18 Mar

Housing starts increase in February

General

Posted by: Mike Hattim

Canada Mortgage and Housing Corporation (CMHC) has reported an increase in the pace of home construction across the country.

According to new data from the federal crown corporation, housing starts in February were up 14% from the month earlier, reaching 253,468 on a seasonally adjusted annual rate.

The February total also marks an 11% increase compared to the same period last year, largely propelled by a 16% rise in the construction of multi-unit buildings. Conversely, the construction of single-detached homes saw a 14% decline.

Bob Dugan, CMHC’s chief economist, said the national housing shortage has pushed developers to concentrate on multi-unit projects in Canada’s major urban areas.

Additional data revealed that adjusted starts in February soared by 79% in Vancouver but dipped by 31% in Montreal.

Since housing starts can vary greatly month over month, CMHC also calculated the six-month moving average of the seasonally adjusted annual rate.

February’s moving average was 245,665, up 0.4% from January. But this pace remains below the six-month trend of over 277,000 starts observed in late 2022.

Commenting on CMHC’s release, TD economist Rishi Sondhi said housing starts in the first quarter are expected to fall short of the figures recorded in the fourth quarter of 2023.

“In the first two months of Q1, housing starts are below their fourth quarter level, suggesting some potential downward pressure on residential investment growth in the first quarter,” said Sondhi. “We think they’ll head lower as the year progresses, with past weakness in home sales filtering through into home building.”

Source CMP
By Mika Pangilinan

15 Mar

Should borrowers expect interest rates to stay higher for longer?

General

Posted by: Mike Hattim

While a drop in interest rates is expected to present a boost to the Canadian commercial mortgage market this year, borrowers should realize rates are unlikely to dip dramatically in the coming months, according to a top broker in the space.

Peter Quinn, director at Multi-Prêts Hypothèques in Quebec, told Canadian Mortgage Professional that a mild decline in rates was likely to be one of the themes of the year for the commercial space, in addition to the much-discussed wave of renewals occurring in 2024 and 2025.

“Many clients are hoping for a significant drop in fixed interest rates which, in my opinion, will not happen,” he said. “The economic indicators are still very strong, so I don’t see much of a decrease before 2025.

“In addition, more than 60% of the mortgage loans in Quebec’s multi-unit and commercial real estate portfolio will mature in 2024/25. Several clients will renew their mortgage loan and will experience a significant increase which most certainly will cause a financial deficit for several buildings.”

That backdrop could result in more sales and a possible reduction in prices, Quinn said, as well as clients who have refinanced their properties in the past gearing up for a new market of opportunities.

“It’s important to be patient as we return to a volatile market,” he said. “For these reasons, and considering the volatility of this market and the potential for inflation to rise again, I don’t believe that interest rates will decrease significantly in the coming years.”

What should commercial mortgage brokers focus on at present?

Top of mind for commercial brokers in the current market, according to Quinn, should be attentiveness and efficiency when dealing with clients – as well as remaining innovative in mortgage brokerage operations and staying attuned to market fluctuations and trends.

Those were all key considerations for Quinn throughout the market turbulence of 2022 and 2023, with his business’s strong performance amidst a stormy economy helping him clinch the Canadian Mortgage Award last year for Broker of the Year – Commercial.

The achievement marked the fulfilment of a goal Quinn had established since beginning his career in the commercial space in 2015. “I tried for the first time in 2020 to get this prestigious award, but at that time I was not ready and I did not win,” he said.

“I therefore continued my growth efforts and won the prize in 2023. [It] allowed me to be recognized among my peers but above all, in the eyes of my clients and my business partners, which added a lot of credibility to my business.”

That momentum has helped carry Quinn into 2024, with business remaining robust in spite of the unpredictable market conditions. The broker told CMP his book had witnessed “significant growth” in the year to date, with a hoped-for increase of at least 35% based on files being processed.

“In addition, we’re in the process of opening the Ontario market, and I believe that our progress will be increasingly important in this new province,” he said. “We’re very confident of doubling our business volume very quickly by 2026.”

