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Mortgage Rate Forecast - May 2020
Mortgage Rate Forecast
Mortgage rates are expected to remain stable over the coming months. We may see continued reductions to rates are the financial markets begin to stabilize.
The Bank of Canada prime rate remains at %. There has been 3 drops in the Prime Rate in the month of March. Each drop was %. These changes were made as a direct result to add stimulus and support to the anticipated economic challenges caused by the COVID-19. In addition, the Bank of Canada has provided billions of dollars in Quantitative Easing. The purpose it to provide confidence and reduce risk to the participants in the financial markets.
Fixed mortgage rates have been extremely volatile with significant declines in rates, then rapid increases to rates to levels slightly higher than when the pandemic occurred. We are currently seeing fixed term mortgages settled into more normal levels based on more typical cost of funds. Expect fixed rates to remain at current level in the next few months, with a slight bias to declining more.
It is important to remember the economic stress we are experience is due to a health crisis. Once the COVID-19 virus can be effectively managed, our economy will begin to return to pre-pandemic levels.
Canada: Residential sales reached a new record in September
Seasonally adjusted home sales rose 0.9% in September to a monthly record of 56,422 units. Sales in Ontario missed Augusts record by a hair due to a 5.3% monthly decline in Toronto. Records were nonetheless registered in Ottawa and Hamilton. In the Province of Quebec, sales were at a record level in the Quebec CMA and in Gatineau, and close to August records in Montreal. In B.C., transactions reached a record outside the three main markets of Vancouver, Fraser Valley and Victoria. There were also sales records in Nova Scotia and New Brunswick. The active-listings-to-sales ratio indicates that the Canadian home resale market was favorable to sellers in Ontario Quebec, the Maritimes Provinces and marginally so in B.C. The market was balanced in the four other provinces.
PROMISES, PROMISES AND MORE PROMISES
Canadas Parliament re-convened today with a ceremonial Speech from the Throne delivered by the Governor General.
Canadas continued response to the COVID-19 pandemic took centre-stage, while providing a lens for a plethora of broader promises: an extension of the wage subsidy, expanded employment insurance, investments in childcare, reaffirmed commitments to universal pharmacare, and green infrastructure investments among many others.
Given the exhaustive list of priorities, this Speech is unlikely to bring the minority government down as it provides plenty of hooks for negotiations in the lead-up to a Fall update where details will be laid out.
It clearly signals more fiscal spending ahead for Canada leaving the question not if but how much. But this was largely channeled ahead, so the market reaction has been mutedor more likely, it is eclipsed by broader US and global developments.
There is little beyond lip service by way of fiscal restraint. This will be left to the Finance Minister to make inevitable trade-offs in her first budget this Fall, particularly as she may need to reserve some firepower for second waves.
Source: Scotiabank https://www.scotiabank.com/ca/en/about/economics/economics-publications/post.other-publications.fiscal-policy.fiscal-pulse.federal.federal-budget-analysis.federal-throne-speech--september-23--2020-.html