Annual inflation hits 3.7% in Canada—a new election issue.

Canadian inflation hits highest reading in two decades. This morning’s Statistics Canada release showed that the July CPI surged to a 3.7% year-over-year pace, well above the 3.1% pace recorded in June. This is now the fourth consecutive month in which inflation is above the 1% to 3% target band of the Bank of Canada and has set Canadian inflation at an all time high. And given the flash election, opposition parties are already making hay. “The numbers released today make it clear that under Justin Trudeau, Canadians are experiencing a cost of living crisis,” Conservative leader Erin O’Toole said in a statement. He went on to suggest that the Liberal government is stoking inflation with its debt-financed government spending programs.

While it is true that deficit spending has surged during the pandemic, the same is also true for nearly every country in the world. Moreover, accelerating inflation is a global phenomenon and most central banks believe it to be temporary. Certainly, Tiff Macklem is firmly of that view, as is the Fed Chairman Jerome Powell.

Supply disruptions and base effects have largely caused the rise in inflation. Semiconductor production, for example, slumped during the 2020 lockdowns, and then couldn’t be ramped up fast enough when demand for cars and electronics returned, leading the prices of new and used autos to rise at a record pace. Prices for airfares and hotel stays also jumped. Companies found themselves short of workers as they reopened, leading some to offer bonuses or boost wages and subsequently raise prices for consumers.

Central bankers believe that the price pressures are transitory, representing temporary shocks associated with the reopening of the economy. Lumber prices, for example, spiked when demand for new homes returned and have since normalized (see the chart below). To be sure, above-target inflation has heightened uncertainty. The central banks do not want to choke off the economic recovery through misplaced inflation fears. Many Canadians remain out of work, and long-term unemployment is still very high. Moreover, the recent surge of the delta variant proves that the recovery is uncertain.

Bank of Canada Governor Tiff Macklem, whose latest forecasts show inflation creeping up to 3.9% in the third quarter before easing at the end of the year, has warned against overreacting to the “temporary” spike.

Shelter prices rising fastest

Prices rose faster year-over-year in six of the eight major components of Canadian inflation in July, with shelter prices contributing the most to the all-items increase. Conversely, prices for clothing and footwear and alcoholic beverages, tobacco products and recreational cannabis slowed on a year-over-year basis in July compared with June. Year over year, gasoline prices rose less in July (+30.9%) than in June (+32.0%). A base-year effect continued to impact the gasoline index, as prices in July 2020 increased 4.4% on a month-over-month basis when many businesses and services reopened.

In July 2021, gasoline prices increased 3.5% month over month, as oil production by OPEC+ (countries from the Organization of Petroleum Exporting Countries Plus) remained below pre-pandemic levels though global demand increased.

The homeowners’ replacement cost index, which is related to the price of new homes, continued trending upward, rising 13.8% year over year in July, the largest yearly increase since October 1987. Similarly, the other owned accommodation expenses index, which includes commission fees on the sale of real estate, was up 13.4% year over year in July.

Year-over-year price growth for goods rose at a faster pace in July (+5%) than in June (+4.5%), with durable goods (+5%) accelerating the most. The purchase of passenger vehicles index contributed the most to the increase, rising 5.5% year over year in July. The gain was partially attributable to the global shortage of semiconductor chips. Prices for upholstered furniture rose 13.4% year-over-year in July, largely due to lower supply and higher input costs.

Core measures

The average of core inflation readings, a better gauge of underlying price pressures, rose to 2.47% in July, the highest since 2009. Monthly, prices rose 0.6% versus a consensus estimate of 0.3%. Rising costs to own a home are one of the biggest contributors to the elevated Canadian inflation rate, following a surge in real estate prices over the past year.

Bottom line 

Today’s inflation data likely did little to alter the Bank of Canada’s view that above-target inflation will be a transitory phenomenon. They are already ahead of most central banks in tapering the stimulus coming from quantitative easing. They do not expec t to start increasing interest rates until the labour markets have returned to full employment, which they judge to occur in the second half of 2022. In the meantime, pent-up demand in Canada is huge as people tap into their involuntary savings during the lockdown to pay higher prices at restaurants, grocery stores and gas stations. Financial markets appear to be sanguine about the prospect for rate hikes, as bond yields have been trading in a very narrow range.