Register now for the 2024 Canadian Mortgage Awards

This year’s Canadian Mortgage Awards are fast approaching, with the eagerly anticipated gala dinner and awards ceremony to take place on May 2 at Toronto’s Congress Centre.

Excellence Awardees have recently been revealed for the most prestigious date in the mortgage industry calendar, with winners to be named on the night. Mortgage professionals from across the country are set to convene for a memorable evening to celebrate the best and brightest the industry has to offer – and registration is still open for what’s set to be an unmissable event in Toronto.

Simply follow the link above to register – with all guest details due on or before April 11, 2024 at 5pm EST.

Renowned Etalk anchor Tyrone Edwards is set to preside over proceedings, which will see a cocktail reception followed by the awards ceremony and dinner banquet, and a post-awards celebration fronted by Ascension Groove Band.

Be sure to register now for what’s gearing up to be an unforgettable night for Canada’s mortgage industry.

Source CMP
By Fergal McAlinden

14 Mar

Where are home prices climbing the quickest in Canada?

General

Posted by: Mike Hattim

New data has unveiled the Canadian areas witnessing the most significant surges in house prices from January 2023 to January 2024, with Bancroft, Ontario leading the pack.

According to real estate experts at calgaryhomes.ca, which scrutinized house sales data from The Canadian Real Estate Association (CREA), Bancroft emerged as the frontrunner, with an average price surge of $71,200, marking a notable rise of 14.7%.

In January 2023, homes in Bancroft had an average price of $484,800, which soared to $556,000 by January 2024. This spike, almost 17 times the national average, has been attributed to a growing trend of remote work arrangements, drawing individuals seeking solace in Bancroft’s natural allure without compromising their professional commitments.

Calgary, Alberta, secures the second spot with an increase of $52,000, reflecting a 10.1% rise from $517,400 in January 2023 to $569,400 in January 2024. The city’s robust economy, driven by sectors such as energy, finance, and technology, alongside its vibrant cultural scene, has been attributed for its appeal as a residential destination.

Fraser Valley, in British Columbia, clinches third place, after seeing a 5.2% rise, from $958,600 to $1,008,800 over the same period. Its verdant landscapes and inviting communities continue to draw both residents and visitors.

The Lower Mainland, also in BC, follows closely, seeing a 4.7% rise of $50,000, while Greater Vancouver, registering a 4.3% hike of $48,300, rounds off the top five.

Ontario’s Sudbury secures sixth place, seeing a $47,100 increase, reflecting a 12.1% rise from $390,800 to $437,900, while Mauricie in Quebec posted a 14.8% rise – meaning its home values climbed by $34,100 year over year.

Greater Moncton in New Brunswick and Vancouver Island saw prices jump by $32,800 and $30,900 respectively. Concluding the list, Grey Bruce Owen Sound in Ontario saw a 5.5% rise of $29,600.

A shift to rural areas

A spokesperson for calgaryhomes.ca attributed the surge to Canada’s diverse landscapes and vibrant communities, highlighting a shift towards rural areas driven by remote work trends. “More rural areas, such as Vancouver Island and Fraser Valley, are seeing a great rise in house prices, moving away from previous trends which saw the more urban areas seeing a rise in house prices due to greater demand for easy access to workplaces. This could be a result of remote working becoming more mainstream,” they noted.

A total of 52 Canadian areas were included in the study, spanning cities, counties, regions, islands, and metros. Benchmark prices for January 2023 and January 2024 were compared to determine the numerical and percentage changes, with areas ranked accordingly.

Source CMP
By Jonalyn Cueto

14 Mar

How likely is a Bank of Canada rate cut in June?

General

Posted by: Mike Hattim

Optimism has swelled in Canada’s housing and mortgage markets about the prospect of imminent interest rate cuts by the central bank – but the need for patience was the main takeaway from its latest announcement, according to a leading bank economist.

