Weekly Digest

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June 26th, 2023

What Happens Next?

The chart below shows how much interest rate forecasts and projections have changed in the last 90 days. The “Time To First Cut” metric continues to get pushed back further into 2024.

• The blue/purple line shows March projections for rates

• The yellow line is current interest rate forecasts

Markets are pricing in a 71% chance of a 0.25% hike at the next Bank of Canada meeting (July 12th). This is being labelled as a “follow up hike” which the Bank of Canada will use to drive their messaging on inflation and housing prices.

The strength of resale housing’s momentum was a key reason for the BoC hiking rates this month.

Outside of Canada, The European Central Bank, Bank of England and US Federal Reserve will likely be following suit. Inflation has been sticky, and ultra-high interest rates might be the only thing to shock the economy out of its current resilient state.

Continued Resiliency

Both the Canadian and US economies have remained resilient in the face of the record interest rate hikes. Record immigration levels have helped this, as it was a short term fix to labour shortages. What is becoming more evident is the strain to city infrastructure along with a lack of housing.

The default rate across multiple product segments remains low. See charts below;

Trends

Borrowers continue to move away from Variable / Adjustable Rate Mortgages.

Borrowers continue to avoid 5 year terms.

A low number of listings are keeping house prices inflated.

CONVENTIONAL

• 5 year fixed, 30 yr amortization – 5.79%

• 3 year fixed, 30 yr amortization – 6.01%

• 5 year variable, 30 yr amortization – Prime – 0.60% = 6.35%

• 5 year fixed, 25 yr amortization – 5.69%

• 3 year fixed, 25 yr amortization – 5.91%

• 5 year variable, 25 yr amortization – Prime – 0.70% = 6.25%

INSURED

• 5 year fixed, 25 yr amortization – 5.19%

• 4 year fixed, 25 yr amortization – 5.29%

• 3 year fixed, 25 yr amortization – 5.74%

• 5 year variable, 25 yr amortization – Prime – .90% = 6.05%

Fast Facts

• 40 million – Canada’s new population. The milestone, measured by Statistics Canada’s real-time population clock, reflected growth across all provinces and territories. While other G7 nations are bracing for declines, Canada’s growth sits at 2.7%—the highest level since 1957.

• $16 million – The amount being spent on University of Guelph’s new Honey Bee Research Centre. The new hub, featuring 200 hives, a research lab, a shop for honey products and pollinator gardens, aims to be a key research tool in reviving bee populations.