For more than 10 years now I have been learning what is important to you. Then finding the best solution for you. Many of my clients were not sure if they needed to use my services as a Mortgage Professional, but once they experienced how this helped them with their Home Buying/Re-Financing project, they are happy they did. Mortgages are deceptively simple and endlessly complicated. You can only choose when you have a choice and have been fully informed. Many great Bank Specialists are providing service to their clients, but they can only offer their Banks solutions. As an independent professional, I work for you by informing you on all things mortgage, including who will be your Best Lender. My services are FREE (with OAC) to my clients. The lenders compensate my business to provide them a qualified Client.
I look forward to assisting YOU.
RATES: Here's the thing...I will connect you with the best rate for your BEST mortgage. I Guarantee it.
Bank of Canada increases its benchmark interest rate to 2.50%
Today, the Bank of Canada increased its overnight benchmark interest rate 100 basis points to 2.50% from 1.50% in June the largest single increase in almost 25 years. This is also the fourth time this year that the Bank has acted to tighten the money supply to combat the possibility of an entrenched inflationary cycle, although previous moves were much smaller (0.25% in March and 0.50% in each, April and June).
The Bank characterized this progressively larger increase as a way to front-load the path to higher interest rates, a clear signal that it is concerned that elevated inflation will become entrenched without affirmative action and that more rate hikes are almost certainly on their way.
With this latest increase, the Bank Rate rises to 2.75%, and the deposit rate increases to 2.50%.
These are the highlights of todays announcement.
Inflation at home and abroad
Inflation in Canada is higher and more persistent than the Bank expected in its April Monetary Policy Report, and will likely remain around 8% in the next few months
Global factors including the war in Ukraine and supply disruptions are the biggest drivers, but domestic price pressures from excess demand are becoming more prominent
Surveys indicate more Canadian consumers and businesses are expecting inflation to be higher for longer, raising the risk that elevated inflation becomes entrenched in price- and wage-setting; if that occurs, the economic cost of restoring price stability will be higher
The July outlook for Canada has inflation starting to come back down later this year, easing to about 3% by the end of next year and returning to the 2% target by the end of 2024
Global inflation is higher and accordingly, many central banks are also tightening their monetary policies
Canadian and global economies
As a result of tighter financial conditions, economic growth is moderating and will continue to do so as tighter monetary policy works its way through the economy; when combined with the resolution of supply disruptions, the Bank believes this change will bring demand and supply back into balance and alleviate inflationary pressures
As a result, the Bank now expects Canadas economy to grow by 3.5% in 2022, 1.75% in 2023, and 2.5% in 2024 and for global economic growth to slow to about 3.5% this year and 2% in 2023 before strengthening to 3% in 2024
Canadian labour markets are tight with a record low unemployment rate, widespread labour shortages, and increasing wage pressures
With strong demand, Canadian businesses are passing on higher input and labour costs by raising prices
Domestic consumption is robust, led by a rebound in spending on hard-to-distance services, while business investment is solid and exports are being boosted by elevated commodity prices
The Bank estimates that Canadas Gross Domestic Product grew by about 4% in the second quarter
In the United States, high inflation and rising interest rates are contributing to a slowdown in domestic demand.
Chinas economy is being held back by waves of restrictive measures to contain COVID-19
Canadian housing market
As growth in Canada is expected to slow to about 2% in the third quarter as consumption moderates, the BoC is now projecting that housing market activity will pull back following unsustainable strength during the pandemic
Looking ahead
Along with noting that its Governing Council decided to front-load the path to higher interest rates with todays 100 basis point increase, the BoC also said it continues to judge that interest rates will need to rise further, and the pace of increases will be guided by the Banks ongoing assessment of the economy and inflation.
The Governing Council stated that it is resolute in its commitment to price stability and will continue to take action as required to achieve its 2% inflation target. The message to the market is clear: inflation must be corralled and higher interest rates are to be expected.
This is an evolving story with the next scheduled chapter landing on September 7th, 2022 the date of the BoCs next policy announcement.
Higher interest rates and household debt: Cause for recession?
From National Bank of Canada
There is a great deal of concern regarding the vulnerability of Canadian households not only to inflation shock but also to sharp interest rate hikes.
For heavily indebted households, the bill could prove hefty. Those that contracted mortgages 4.Sx their gross income could see their monthly payments increase by $187 to $281 from 2022 to 2024 and absorb as much as 2.6% to 4.0% of their net income.
At the macroeconomic level, however, the story is far different given the high proportion of properties without mortgages. By our calculations, the payment shock related to servicing the accumulated debt will represent 0.65% of disposable income over the next three years. The amount is significant but manageable in that it alone will not suffice to pull the economy into a recession.
https://www.nbc.ca/content/dam/bnc/en/rates-and-analysis/economic-analysis/special-report_220728.pdf
Prices continue to lose momentum in June
With the decrease in resale market transactions and the increase in interest rates, property price growth moderated for a third consecutive month, but still remained solid in June at 1.0% after adjusting for seasonal effects. Using the seasonally adjusted unsmoothed index, which is more sensitive to market fluctuations, the moderation is even more pronounced, with property prices essentially flat in May and June. While the Bank of Canada has indicated that it will continue to raise its policy rate and that transactions in the real estate market should continue to decline, we anticipate that the composite index should decrease by 10% by the end of 2023. The price declines have already begun to spread across the country. In fact, for all 32 markets where the seasonally adjusted unsmoothed index was available in June, 58% experienced a decline during the month, compared to 34% in May and only 16% in January. We have to go back to May 2020, at the very beginning of the pandemic when uncertainty was at its peak, to find such a large proportion of markets in decline.
https://www.nbc.ca/content/dam/bnc/en/rates-and-analysis/economic-analysis/economic-news-teranet.pdf