Doug Porter, chief economist at Bank of Montreal (BMO), told Canadian Mortgage Professional that the Bank of Canada’s language in its March 6 statement suggested it was in no hurry to start bringing rates lower.

The Bank kept its benchmark interest rate unchanged in last week’s decision, leaving it rooted at 5.0% and holding rates where they are for the fifth time in a row.

“I thought that they might open the door a little bit to the possibility of rate cuts,” Porter said. “There was the one slight nod in that direction, that they see some signs that wage pressures are starting to ease a bit.

“But I think the overriding message was that we all have to be patient – this is going to take some time. They need at least a few more months of good inflation data, or better inflation data, before they can become comfortable. And I think the watchword here is patience.”

Could the BoC push back its timeline for rate cuts?

BMO’s forecast still envisages a first cut by the central bank in June. Still, Porter said that’s by no means a “foregone conclusion” – and that there appears next to no chance of the Bank deciding to start cutting earlier.

“A lot of things would have to go miraculously right in the next five weeks to get them cutting in April,” he said. “I seriously doubt they’d be ready. Even June is starting to look a little bit questionable, because they’d have to start teeing that up relatively soon if they’re expecting to cut rates into June.”

Would-be homebuyers waiting for rates to start falling were left disappointed by the Bank’s latest call, although it seems increasingly clear the days of rate hikes are in the past.

Prospective buyers are likely to take confidence from the chance of lower rates at some point in 2024, Porter said – but they shouldn’t expect a rapid decline in rates after the first cut.

“I think if you’re looking to get into the market, you would be somewhat encouraged by the talk that rates are likely to come down slowly, gradually,” he said. “But you might not be thrilled about the caution that the central bank governor has indicated around that view, that this is going to take some time and rates are not going to come down as fast as they went up.

“I like to say rates took the elevator up; they’re going to take the staircase down. This is going to be a pretty slow walk down the mountain, I think.”

If economic trends continue to play out as expected, Porter said BMO expects the Bank of Canada to trim rates to 4% by the end of this year and 3% by the end of 2025 – although that’s by no means a surefire thing in light of the central bank’s continuing cautious outlook.

“I think if we’re going to be off, it’s that rates are a little bit higher than what we’re projecting at the end of both years,” he said. “In other words, this whole backing down in rates might take a little bit longer.”

Should the Bank of Canada be focusing on different inflation measures?

The Bank has faced criticism in recent weeks for its focus on inflation measures that include shelter costs and mortgage interest payments, both of which have rocketed amidst rate hikes since 2022.

Those measures, critics have highlighted, will remain high as long as the Bank keeps interest rates at their current elevated level.

Nonetheless, Porter said there’s a case to be made for the Bank’s current approach – and noted that CPI-median, one of governor Tiff Macklem’s preferred ways of gauging inflation that isn’t heavily influenced by mortgage interest costs, has remained high.

“I appreciate the fact that outside of mortgage costs alone, inflation is basically at 2%. That is true,” Porter said. “But some other costs have actually come down because mortgage rates are up. Things like new home prices have actually dropped because mortgage rates are up.

“I think if you look at the overall shelter basket, it’s pretty indicative of what shelter costs are doing…. And the median measure is still rising by more than 3%. If I had to pick one number that I’d be watching in the months ahead, it would be that median price measure. And I do think it’s not a bad measure. It’s fairly pure, and it doesn’t really get affected directly by those soaring mortgage interest costs.”

Source CMP
By Fergal McAlinden

8 Mar

Bank of Canada reaction: What’s next for Canada’s housing market?

General

Posted by: Mike Hattim

The Bank of Canada made no reference to the national housing market in its latest statement on interest rates – but will the central bank have been concerned by news of a sizeable uptick in market activity at the beginning of the year?

Data released by the Canadian Real Estate Association (CREA) in mid-February showed national home sales jumped by 3.7% in January on a monthly basis, the second month in a row that sales have increased.

Given that brisker pace of activity, the Bank’s decision not to mention concern over the housing market was a surprising one, according to RateHub.ca co-chief executive officer and CanWise mortgage lender president James Laird.

