Paul J Rocha - Senior Mortgage Agent

If you’ve never heard of M2, you’re not alone. Yes, it is a BMW model 🚗 but more importantly for mortgages it is a measure of how much money is circulating in the economy 💵: cash, savings, and other easy-to-access funds.

📈 Why does this matter? When there is a surge of money in the economy, it often pushes everyday prices like food 🥖 gas ⛽ and housing 🏡 higher. That is inflation. And when inflation rises, central banks keep interest rates higher to try and slow it down.

🇺🇸 In the U.S., M2 just set another record high at over $22 trillion.
🇨🇦 Canada’s M2 is also climbing, and historically our mortgage market tends to follow what happens south of the border.

👉 The takeaway: When money supply grows faster than the economy, it adds pressure on inflation. And when inflation stays high, so do mortgage rates and borrowing costs for families.

🏦 The Bank of Canada cut its key rate by 0.25% to 2.50% last week after holding steady at 2.75% for four consecutive meetings. But if rising M2 leads to more inflation, it could make it harder for them to cut much more.

That is why rates can feel stuck sometimes, even when we are all waiting for relief.