Time for your cheat sheet on this week’s top stories.
Canadian Real Estate
Canadian Mortgage Rates Start Climbing As Gov Bond Yields Surge
Government of Canada (GoC) bond yields are making a steep climb, especially the 5-year term. Since fixed rate mortgage costs are directly influenced by this, expect mortgage rates to climb. The GoC 5-year bond yield surged a whopping 19 basis points over just the past 3-days, motivated by rate cuts. The 5-year fixed rate mortgage has yet to reflect the increase, but similar pressure on yields have already pushed other fixed rate interest costs higher.
Canada’s Existing Mortgage Borrowers Get Relief, Won’t Motivate Buyers: BMO
One of Canada’s Big Six reminded investors that rate cuts help some, but won’t necessarily motivate new activity. Earlier this week, BMO told investors that rate cuts will help provide relief to variable rate mortgage and HELOC borrowers. It won’t provide more credit fuel for new buyers though, since they already had access to cheaper fixed-rate mortgages. Even post-rate cuts, fixed rate mortgages remain significantly cheaper—though that can change soon with rising bond yields.
Bank of Canada Makes Supersized Cut, Fears Immigration Shift Will Slow GDP
The Bank of Canada made a widely expected supersized rate cut on fears the economy is slowing. The central bank justified the decision on GDP coming in significantly below expectations, and policy decisions adding fuel to the fire. They also voiced their primary concern to future growth—reduced immigration. Canada’s aggregate GDP has gotten a boost from immigration over the past two years via the simple act of just adding more units. Though aggregate GDP largely only serves as backing for state-borrowing, and is effectively meaningless unless adjusted per-capita.
Greater Vancouver Real Estate Sales Surged… So Did Inventory
Greater Vancouver real estate sales were much higher than last year, helping to firm prices. The regional board reported a 40% increase in sales for November, a substantial jump from last year but still weak for the season. At the same time, inventory also jumped to one of the loftiest levels on deck for the month—not just compared to last year, but the past decade. Increased sales tempered market sentiment as more inventory hit the market, creating a balanced atmosphere. That’s a trend unlikely to last through the winter, but it’s anyone’s guess which one gives out first.
Canadian Loonie Forecast To Remain Weak, Bad News For Home Building
The Canadian dollar (a.k.a. The loonie) is forecast to remain weak in the coming months against the US dollar. A weak currency is typically good for job creation, attracting foreign capital to exploit the cheaper labor. However, it’s bad for the cost of living, since most commodities are priced in US dollars, like lumbar and gas. It’s a calculated gamble that may not pay off, as the US adopts policies to bring more employment back onshore and reduce its dependency on foreign labor.
Toronto’s Jobless Population Hits 380k, Back To Pandemic Levels
Canada may have more economic headwinds coming, as the country’s largest city struggles with unemployment. Nearly 1 in 10 workers struggle to find employment in Toronto CMA, adding up to a whopping 380k jobless people. This is the largest jobless population in the city since May 2021. More bluntly, the region’s economy is doing so well it’s hard to tell if times are good or if it’s been shut down for public health measures.
