Weekly Digest

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September 20th, 2023

Inflation is Back on the Rise

In our digest last week, I mentioned that we would be getting some bad news on the inflation battle. Heads rolled a full 360 degrees as inflation is now back to 4.0%

Annual Inflation; 4.0% (up from a 3.30% in July)
Monthly Inflation; Up 0.40%
Core Inflation year over year; 4.0% (up from 3.75% in July)
Avg Core Inflation (90 days); 4.50% (up from 3.50% in July)

Crude oil is sitting at a 1 year high; $93+ per barrel. 50% of the inflation basket is rising at a pace faster than 5% per year. 

Now what?

Fixed rates are on the rise, again. The 5 year bond yield is up to 4.18 and chances of a rate hike are now fully priced in by early 2024. Rate cuts are now pushed further back extending beyond 12 months time to the end of 2024. The next inflation reading is October 17th, a week before the next B.O.C decision. Watch for a more Hawkish verbiage from Tiff Macklem and the B.O.C over the next 30 days.

Federal Government Removes GST on New Rentals

Put simply, building purpose built rentals properties was a taxation nightmare. Builders were forced to pay GST when building a rental property (apartment building, multiplex, etc) and it was hard to recover those funds upon project completion. The new policy put forth by the government removes the tax on new buildings when building 4+ self contained units OR 10+ rooms. The previous 36% rebate will now increase to 100%.

90% of units must be designated as long-term rentals to be eligible.

CMHC Report On Affordability

Canada’s housing supply gap will reach new highs by 2023. CMHC is estimating we need 3,500,000 more homes built by 2030 to restore affordable housing. This is ON TOP of what is being projected for housing completions by the same date. Ontario will have the worst supply gap of 1,480,000. Quebec is second with 860,000 and finally British Columbia at 610,000.

See the full report here.

Insured Mortgage Volumes Continue to Drop

Speaking of CMHC, the three main insurers volume is falling off a cliff this year. Insured files are down over 34% year over year, and only 12% of new mortgage in Q1 of this year were default insured.

Current Interest Rates

CONVENTIONAL

• 5 year fixed, 30 yr amortization – 6.09%

• 3 year fixed, 30 yr amortization – 6.56%

• 5 year variable, 30 yr amortization – Prime – 0.40% = 6.80%

• 5 year fixed, 25 yr amortization – 6.09%

• 3 year fixed, 25 yr amortization – 6.46%

• 5 year variable, 25 yr amortization – Prime – 0.50% = 6.70%

INSURED

• 5 year fixed, 25 yr amortization – 5.64%

• 4 year fixed, 25 yr amortization – 5.74%

• 3 year fixed, 25 yr amortization – 6.19%

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

Fast Facts

• 51% – Restaurants in Canada operating at a loss or are struggling to break even, according to Restaurants Canada, a number that has increased by almost 40 percentage points from the pre-pandemic rate.

• 2,200,000 – That’s how many litres of red wine flooded the streets of Sao Lourenco do Bairro, Portugal—enough to fill about 3 million bottles. The beverage flowed after storage tanks at a local distillery ruptured. Portugal has the world’s highest wine consumption per capita.