He told Canadian Mortgage Professional that the central bank’s continuing caution on interest rates showed it was in no rush to introduce its much-anticipated first cut of the year.

“I was expecting them to specifically mention concern about the strong start to the housing market that we’ve had for the year,” he said. “I don’t think they’d be pleased to see… prices up 7% December-January, up strongly over last January.

“So I don’t think they would be pleased to see that even before they’ve cut rates, housing continues to be so red hot. And I was surprised they didn’t mention that specifically.”

When will the Bank of Canada cut interest rates?

The Bank appears to be taking a “wait-and-see” approach to rates as it continues to weigh up how economic data is playing out, Laird said, with its latest decision marking the fifth time in a row that its benchmark rate has remained unchanged.

It’s unlikely to give many clear signs that a cut is imminent until it actually begins to lower rates, he added, to stave off the risk of heating up the economy even further.

“I think we might not know the cut is happening until it actually occurs, because I think even announcing it, or that they’re thinking of it, will be the opposite of the goals that they’re trying to achieve,” he said.

That caution is partly because of the market resurgence that took place in spring of last year when the central bank strongly suggested its rate-hiking path was at an end, bringing about a spike in home sales and prices across the country.

Inflation began to jump unexpectedly as a result – and the Bank was forced to hastily bring rates higher again with a pair of summer hikes.

“In a way, I think that’s what the Bank is terrified of,” Laird said. “It was just when they announced [at the start of] 2023 that they thought they were done hiking rates, that caused a strong housing market, consumer spending to go higher than they wanted, and a surge in inflation.

“So they’ve seen that happen. Their announcement of a hold, and sort of forecasting of normal rate hikes, caused things to go [against] the way they wanted them to. My expectations are the Bank will cut later and by less than what the market is expecting.”

Is the housing market set for a busy spring?

Still, while rates are not on the wane anytime soon, the fact that no further hikes look likely means consumer confidence toward the housing market is set to continue growing.

That’s both because buyers are now used to rates at their current levels, and looking ahead in expectation that rates will be lower later in the year, according to Laird.

“I’d say a lot of people are looking at this and saying, ‘OK, rates have been like this for a little while. I understand it. I can afford it at this level,’ and looking out they’re saying, ‘OK – I can afford it, or maybe it’s a slight stretch, but it seems like the trajectory is [towards] the current rates or lower.’”

Could that mean the housing market is set for strong activity in the months ahead, or will it take the first cut for homebuying to heat up even further?

“If people are assuming what [the Bank] will do and making the decisions based on that right now, we might just have a strong spring market period, because of that sentiment and expectation,” Laird said.

Source CMP
By Fergal McAlinden

7 Mar

Bank of Canada still likely to cut rates in June: CIBC’s Tal

General

Posted by: Mike Hattim

The Bank of Canada gave no indication in its March announcement that interest rates are set to fall soon – but the central bank is still likely to cut in June, according to CIBC deputy chief economist Benjamin Tal (pictured).

Yesterday’s statement saw the Bank maintain its benchmark rate at 5.0%, the fifth decision in a row it has left rates unchanged, and indicate its continuing concern over Canada’s inflation outlook.

Still, while its tone was slightly more hawkish than many had expected, Tal said the central bank had good reason not to give away the game on when it’s likely to begin bringing rates down.

“What’s interesting is the language of the statement, which is not as dovish as some people expected,” Tal told Canadian Mortgage Professional after yesterday’s announcement. “There’s no hint of any cuts coming. They’re concerned about sticky inflation – and I think it makes sense.

“You cannot have the Bank of Canada hinting at cutting without causing some changes in the market. They don’t want to see the long end of the curve, the five-to-10-year rates, falling too rapidly. Also, if the situation is so good, why aren’t you cutting now? So they have to justify why they’re not cutting, and they cannot be dovish.”

BoC continues to focus on inflation reduction

Markets had priced in little to no chance of a cut in yesterday’s announcement, with expectations weighed heavily towards a rate drop later in the year – and for Tal, the Bank is likely to use April’s monetary financial report as an opportunity to start hinting at a cut before lowering rates for the first time in July.