This article was published by Dr. Sherry Cooper, to read the article on her website click here

Angela Calla is a 17-year award-winning woman of influence which sets her apart from the rest. She is without a doubt, a true expert in her field. Alongside her team, Angela passionately assists mortgage holders in acquiring the best possible mortgage. Through her presence on “The Mortgage Show” and through her best-selling book “The Mortgage Code“, Angela educates prospective home buyers by providing vital information on mortgages. 

In August of 2020, at the young age of 37, Angela surpassed $1 Billion dollars in funded personal mortgages. In light of this, her success awarded her with the 2020Business Leader of the Year Award.

Angela is a frequent go-to source for media and publishers across the country. For media interviews, speaking inquiries, or personal mortgage assistance, please contact Angela at hello@countoncalla.ca or at 604-802-3983.

Click  here to view the latest news on our blog. 

Today the Canadian Real Estate Association (CREA) released statistics showing national existing home sales fell 3.5% nationally from June to July 2021–the fourth consecutive monthly decline. Over the same period, the number of newly listed properties dropped 8.8%, and the MLS Home Price Index rose 0.6% and was up 22.2% year-over-year.

While sales are now down a cumulative 28% from the March peak, Canadian housing markets are still historically quite active (see Chart below). In July, the decline in sales activity was not as widespread geographically as in prior months, although sales were down in roughly two-thirds of all local markets. Edmonton and Calgary led the slowdown, but these cities didn’t experience falling sales until recently. In Montreal, in contrast, where sales began to moderate at the start of the year, activity edged up in July.

The actual (not seasonally adjusted) number of transactions in July 2021 was down 15.2% on a year-over-year basis from the record for that month set last July. July 2021 sales nonetheless still marked the second-best month of July on record.

“While the moderation of sales activity continues to capture most of the headlines these days, it’s record-low inventories that should be our focus,” said Cliff Stevenson, Chair of CREA. Most markets are in sellers’ market territory.

New Listings

The number of newly listed homes dropped by 8.8% in July compared to June, with declines led by Canada’s largest cities – the GTA, Montreal, Vancouver and Calgary. Across the country, new supply was down in about three-quarters of all markets in July.

This was enough to noticeably tighten the sales-to-new listings ratio despite sales activity also slowing on the month. The national sales-to-new listings ratio was 74% in July 2021, up from 69.9% in June. The long-term average for the national sales-to-new listings ratio is 54.7%.

Based on a comparison of sales-to-new listings ratio with long-term averages, the tightening of market conditions in July tipped a small majority of local markets back into seller’s market territory, reversing the trend of more balanced markets seen in June.

Another piece of evidence that conditions may be starting to stabilize was the number of months of inventory. There were 2.3 months of inventory on a national basis at the end of July 2021, unchanged from June. This is extremely low – still indicative of a strong seller’s market at the national level and most local markets. The long-term average for this measure is twice where it stands today.

Home Prices

The Aggregate Composite MLS® Home Price Index (MLS® HPI) rose 0.6% month-over-month in July 2021, continuing the trend of decelerating month-over-month growth that began in March. That deceleration has yet to show up in any noticeable way on the East Coast, where property is relatively more affordable.

Additionally, a more recent point worth noting (and watching) just in the last month has seen prices for certain property types in certain Ontario markets look like they might be re-accelerating. This could be in line with a re-tightening of market conditions in some areas.

The non-seasonally adjusted Aggregate Composite MLS® HPI was up 22.2% on a year-over-year basis in July. While still a substantial gain, it was, as expected, down from the record 24.4% year-over-year increase in June. The reason the year-over-year comparison has started to fall is that we are now more than a year removed from when prices really took off last year, so last year’s price levels are now catching up with this year’s, even though prices are currently still rising from month to month.

Looking across the country, year-over-year price growth averages around 20% in B.C., though it is lower in Vancouver and higher in other parts of the province. Year-over-year price gains in the 10% range were recorded in Alberta and Saskatchewan, while gains are closer to 15% in Manitoba. Ontario sees an average year-over-year rate of price growth in the 30% range. However, as with B.C., gains are notably lower in the GTA and considerably higher in most other parts of the province. The opposite is true in Quebec, where Montreal is in the 25% range, and Quebec City is in the 15% range. Price growth is running a little above 30% in New Brunswick, while Newfoundland and Labrador is in the 10% range.

Bottom Line

Sales activity will continue to gradually cool over the next year, but it will take higher interest rates to soften the housing market in a meaningful way. Local housing markets are cooling off as prospective buyers contend with a dearth of houses for sale. Though increasing vaccination rates have begun to bring a return to normal life in Canada, that’s left the country to contend with one of the developed world’s most severe housing shortages and little prospect of much new supply becoming available soon.

