Weekly Digest

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June 30th, 2023

Inflation Cools

Inflation is down a full 1% month over month (now sitting at 3.40%). This is lowest inflation has been in 2 years. The 3-month core measure is also down to 3.60%.

Over 60% of the slowdown can be attributed to stabilizing energy prices. Grocery price inflation is still up >9% and mortgage interest costs are up 30%. Mortgage interest costs remain the largest single contributor to inflation. Catch 22?

Is this enough to avoid a rate hike in July? As of now, the answer appears to be “no”. Employment data sets come out July 7th. This will be the next key news to watch out for.

CPI will be sticky for awhile as the comparable benchmark from July 2022 will slow the rapid drops to the numbers.

What is the Base Effect? The base effect for year over year comparisons refers to the impact of price movements from 12 months earlier on the current month’s CPI.

When a large upward price change in the base month is no longer influencing the 12-month price movement, it has a downward effect on the current month’s headline CPI. Conversely, when a large downward price change in the base month falls out, it creates upward pressure on the current month’s annualized figure.

In the first half of 2022, the global economy experienced the effects of the Russian invasion of Ukraine, leading to a significant price increase for Canadian consumers from January to June. This resulted in headline consumer inflation rising from 5.1% in January to 8.1% in June 2022.

As the price increases observed in the first half of 2022 gradually fall out of the 12-month price movement, the rate of inflation has lowed in recent months.

Overall, prices still remain elevated. The odds of another bank hike eased, but still sit at 57%. This is down from 72% last week.

Mortgage Brokers Eat up Market Share

As rate stay elevated, alternate choices to the Big 6 Banks remain an important part of the lending business. Each year, the mortgage broker channel continues to eat up banking market share. Alternate “B” and “C/Private” lenders will continue to be an important option to borrowers who are self employed, or, need income and debt servicing exceptions.

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

• 54% – that is the average increase to build a home or apartment complex in Canada’s top 11 cities compared to 2019.

• 20 – That’s the years of research that was ruined after a janitor switched off a freezer at a New York university to mute “annoying” alarm sounds. The lab freezer contained temperature-sensitive samples that were part of a research project on photosynthesis. The university is suing the janitor’s employer for US$1 million in damages.