Ground Level Updates on Mortgages and the Housing Market, before it hits the news
Bond yields crept higher last week on stronger 🇺🇸 data and stabilizing GDP in 🇨🇦 tapping the breaks on fix rate drops + reflecting a lower 41% chance of an Oct BoC cut
While many remain dovish for an Oct cut, jobs data on Oct 10 + CPI on Oct 21 will mainly determine market odds
🚨 JUST IN 🇨🇦 Real GDP rose 0.2% in July, exceeding market consensus of a 0.1% gain
This following 3 consecutive months of GDP contraction
Mining, oil/gas led the expansion, with manufacturing stabilizing
Markets shrugging off these gains with one more BoC cut still on deck
For the first time in over 3 years, variable mortgage rates are generally lower than their fixed rate counterparts
But not by much... typically 0.10% - 0.25% lower than fixed
So VRM NEEDS to drop another 0.25% min to justify the higher risk, then hold for a good 2+ years
After last weeks 0.25% BoC cut, the question turns to what's next?
Market odds are 50% for an Oct cut. Stabilization or further weakness in jobs, GDP, and CPI will determine the Oct decision
Out further markets price 100% chance of a cut within 6 mons, then 0.50% hikes in 2028
BREAKING: The Bank of Canada cuts by 0.25%, from 2.75% to 2.50% - its lowest level since July 2022 - as 🇨🇦 economic deterioration outweighs inflation concerns
This is the first time the BoC has cut, with its core inflation target still above 3%
BREAKING: 🇨🇦 CPI/inflation was up 1.9% in August compared to 1.7% in July, but below market consensus of 2%
Gas prices continue to pull down inflation but at a slower pace. Excluding gas, inflation was at 2.4%
BoC rate cut odds remain 90%+ with little change in bond yields
Odds of a BoC cut this Wednesday remain high at 92%
~80% of economists agree there will be a BoC cut but not RBC. Specifically RBC maintains the BoC shouldn't cut given elevated inflation expectations
Fixed rates began dropping market wide ironically with RBC leading the cuts
Financial markets are fully pricing a 0.25% BoC cut on Sept 17, with a 90%+ chance of an additional cut in 2025
Fixed mortgage rates are positioned to drop 0.05-0.10% over the next 1-2 weeks
Only a surprise boost in CPI on Sept 16 could derail these odds before the BoC meets
BREAKING: 🇨🇦 shed 66,000 jobs in August, with unemployment increasing by 0.2% to 7.1% and exceeding expectations of 7% unemployment
Bond yields dipped on the news adding slight negative pressure to fixed mortgage rates and increasing the likelihood of a Sept BoC cut to ~70%
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