Weekly Digest

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July 13th, 2023

The Final Hike?

Canada’s overnight rate is now 5% with the prime rate at it’s highest level in 22 years. The Bank of Canada is predicting inflation will stick at around 3% for the next 12 months. There are no concrete predictions on what happens at the next meeting – we will need to wait for a couple economic reports to be released (employment +inflation).  Watch for these reports over the coming weeks…

1/3 of all mortgage holders in Canada have now been directly affected by higher rates. These would include floating rate clients, new borrowers or those who have come up for renewal. With 10 rate increases in the last 16 months, it has been a tough year for many Canadians.

How Are Clients Holding On?

Surprisingly well. Just 15 people per 1000 are 90 days behind on their mortgage which is a mere 1.50% of borrowers. There are several reasons why we have not seen a “sell off” of homes leading to fresh inventory from distressed buyers.

• Unemployment is still at records lows.

• Higher rates have only affected about 1/3 of the population.

• Home prices are still stable.

• Stress testing has proved valuable as clients qualified for rates similar to those of today.

• Quality of mortgage approvals and applications continues to improve over time with less fraud. This can be attributed to increased broker and lender technology.

Jobs Report – Canada

The jobs report data continue to out perform expectations. This doesn’t help us on the interest rate front…

For June;

• 59,000 jobs added (20,000 above expectations)

• Unemployment rose to a 16 month high of 5.40%. How can unemployment go up if we are adding new jobs? The answer is immigration. As more “new” Canadians continue to arrive, the labour market is being flooded with supply of talented workers.

Following this report, the 5 year bond reached just shy of 4%. This is the highest since 2007. This has since cooled back down to the high 3% range.

US CPI

US Inflation came in lower than expected at 3.0%. This is the lowest reading since March of 2021. The US also reported the slowest job growth in 2.5 years. With inflation pushing closer to a “2”, these are great signs that we are through the worst of the rate tightening cycle in the US (which translates well for borrowers in Canada).

Current Interest Rates

CONVENTIONAL

• 5 year fixed, 30 yr amortization – 5.94%

• 3 year fixed, 30 yr amortization – 6.16%

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

• 5 year fixed, 25 yr amortization – 5.84%

• 3 year fixed, 25 yr amortization – 6.06%

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

INSURED

• 5 year fixed, 25 yr amortization – 5.24%

• 4 year fixed, 25 yr amortization – 5.39%

• 3 year fixed, 25 yr amortization – 5.84%

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

Fast Facts

• $3.5 million USD – That’s the amount of cash that slipped through the fingers of fishermen at North Carolina’s Big Rock Blue Marlin Tournament when the 619 pound marlin they had on the line was bitten by a shark, making it ineligible to win the prize money.

• $63,000 USD – That was the price paid at auction for a tiny handbag (less than 0.03 inches wide). Barely visible to the human eye, the “microscopic handbag”, based on a popular Louis Vuitton design, is smaller than a grain of sea salt. Created by a New York art collective known for poking fun at fashion’s excesses, it was sold with a microscope through which it can be viewed.

• 305,000 – That’s the estimated number of people who were at the Calgary Stampede parade on Friday, matching last year’s record numbers.