Weekly Digest——— January 11th, 2024 |
Thank you |
Thank you to those realtors, financial planners and partners who have continued to support us through a tough market. If you know of anyone in your industry that might work well with our team, please send an introduction. |
Looking Ahead to 2024 |
Below is the Bank of Canada meeting schedule, and the implied overnight rate following each meeting (data from year end 2023). The market is currently projecting five rate cuts of 25 bps by the end of next year, resulting in an implied overnight rate of 3.75% by December 2024. Assuming the banks follow suit, we can anticipate the Prime Rate falling from 7.20% to 5.95%. Most variable rate borrowers would land in the 4% range again. |
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Ultimately the path forward for rates is an unclear one, but we now know rates are finally on the way down, and not up. Many factors to watch for; |
Trends in Term Selection – 2023 |
3 year fixed terms had unprecedented activity in 2023. Despite 3-year rates priced a full 1% higher than the 5-year rates, 25% of funded fixed rate mortgages in 2023 had 3-year terms, compared to fewer than 5% in 2021 & 2022. Fewer than 10% of borrowers selected an adjustable rate in 2023 compared to 55% in 2022. |
Trends in Term Selection – 2024 |
With rate cuts imminent, a variable rate mortgage becomes a viable consumer option again. Borrowers can “ride the wave” down as the cuts occur bringing payment and cost savings throughout the year (and term). 3 year fixed rates were our most popular term in 2023, but now even shorter term options such as 1 & 2 year terms are gaining traction. With the 1 & 2 year fixed pricing sitting equal to variable the variable rates, the variable gives the added benefit of locking in to a fixed term at any time. |
Delinquencies |
What still hasn’t changed, at least not in a material way yet, is delinquencies. Despite the rapid increase in adjustable-rate payments and fixed rate renewals into higher rates, borrowers have demonstrated resiliency. First National, one of Canada’s largest lender’s 90-day residential arrears rate increased by just 1 basis point in 2023. |
Market Returns From 2023 |
The markets were positive in December as inflation continued to cool and speculation of 2024 interest rate cuts gained momentum. The markets have now priced in some light at the end of this 2-year-long interest rate tunnel. |
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Mortgage Renewals – Looking Ahead |
The big ticket years for renewals, and the economic impact that follows is 2025 and 2026. With many interest rates set to double on renewal, this will be an important year for borrowers looking to switch lenders for lower rates, or refinance to lower their payments. |
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Current Interest Rates |
CONVENTIONAL 5 year fixed, 30 yr amortization – 5.69% 3 year fixed, 30 yr amortization – 5.79% 2 year fixed, 30 yr amortization – 6.29% 5 year variable, 30 yr amortization – Prime – 0.50% = 6.70% 5 year fixed, 25 yr amortization – 5.59% 3 year fixed, 25 yr amortization – 5.69% 2 year fixed, 25 yr amortization – 6.19% 5 year variable, 25 yr amortization – Prime – 0.60% = 6.60%
INSURED 5 year fixed, 25 yr amortization – 5.24% 4 year fixed, 25 yr amortization – 5.24% 3 year fixed, 25 yr amortization – 5.39% 5 year variable, 25 yr amortization – Prime – .90% = 6.30%
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Fast Facts |
$12.2 billion USD – How much short sellers lost betting against Tesla in 2023, according to one estimate. It’s the most that short sellers lost on a single company last year. $1.164 million – Vehicles sold in Canada last year, an 11.8% boost from 2022. It was the biggest boost in sales automakers have seen in the country since 1997. 20% – Share of Canadian restaurants that are at risk of closure after the Canada Emergency Business Account repayment deadline on January 18, per industry groups.
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