The Bank said on Wednesday it expected inflation to remain around the 3% level throughout the first half of 2024 before gradually easing – although it also “wants to see further and sustained easing in core inflation” and is focused on the economy’s demand-supply balance.

It continues to focus on inflation measures that include mortgage interest payments, which have spiked in tandem with the central bank’s benchmark rate over the past two years.

Observers including TD Economics have highlighted the difficulty of returning inflation towards the Bank’s 2% target while interest rates – and by extension, mortgage interest payments – remain high.

“In order to get to 2%, ironically, you need to cut,” Tal said. “I think that’s something that will be coming. But I think that they are still unwilling to do the adjustment, remove mortgage interest payments from the calculation – and that’s something that will complicate the message. But none of that will change my mind that the first cut will be in June.”

What does the latest BoC decision mean for the housing market?

Major Canadian housing markets including Toronto have seen homebuyers step off the sidelines in growing numbers since the beginning of the year, emboldened in part by growing confidence that rate hikes are at an end and lower borrowing costs are on the way.

“Buyers are coming back slowly. I think we know that buyers do care about the level [of rates], but also they care about the trend,” Tal said. “And they know that the trend is basically down as opposed to up in terms of future rates.

“So that’s something that takes some people into the market. I think that that trend will accelerate when we actually see cuts – let’s say in June. So that will be accelerated in terms of more people in the market.”

Lower rates are also likely to impel more sellers to enter the market, Tal said – with that increased supply from the resale market set to prevent prices from rising dramatically even as homebuying picks up in the spring.

Still, even if the Bank chooses to cut rates in June, there seems little prospect of a housing market surge that month, he added. “I don’t know if I would use the word ‘surge’ – but I definitely would use the word ‘improvement,’” he said. “I think the fall will be strong.”

While there was no indication of coming rate cuts in today’s statement, Tal said Canadians also shouldn’t be surprised by the Bank’s cautious tone.

“I think people should not be disappointed by the language because the Bank cannot really use dovish language in this environment,” he said. “They will keep it for later.”

Source CMP
By Fergal McAlinden

7 Mar

Economic Insights from Dr. Sherry Cooper

General

Posted by: Mike Hattim

The focus of the Bank of Canada is on slaying the inflation dragon. The good news is that the year has started with a marked decline in price pressures. Due to falling energy prices, airline fares and a deceleration in clothing and food, year-over-year inflation in January dipped to 2.9%. This follows 3.4% inflation in December.

The cost of shelter represents nearly a third of the Consumer Price Index, and the combination of rapidly rising population growth and already acute excess demand for housing will continue to underpin higher-than-target inflation. While mortgage interest costs will decline once the central bank begins to cut interest rates, and home replacement costs have already declined because of the overall decline in national home prices, rental costs are surging. In January, rents rose by nearly 8% y/y.

The pace of housing starts in Canada is inadequate to keep up with future demand. Over the past year, the population has increased by a whopping 1.3 million people, while housing starts are running at less than 250,000 annual pace. To be sure, starts saw strong year-over-year growth last year—the second-highest number of starts since 1990. Nonetheless, this is nowhere near sufficient to meet demand. Not to mention to meet affordable demand.

Even with the best intentions of governments at all levels, it is virtually impossible to maintain even this level of starts given zoning restrictions, land development costs, labour shortages and rising construction costs. Actions taken thus far by federal, provincial and municipal governments help, but we cannot house the current pace of immigration without seeing substantial upward pressure on rents.

According to economists at the National Bank, the difference between annual headline CPI inflation and shelter inflation is at its highest level since 1982. The Bank of Canada is mindful of these conditions. Inflation has fallen to the 2% target, excluding shelter costs, but those costs feed into inflation expectations and mounting wage demands.

