Weekly Digest

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March 7th, 2024

Bank of Canada Holds

To no surprise, B.O.C’s key rate was held at 5%, and Prime remains at 7.20%. Since inflation’s peak, core inflation has averaged a 13 basis point monthly decline. If that pace continues, it means getting into the 2%’s could take at least three more months (June/July). This is when the first cut will likely occur.

Macklem also dropped a quote; “It’s very safe to say we aren’t going to be lowering rates at the pace we raised them.”

This is the Bank’s fifth consecutive rate hold (over an 8 month window).

The next rate announcement is scheduled for Wednesday, April 10, 2024

Economic Pressures

According to Equifax, economic pressure is more visible as many consumers struggle to make monthly credit payments. Delinquency rates for non-mortgage balances that are >90 days overdue went up from 1% in Q4 2022 to 1.3% in Q4 2023. This is a 28.9% increase. Mortgage delinquency rates over the last 12 months saw a 52.3% increase, from 0.09% to 0.14%.

Early Price Adjustments

Sales are still down, but values are now improving. Looks like we hit the floor at the end of 2023.

• Metro Toronto: +1.3% y/y

• Metro Vancouver: +1.9% y/y

• Calgary: +2.2% y/y

First Time Homebuyer Incentive Program

Another failed housing policy by our current government, the FTHIP has been cancelled. This was one of the worst executed housing policies in recent memories, and those in major cities could not use the program.

Originally approved for $1.25 billion for incentives, the program was slated for 100,000 first time buyers. The government would match down payments of 5% for borrowers, while taking 5% of the equity in the property. However, the standard FTHBI imposed a $120,000 household income limit and 4x loan-to-income limit. What can you get in Toronto or Vancouver for $480,000? This was far more restrictive than traditional insured guidelines so you would qualify for LESS than the banks were willing to fund.

Fast forward four years, and despite so called enhancements, less than 30,000 applications funded and $409 million was spent.

Now, we will need to pay administrative support staff to monitor the program for the next 25 years for just 30,000 home owners. Every dollar wasted on this program should have gone toward boosting housing supply in a more meaningful manner.

Current Interest Rates

CONVENTIONAL

• 5 year fixed, 30 yr amortization – 5.09%

• 3 year fixed, 30 yr amortization – 5.29%

• 2 year fixed, 30 yr amortization – 6.00%

• 5 year variable, 30 yr amortization – Prime – 0.60% = 6.60%

• 5 year fixed, 25 yr amortization – 4.99%

• 3 year fixed, 25 yr amortization – 5.19%

• 2 year fixed, 25 yr amortization – 5.90%

• 5 year variable, 25 yr amortization – Prime – 0.70% = 6.50%

INSURED

• 5 year fixed, 25 yr amortization – 4.89%

• 4 year fixed, 25 yr amortization – 4.89%

• 3 year fixed, 25 yr amortization – 4.99%

• 5 year variable, 25 yr amortization – Prime – .90% = 6.30%

Fast Facts

• $380 million. The latest estimate for how much the FIFA World Cup will cost the city of Toronto. The price tag is now $80 million over the original projection of $300 million. 

• $5 million. What a supervisor at London’s Heathrow airport made from an alleged scam where they snuck immigrants without visas into Canada by exploiting an airline loophole.

• €1.84 billion. Fine given to Apple by the EU for the tech companies’ anticompetitive practices in the music streaming market. It’s the first time Apple has been fined by the EU.

• US$200 billion. Net worth of Amazon founder Jeff Bezos, who reclaimed the title of the world’s richest person this week. Bezos now has a cool $2 billion edge over Elon Musk.