Categories for Economic Analysis

10-year Fixed Rates Could Rebound Quicker

If you’ve got a hankering for a mortgage with maximum rate assurance, none beats the 10-year fixed. But once Canada rounds the corner on its economic recovery, 10-year rates could climb faster than other mortgage rates. The reason: 10-year terms reflect longer-term economic expectations than 5-year terms, for example. As a result, they often react more to changes in the...

Spend Until We Bend

—The Mortgage Report: Nov. 30— Trudeau’s government said Monday that it plans to lift Canada’s debt ceiling by up to 57% as it embarks on record spending and deficits in the name of pandemic relief. Canada’s historic deficit just keeps on climbing. It’s now estimated at $381.6 billion for the current fiscal year, up from $343.2 billion this summer and...

Getting Past the Next Three Months

The bad news: COVID cases have exploded, hospitalization numbers are surging and most people may be slow to get vaccinated. The good news: the fatality rate is dropping and vaccine distribution could start next month. The question is, which news will the bond market pay more attention to? Our guess is the latter. Black swans aside, markets often discount major...

More Zigs & Zags to Come

—The Mortgage Report: Weekend Edition— Canada’s rate outlook got a boost this week from two influential developments: Promising vaccine news (20 potential vaccines are in late-stage trials, including Pfizer’s drug that’s reportedly over 90% effective), and The widespread acceptance of Joe Biden’s presidential victory. This much-needed dose of good news led investors to sell government bonds, which is typical when...

Canada’s Mortgage Rate Outlook, Post-Biden Victory

—The Mortgage Report: Weekend Edition— Joe Biden has won the U.S. presidency, reports AP. Now rate-watchers will wait for the U.S. bond market to open Sunday at 6 p.m. ET to see the short-term rate impact. Biden’s apparent win isn’t the main thing bond traders are concerned with. What matters more is whether the Republicans maintain control of the U.S....

“Real” Mortgage Carrying Costs Have Never Been Higher

—The Mortgage Report: Sept. 30— The costs you’re expected bear to carry a new mortgage have never been higher—at least based on how lenders assess you as a mortgage applicant. Rocketing home prices and a stubbornly high “stress test rate” have pushed the basic inflation-adjusted cost to carry a home (i.e., average mortgage payment + heat + property taxes) to...

Throne Speech Giveaway Portends Faster Recovery in Rates

The boom, not the slump, is the right time for austerity at the Treasury.—John Maynard Keynes (1937) Canada’s Liberal government ripped a page out of Keynes’ playbook Wednesday, promising to use “whatever fiscal firepower is needed” to rebuild the economy and recover “one million jobs.” That includes multi-billion-dollar-price-tag initiatives like extending the Canada Emergency Wage Subsidy through summer 2021, making...

Who Repealed the Law of Supply and Demand?

. If you want to pay less mortgage interest, it helps to have a cheaper home. If you want a cheaper home, it helps if there are more homes than people want to buy. Cue the Economics 101 reference. Yet, there are some who’d like us to believe that demand, not supply, is the problem. As if not having enough...

The Striking Rate/Stock Divergence Continues

—The Mortgage Report: Sept. 2— Here’s something that baffles even experienced financial professionals. The U.S. stock market is exploding to all-time highs while bond yields trudge near record lows. It’s a question investors are asking all the time: are stocks signalling a growth recovery that will lift yields higher? The mortgage relevance is clear: if U.S. yields pop, so do...

Did the BoC Just Unleash the Bulls?

—The Mortgage Report: Weekend Edition— It Might as Well Have: On Wednesday, the Bank of Canada threw caution to the wind and changed its playbook. It pledged not to hike rates until “the 2 percent inflation target is sustainably achieved.” The significance of that statement is now sinking in and here’s why. Normally, the Bank of Canada doesn’t wait for...