23 Oct

Bank of Canada Cuts Policy Rate by 50 Basis Points to 3.75%

General

Posted by: Frank Fik

VANCOUVER (October 23, 2024) – The Canadian Mortgage Brokers Association – British Columbia (CMBA-BC) welcomes today’s announcement by the Governor of the Bank of Canada Tiff Macklem that the Bank of Canada will substantially cut its key overnight rate by 50 basis points from 4.25 per cent to 3.75 per cent. This decision follows rate cuts in June, July and September of 25 basis points each. The central bank is also signalling that further rate reductions may be on the horizon as we approach 2025.

CMBA-BC is strongly encouraged by today’s decision, viewing it as a positive step towards alleviating financial pressure on mortgage holders, borrowers, and first-time homebuyers across British Columbia. While immediate changes to fixed mortgage rates may not occur, variable rate mortgages and Home Equity Lines of Credit will benefit from the decreased prime lending rate. Additionally, homeowners nearing mortgage renewal can expect significant relief.

“Today’s decision is a crucial lifeline for mortgage holders and prospective buyers in our province,” said Rebecca Casey, President of CMBA-BC. “We are pleased to see this accelerated interest rate cut and believe it will provide much-needed financial relief, particularly for first-time homebuyers who are struggling to enter the market.”

CMBA-BC has strongly advocated for policies that support mortgage holders and homebuyers, emphasizing the importance of reducing interest rates in the current economic climate. Ongoing cuts can significantly help residents facing the challenges of inflation and rising living costs.

Recent economic indicators show many positive trends, including inflation in decline. Statistics Canada reported a stark decline in the Consumer Price Index (CPI) to 1.6 per cent in September, down from 3.8 per cent just a year prior. GDP growth on the other hand has remained steadier, at 0.9 per cent in Q2, up from 0.6 per cent in Q1 of this year.

Despite these improvements, the housing market remains under strain and is top of mind for British Columbians. An October 11 poll conducted by Ipsos indicated that housing affordability and availability was among the top three issues in the BC provincial election, with 31 per cent of voters indicating it was their number one concern.

“To create a more supportive environment for those managing higher payments and to improve the overall mortgage landscape in B.C., ongoing economic relief is essential,” added Casey. “This latest and significant rate cut is a step in the right direction towards enhancing the housing market and providing greater stability for consumers.”

CMBA-BC is committed to advocating for homebuyers and mortgage holders while promoting a stable and thriving housing market in British Columbia.

Published by CMBA – Canadian Mortgage Brokers Association British Columbia

15 Oct

Residential Market Commentary – Coin toss on rate cut

General

Posted by: Frank Fik

High hopes for a big, 50 basis point, rate cut by the Bank of Canada later this month have dimmed.  A strong jobs report for September has several analysts pulling back their forecasts.  They are now saying a, more traditional, 25 basis point cut is most likely.

Statistics Canada’s September employment report shows the economy added 42,000, net, new jobs, including 112,000 new full-time positions.  The unemployment rate ticked down one notch to 6.5% from 6.6% in August.

Those figures are being used to support the argument that the central bank’s current policy of quarter-point cuts is working and there is no need to change.

However, economists are also looking at other aspects of the report that, they say, temper the good news.  Those factors suggest September is an anomaly, given previous reports that show a job market that is not keeping pace with immigration.

They point out that the number of people who are working, or looking for work, dipped for the third time in four months; total hours worked declined and hourly wage growth slowed.  All of these indicate some weakness in the economy that could justify a half-percent cut in the Bank of Canada policy rate.

Given the mixed nature of the jobs report, most economists agree that the up-coming inflation report, which is due before the next rate setting, will likely be the key factor in any decision.

Published by First National Financial LP

1 Oct

Residential Market Commentary – Less stress

General

Posted by: Frank Fik

Conditions seem ripe for a big, 50-point, interest rate cut by the Bank of Canada at its next setting later this month.  But the federal banking regulator has confirmed it will be providing, more direct, mortgage relief.

The Office of the Superintendent of Financial Institutions (OSFI) says it is going to end the stress test for uninsured mortgage switches.  The formal announcement is set for November 21.

The stress test, which was introduced at the beginning of 2018, requires borrowers with uninsured mortgages (i.e., a down payment of 20% or more) to qualify for their loan at the Bank of Canada’s five-year benchmark rate or their mortgage rate plus 2%, whichever is higher.

The upcoming change means borrowers who are making a straight swap of their existing mortgage from one lender to another – keeping the same loan amount and amortization schedule – will not have to requalify and pass the stress test.

Removing the stress test requirement answers a long-standing complaint that it discouraged – even prevented – borrowers from shopping for a new, cheaper lender at renewal time.  OSFI says it is making the change based on feedback from the mortgage industry and Canadians.

In March the federal Competition Bureau recommended dropping the stress test, saying the policy was “not evenly applied.”  OSFI all but admits the policy was wrong, saying the risks it had been intended to address “have not significantly materialized.”

Published by First National Financial LP