Next week, Statistics Canada will release the fourth quarter GDP data, which is expected to run at about a 1.0% annual rate. There will be revisions to the -1.1% Q3 number as well. With the help of population growth, Canada has avoided a recession despite the huge increase in interest rates this cycle. But the labour market is slowing, and job vacancies have fallen sharply.

Homeowners will suffer marked increases in their monthly mortgage payments as they renew this year and next. Aware of this, the Bank will likely begin to cut interest rates by mid-year—beginning a series of rate cuts that will continue over the next two years.

Housing activity has likely bottomed, and home price pressures will begin to mount, especially in the GTA and GVA, where price declines were the largest. We believe the central bank will start cutting interest rates by mid-year.

7 Mar

Tips to Improve Your Credit Score

General

Posted by: Mike Hattim

One of the important factors in home ownership is understanding things like your credit score.  Some people don’t pay much attention to this metric until they begin the mortgage discussion!

However, you will find that your credit score is one of the most important factors when it comes to qualifying for a mortgage at the best rate – and with the most purchasing power.

Credit scores range from 300 to 900, the higher your credit score the better. Ideally, you should be aiming for a credit score of 680 for at least one borrower (or guarantor), especially if you are putting under 20% down. If you are able to make a larger down payment of 20% or more, then a score of 680 is not required.

This score is based on spending habits and behaviours including:

  • Previous payment history and track record of paying your credit accounts on time is the number one thing that your credit score considers.
  • Your current level of debt and whether you’re maxed or not is the second most important factor.
  • How long you have had your credit in good standing is the third most important factor.
  • Attaining new credits is the fourth factor and can be a red flag if you’re opening several credit cards, accounts, or loans in a short period.

If you want to improve your credit score, you can! It is a gradual process, but it is well worth it. Here are some tips to help you get started!

  1. Pay Your Bills: This seems pretty straightforward, but it is not that simple. You not only have to pay the bills, but you have to do so in full AND on time whenever possible.  Paying bills on time is one of the key behaviors lenders and creditors look for when deciding to grant you a loan or mortgage. If you are unable to afford the full amount, a good tip is to at least pay the minimum required as shown on your monthly statement to prevent any flags on your account.
  2. Pay Your Debts: Whether you have credit card debt, a car loan, a line of credit, or a mortgage, the goal should be to pay your debt off as quickly as possible. To make the most impact, start by paying the lowest debt items first and then work towards the larger amounts. By removing the low-debt items, you also remove the interest payments on those loans which frees up money that can be put towards paying off larger items.
  3. Stay Within Your Limit: This is key when it comes to managing debt and maintaining a good credit score. Using all or most of your available credit is not advised. Your goal should be to use 70% or less of your available credit. For instance, if you have a limit of $1000 on your credit card, you should never go over $700. NOTE: If you find you need more credit, it is better to increase the limit versus utilizing more than 70% of what is available each month.
  4. Credit and Loan Application Management: Reduce the number of credit card or loan applications you submit. When you submit too many credit card applications, your credit score will go down, and multiple applications in a short period can do more damage. You’re best to apply for one or two cards and wait to see if you are accepted before attempting further applications.

If you have questions about your credit score, don’t hesitate to reach out to me today! Whether you want to check your score or find out how you can improve it, my door is always open.

Your credit mix is the final aspect of your credit score to determine whether you have a healthy mix of credit cards, loans, lines of credit, etc.

7 Mar

Fraud Awareness Month

General

Posted by: Mike Hattim

Did you know? March is Fraud Awareness Month. Protecting yourself and your mortgage from fraud is crucial to safeguard your financial well-being. Understanding some of the more common mortgage fraud scams and how to protect yourself can make all the difference!

The most common type of mortgage fraud involves a criminal obtaining a property, and then increasing its value through a series of sales and resales involving the fraudster and someone working in cooperation with them. A mortgage is then secured for the property based on the inflated price.

