did you Like this post? Then follow me on Instagram or Facebook. It’s filled with current news and where I share my ideas on how to get where you want to go in real estate.
