Decade Discounts: With rates near perma-lows, according to some, people aren’t exactly lining up to lock in for 10 years. That’s especially true with penalties being so large on 10-year fixed terms, that is, until a mortgage passes its five-year anniversary—at which point the Interest Act limits penalties to three months’ interest. Nevertheless, effective rates on 10-year fixed mortgages just hit a record low today, according to RateSpy’s records. The cheapest 10-year is now just 2.84% through select brokers. The offer applies to all loan-to-values and all deal types (purchase, switch or refinances). The property must be owner-occupied and located in Ontario. Here are the best 10-year fixed rates we’re tracking at the moment.
Best-Case Scenario: If you’re in the mood for good news, Bank of Canada Governor Stephen Poloz delivered today. He said the best-case scenario for Canada’s economic recovery is still the “most likely scenario.” But he cautioned, “significant” monetary stimulus will be needed to rebuild jobs and spending. That’s essential to keep inflation near-target, given that deflation and high debt loads are the “two main ingredients of depressions…”
Don’t Tinker, Says NBC: “Now is not the time to tinker with mortgage rules,” write National Bank analysts. “Introducing more restrictive underwriting criteria at this time is likely to add further stress to a housing market that is experiencing a significant slowdown…It could exacerbate house price declines that negatively impact the broader economy through wealth effects, not to mention rising losses [for lenders and default insurers].”
Mini-Rebound: Home sales picked up “notably” in the first half of May, says CIBC. That follows plummeting sales and listings in April, as the following chart from CIBC shows. The bank’s economists expect disproportionate demand for less expensive housing types in the weeks ahead. That “compositional effect” is pulling down average sale prices faster than normal.
Favourable Rate Resets: Tens of thousands of borrowers stand to save when their mortgage renews next. In the same report as above, CIBC Economics says, “…The weighted average mortgage rate currently paid by borrowers [is] roughly 50 basis points higher than the current rate…” It shared these other insights as well:
“…Lower-income borrowers are participating in [mortgage deferrals] at a higher rate…” (no surprise)
Landlords report a “better-than-expected” 9 out of 10 renters are paying their rent. (a surprise)
Only 18% of jobs lost since February were full-time “high paying” jobs.
Status Quo: RBC said today it sees no significant change in monetary policy near-term, once incoming Governor Tiff Macklem takes control of the Bank of Canada next week. Macklem’s first rate decision as BoC chief comes Wednesday, June 3.
Quotable: “It’s probably not going to be a quick, sharp V-shaped type of recovery that people were expecting initially.”—George Davis, RBC Capital Markets’ chief technical strategist (Financial Post)