Below are some red flags to be aware of as potential lead-ins to fraud:

  • If someone offers you money to use your name and credit information to obtain a mortgage
  • If you are encouraged to include false information on a mortgage application
  • If you are asked to leave signature lines or other important areas of your mortgage application blank
  • If the seller or investment advisor discourages you from seeing or inspecting the property you will be purchasing
  • If the seller or developer rebates money on closing, and you don’t disclose this to your lending institution

Another fraud scheme to be aware of is title fraud. Title fraud is essentially a form of identity theft and is typically discovered when your mortgage mysteriously goes into default and the lender begins foreclosure proceedings.

With title fraud an individual, who is using false identification to pose as you, will register forged documents transferring your property to his/her name. From there, they register a forged discharge of your existing mortgage and get a new mortgage against your property. Then the fraudster makes off with the new home loan money without making mortgage payments. The bank thinks you are the one defaulting – and your economic downfall begins.

But don’t panic! There are lots of ways you can protect yourself from title fraud:

  • Always view the property you are purchasing in person
  • Check listings in the community where the property is located – compare features, size, and location to establish if the asking price seems reasonable
  • Make sure your representative is a licensed real estate agent
  • Beware of realtors or mortgage professionals with a financial interest in the transaction
  • Ask for a copy of the land title or go to a registry office and request a historical title search
  • In the offer to purchase, include the option to have the property appraised by a designated or accredited appraiser
  • Insist on a home inspection to guard against buying a home that has been cosmetically renovated or formerly used as a grow house or meth lab
  • Ask to see receipts for recent renovations
  • When you make a deposit, ensure your money is protected by being held “in trust”
  • Consider the purchase of title insurance. While title can be purchased after taking possession or years later, the best time to purchase a title insurance policy is NOW before an issue like fraud is discovered.

Remember, being proactive and vigilant is key to protecting yourself and your mortgage from fraud. If you suspect fraudulent activity, act promptly to mitigate potential damage and report it to the appropriate authorities.

6 Mar

Bank of Canada announces March rate decision

General

Posted by: Mike Hattim

The Bank of Canada has left its benchmark rate unchanged in its latest decision, keeping rates where they are for the fifth time in a row.

The central bank said on Wednesday morning that it was maintaining its overnight rate, which leads variable mortgage rates in Canada, at its current level of 5.0%. That means the rate remains at a 22-year high but has not increased since July of last year.

After a series of rapid interest rate hikes throughout 2022 and 2023, recent announcements by the Bank have contained little in the way of surprises – and its latest statement was no different. Markets had seen virtually no chance of a rate cut today, although sentiment is more bullish about a possible move toward lower rates in April or June.

The Bank said it remained “concerned” about risks on the inflation outlook, and that it needed to see “further and sustained easing” in core inflation in the months ahead.

Inflation ticked downward by more than expected at last reading, hitting 2.9% with the consumer price index (CPI) inching toward the Bank’s target rate.

However, the Canadian economy has also defied expectations of a recession, expanding in the fourth quarter and growing at a 1.0% annualized rate as gross domestic product (GDP) also likely increased in January.

While it left rates unchanged in January, the central bank dropped language from prior statements indicating a preference toward further hikes – and economists surveyed by Bloomberg had suggested no movement up or down was likely in today’s announcement, with June likely to mark the first move in the Bank’s rate-cutting salvo.

The Bank is expected by those economists to ease the policy rate to 3% by the end of 2025, with traders estimating chances of a cut at its next meeting – scheduled for April 10 – at around 33%.

Are rate hikes now a thing of the past?

The Bank of Canada slashed its benchmark rate to a rock-bottom 0.25% at the onset of the COVID-19 pandemic, easing borrowing costs as the escalating public health crisis ground the economy to a halt.

It kept rates at that level for nearly two years, ending that streak with a 25-basis-point hike in March 2022 amid growing concerns over rising inflation and introducing nine further hikes until last July.

With inflation ticking resolutely downwards from a 39-year high of 8.1% in the summer of 2022, the central bank has softened its tone on the prospect of further hikes in recent months – and governor Tiff Macklem all but confirmed at the end of last year that rate cuts were on the way.

Source CMP
By Fergal McAlinden