Tag Archive: rate forecasts


2020 Mortgage Predictions

Every December, we try to read the tea leaves and prognosticate what’s ahead for real estate lending. (See this year’s 2020 mortgage predictions.) It’s always a fun exploit, and this year, unlike most, there’s a good shot that our calls go 5 for 5. One topic that remains a crap-shoot in 2020 is housing appreciation. Canada is entering the year with...

Scotiabank Makes Case for Rate Cuts, Despite BoC Hesitation

Central banks around the world have been cutting rates. But, so far, the Bank of Canada has avoided joining that club. One of its worries is that lower interest rates would reignite the mortgage and housing markets, adding to Canadians’ already toppy debt loads. Deputy BoC Governor Carolyn Wilkins reiterated these concerns in a speech yesterday. “You’ve heard us say...

Unemployment as a Rate Indicator

People are constantly hoping to time the rate market, despite how ineffective it may be. For the brave souls who try, here’s some interesting research from the U.S. Federal Reserve. One of its economists, Claudia Sahm, has documented a pattern in unemployment data. In her Fed report, she writes, “…Comparing the three-month average [U.S.] unemployment rate to its low over the prior...

Inflation Ringing No Alarm Bells

If you knew where inflation was headed, you’d have a great chance of knowing where mortgage rates were headed. The latter rises and falls with the former. That’s why so many people try to predict inflation. Among the many who think they know where it’s going: The 100 senior Canadian businesspeople surveyed by the Bank of Canada every quarter 2...

The Bank of Canada, Waiting For Its Cue

The Bank of Canada said today that it’ll keep coasting on rates. But the market isn’t so sure. Investors think our central bank may have to cut sooner than some expect. Here’s a summary of this morning’s decision: Rate Announcement: No change Overnight rate: Remains at 1.75% Prime Rate: Remains at 3.95% Market Rate Forecast: One rate cut in 2020 BoC’s Headline Quote:...

How Long Can the Bank of Canada Resist the Fed’s Rate Pull?

The U.S. Federal Reserve and Bank of Canada seldom make rate announcements on the same day, but tomorrow will be an interesting exception. No one expects any fireworks, but if you believe market expectations, the Fed will cut its key rate 1/4 point while the BoC does a whole lot of nothing. If it all plays out accordingly, it’ll be...

How People Choose Between Fixed & Variable Rates

As much as academics advise against it, people (consciously or subconsciously) try to predict interest rates before choosing a mortgage. But, interestingly, they don’t look very far into the future when making these forecasts. “…Households are forward-looking over relatively short periods of time,” research shows. A 2015 international study by Cristian Badarinza, John Y. Campbell and Tarun Ramadorai found that “the...

The Power of Short Terms

Knowing the future wouldn’t help you pick the right mortgage. Unless you knew all the future. Imagine a fantasyland case where it was 100% certain that all mortgage rates would be higher in five years. With that priceless information most people would take a 2.49% five-year fixed over a 2.59% one-year fixed. But initial rates and ending rates are only two...

What the Fed Rate Cut Decision Means for Canadian Mortgages

Canadian mortgage rates take their cues from many things, and U.S. monetary policy is near the top of the list. That’s why today’s Fed rate cut—the first since the financial crisis—is meaningful to borrowers. Fed decisions always move Canadian rates in some respect but in this case, key questions remain. Here are the two biggest ones. How Many Cuts Are...

The Mortgage Risk of Resurrecting Inflation (+ Rate Nuggets)

In 18 days the Fed is expected to do what it’s virtually never done: inflate the U.S. economy with a rate cut — despite 50-year lows in unemployment and record highs in stocks. Some argue the Fed is dangerously veering off its normal course, that Trump’s browbeating of Powell is working. The risk is clear: more inflation. And inflation is...