Weekly Digest

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January 6th, 2025 – January 12th, 2025

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Partner Trip for 2026

Our annual Spring partner trip has been announced for 2026 and it will be held in San Diego, California.

Send $1,500,000.00 in total closed mortgage business to automatically gain your spot on the trip.

Trudeau Steps Down

Prime Minister Justin Trudeau’s resignation sets off a contest for who will lead the party into the next election. Hopefully this will happen much sooner than October if the opposition parties manage to topple the minority Liberal government with a no-confidence vote. There are few immediate economic consequences of Trudeau’s decision, given the Conservatives seem likely to win a big majority this year no matter who replaces Trudeau.

Although Trudeau announced his resignation, he will remain as party leader and prime minister until registered party members vote in a leadership contest. We do not yet know when that vote will take place. The Liberal Party Constitution states that candidates must deliver written nominations, signed by at least 300 party members, 90 days before a vote. As the candidates need time to gather those signatures, a leadership vote under those terms would be unlikely before mid-April.

Either way, neither candidate seems to have much chance to overturn the Conservative’s commanding poll lead. The model from polling aggregator 338Canada puts the Conservatives on track to secure 236 of 338 seats. This would be 64 more than required for a majority and the largest winning margin since the Conservatives win in the 1984 election. This coincidently followed Trudeau senior’s resignation.

Even if Trudeau’s successor inspires a resurgence for the Liberals in the polls, it still seems likely that Conservative Party Leader Pierre Poilievre will soon be prime minister.

Pierre Poilievre plans to:

• Scrap the GST on homes under $1 million

• Limit immigration

• Disband the housing accelerator fund

• Cut bureaucracy

• Free up government-owned land

• Speed up building permits

• Reduce development charges

Consumer Price Index Canada

• Headline inflation: 1.9% y/y (est: 2% | prior: 2%) and 0.0% m/m (0.1% est.)

• Average core inflation: 2.65% (est. 2.45% | prior: 2.65%) and 0.3% m/m

The BoC’s preferred core measure did not change. Stuck at 2.65% year-over-year, it overshot Bay Street’s estimates by 20 basis points.

Capital Economics concludes, “While this at the margin raises the chance for a pause at the Bank’s next meeting in January, we continue to forecast a 25 bps cut.”

• Food purchased from stores: +2.6% y/y

• Shelter: +4.6% y/y

• Transportation: 1.1% y/y

• Mortgage interest cost has decelerated for the15th consecutive month

Full Report is here:

https://www150.statcan.gc.ca/n1/daily-quotidien/241217/dq241217a-eng.htm

US Fed Announcement

The Fed cut the planet’s most consequential interest rate by 25 bps at the end of 2024.

• Projects just 2 cuts next year which is a dramatic change from previous forecasts of 4.

• Sees core inflation at 2.5% next year, up notably from 2.2%.

• Effectively forecasts a 3.0% neutral rate.

• The Fed doesn’t see inflation hitting its 2% target until 2027.

• “The U.S. economy has just been remarkable,” Fed Chair Powell stated

• The 0.92 correlation between the U.S. Fed Funds rate and Canada’s overnight rate could continue veering off its historical path. If U.S. inflation becomes a bigger problem, Canadian inflation and/or yield inflation will follow, putting a floor under our mortgage rates.

• The U.S. economy sits at just 4.2% unemployment, and 3.1% projected GDP which doesn’t signal more rate relief.

Official statement is here: https://www.federalreserve.gov/newsevents/pressreleases/monetary20241218a.htm

What’s Next?

Here are the latest next-meeting odds:

• For the Bank of Canada meeting on Jan. 29:

  • 25bps cut: 72% chance

  • No change: 28% chance

• For the Federal Reserve meeting on Jan. 29:

  • 25bps cut: 11% chance

  • No change: 89% chance

2024 Mortgage Originations

Spreads are elevated as Bank’s are trying to make up for lower market share over the last 2 years.

Spreads are elevated as Bank’s are trying to make up for lower market share over the last 2 years.

Current Interest Rates

CONVENTIONAL

• 5 year fixed, 30 yr amortization – 4.89%

• 3 year fixed, 30 yr amortization – 4.79%

• 2 year fixed, 30 yr amortization – 5.74%

• 5 year variable, 30 yr amortization – Prime – 0.50% = 4.95%

• 5 year fixed, 25 yr amortization – 4.79%

• 3 year fixed, 25 yr amortization – 4.69%

• 2 year fixed, 25 yr amortization – 5.64%

• 5 year variable, 25 yr amortization – Prime – 0.60% = 4.85%

INSURED

• 5 year fixed, 25 yr amortization – 4.49%

• 4 year fixed, 25 yr amortization – 4.49%

• 3 year fixed, 25 yr amortization – 4.39%

• 5 year variable, 25 yr amortization – Prime – .90% = 4.55%

Fast Facts

• $13.2 million – Average amount Canada’s 100 highest-paid CEOs earned in 2023, per a new report. The top dog was Patrick Dovigi of GFL Environmental, who earned $68.5 million.

• US $2 trillion – Increase in Nvidia’s market valuation in 2024.

• 11% – Drop in Canadian opioid deaths in the first half of 2024 from 2023.

• 20 – How many minutes a single cigarette can take off your life, according to a study published in the British journal Addiction.

• US$10 billion – Penalties the Securities and Exchange Commission has written off over the past ten years because it’s been unable to collect what it’s owed.