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BoC’s Macklem: More Interest Rate Hikes Are “Warranted.”

Having already raised interest rates by 300 basis points this year, the Bank of Canada’s Tiff Macklem confirmed on Thursday that additional rate hikes (plural form) are “warranted.”

In a prepared speech delivered at the Halifax Chamber of Commerce, Macklem said the Bank has yet to see clear evidence that underlying—or “core”—inflation is coming down.

“When combined with still-elevated near-term inflation expectations, the clear implication is that further interest rate increases are warranted,” he said. “Simply put, there is more to be done.”

Additionally, he said labour conditions remain “very tight,” wage growth is rising, and the economy remains in excess demand. “We will need additional information before we consider moving to a more finely balanced decision-by-decision approach,” he said.

Observers took the comments as hawkish and a signal that the Bank isn’t likely to pivot to a more dovish stance at its upcoming rate meeting on October 26 as some had expected.

“There had been a narrative offered in the market that October’s hike would be one more and done with a coming dovish pivot,” wrote Scotiabank economist Derek Holt. “That narrative got flushed today.”

“With less than three weeks to go before the next decision on October 26…the Governor is clearly not thinking that the October communications will involve a dovish pivot versus a largely preset path to keep hiking thereafter,” he added.

Source: https://www.canadianmortgagetrends.com/2022/10/bocs-macklem-more-interest-rate-hikes-are-warranted/

Steve Huebl·Bank of Canada·October 6, 2022

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Mortgage Rate Pricing: Canada vs. the U.S.

While Canadian brokers watch the 5-year yield for hints on fixed-rate direction, in the U.S. the benchmark is the 10-year Treasury.

When yields are moving meaningfully in Canada, a lender might send a rate update once this week, or perhaps twice if the moves are large enough.

When yields are moving in the U.S., even if it’s a tiny five-basis-point blip, lenders adjust rates on the double.

U.S. brokers can sometimes get three to four rate updates (from one lender) in one day. This happened last Tuesday after the Federal Reserve clarified that there’s much more policy tightening to come—and that people shouldn’t bet on rate cuts next year.

One U.S. wholesale lender I watch lifted rates four times by the end of the day. Some of the others, three times. And most others at least twice.

In Canada, where I’ve been watching rates for over 15 years, I can count on one hand the number of times I remember a lender bumping up rates twice in one day.

By the way, U.S. lenders price to three decimal points instead of two (e.g., 4.375%), which is kind of funky from a Canadian’s perspective.

Source: https://www.canadianmortgagetrends.com/2022/08/rate-pricing-canada-vs-the-u-s/

Robert McLister·Mortgage Strategies·August 3, 2022

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Bond Yields Plunge. What It Means For Fixed Mortgage Rates.

Bond yields dove over 30 basis points on Friday as economic worries start to replace inflation concerns.

Bond yields, which lead fixed mortgage rates, fell to 2.84% on Friday, down from 3.15% on Thursday and well off the 3.59% high reached in mid-June.

The decline comes due to growing expectations of an economic downturn.

“The thinking is that central banks will soon have broken the economy,” McLister told CMT. “That implies lower growth, lower inflation, and ultimately lower mortgage rates.”

Ron Butler of Butler Mortgage told CMT that monoline lenders, in particular, can “absolutely offer lower rates” on high-ratio and insurable mortgages, and so he expects fixed rates to continue to drop.

According to data tracked by McLister, average deep-discount 5-year fixed mortgage rates offered by national lenders have so far dropped by about 10 bps since the 5-year bond yield retreated from its recent high.

Source: https://www.canadianmortgagetrends.com/2022/07/bond-yields-plunge-what-it-means-for-fixed-mortgage-rates/

Steve Huebl·Interest Rates·July 22, 2022

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Canadian Rent Prices Were Flat In June, But Could Rise Further As Demand Grows.

The average rent in Canada took a breather in June, dropping slightly compared to May, according to data from Rentals.ca.

The flat reading follows a 3.7% monthly increase in May. Average rents are still 9.5% higher than they were last year, but are down 3.5% compared to pre-pandemic June 2019.

Five Canadian cities have seen rent prices for all property types soar over the past year by more than 20%:
Vancouver: $2,926 (+25%)
Toronto: $2,463 (+20%)
Calgary: $1,752 (+26%)
London, ON: $1,933 (+29%)
Kitchener, ON: $1,932 (+21%)

But as report author Ben Myers, president of Bullpen Research & Consulting, pointed out, those oversized increases are largely due to rents having plummeted during the pandemic.

“A couple of those markets are still not even back to where they were prior to the pandemic,” he told CMT, adding that Vancouver is the anomaly, with rents significantly higher than they were in 2019.

Source: https://www.canadianmortgagetrends.com/2022/07/canadian-rent-prices-stabilized-in-june-but-demand-is-expected-to-grow/

Steve Huebl·Real Estate·July 14, 2022

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