This article was published on Dr. Sherry Cooper’s website, August 16, 2021. To view the article there, click here.

Angela Calla is a 17-year award-winning woman of influence which sets her apart from the rest. She is without a doubt, a true expert in her field. Alongside her team, Angela passionately assists mortgage holders in acquiring the best possible mortgage. Through her presence on “The Mortgage Show” and through her best-selling book “The Mortgage Code“, Angela educates prospective home buyers by providing vital information on mortgages. 

In August of 2020, at the young age of 37, Angela surpassed $1 Billion dollars in funded personal mortgages. In light of this, her success awarded her with the 2020Business Leader of the Year Award.

Angela is a frequent go-to source for media and publishers across the country. For media interviews, speaking inquiries, or personal mortgage assistance, please contact Angela at hello@countoncalla.ca or at 604-802-3983.

Click  here to view the latest news on our blog. 

While the Liberals don’t have any new plans to tackle housing to date — the party’s latest platform promise includes $10 a day child care for families — the party’s ongoing platform features three housing components.

1. As part of a new, ten-year investment of nearly $20 billion in social infrastructure, the Liberals say they will prioritize significant new investment in affordable housing and seniors facilities.
2. The party says it will undertake a review of escalating home prices in high-priced markets — like Vancouver and Toronto — to determine whether speculation is driving up the cost of housing.
3. The Liberals say they will increase the new residential rental property rebate on the GST to 100% — eliminating all GST on new capital investments in affordable rental housing.
   • This wll provide $125 million per year in tax incentives to increase and substantially renovate the supply of rental housing across Canada

However, as part of the Liberal’s 2021 federal budget, the party said $3.8 billion in new and re-assigned funding would be allocated for affordable housing, the Canada Housing Benefit, and other initiatives to build, convert, or repair 35,000 units across Canada. These funds will be distributed over the course of seven years.

What’s more, the budget shows $612 million will be dedicated to the homelessness strategy, including veterans, over two years.

The Liberals also announced a 1% national tax on non-resident, non-Canadian-owned residential real estate considered vacant or underused. This revenue stream is estimated to bring in $700 million over four years and would be levied annually beginning in 2022.

This article was written and published by Ainsley Smith, a writer from Storeys Publishing (2021). To read the full article click here

Angela Calla is a 17-year award-winning woman of influence which sets her apart from the rest. She is without a doubt, a true expert in her field. Alongside her team, Angela passionately assists mortgage holders in acquiring the best possible mortgage. Through her presence on “The Mortgage Show” and through her best-selling book “The Mortgage Code“, Angela educates prospective home buyers by providing vital information on mortgages. 

In August of 2020, at the young age of 37, Angela surpassed $1 Billion dollars in funded personal mortgages. In light of this, her success awarded her with the 2020Business Leader of the Year Award.

Angela is a frequent go-to source for media and publishers across the country. For media interviews, speaking inquiries, or personal mortgage assistance, please contact Angela at hello@countoncalla.ca or at 604-802-3983.

Click  here to view the latest news on our blog. 

Canada’s NDPs say they have a plan to target the housing crisis and make housing more affordable, and here’s how they promise to accomplish this if elected:

Go after big money investors by:

• Singh and the NDP say they will go after big money investors by putting a 20% Foreign Buyer’s tax on the sale of homes to individuals who are not Canadian citizens or Permanent Residents.
• The NDP says they would target money laundering and organized crime within the housing sector by making it harder to hide behind nameless companies and giving regulators more teeth.

Increase affordable housing supply by:

• If elected, the NDP says it will increase housing supply by building 500,000 affordable homes in ten years;
  • The party promises to have the first half done within five years.
• This will be achieved with the right mix of effective measures that work in partnership with provinces and municipalities, build capacity for social, community, and affordable housing providers, to provide rental support for co-ops, and meet environmental energy efficiency goals.
• This ambitious plan will create thousands of jobs in communities all across the country, jump-starting the economic recovery, and helping Canadians get the affordable housing they need.

The NDP says it will also set up dedicated fast-start funds to streamline the application process for co-ops, social, and non-profit housing and help communities get the expertise and assistance they need to get projects off the ground. The party says it will mobilize federal resources and lands for these projects, turning unused and under-used properties into vibrant new communities.

Re-introduce 30-year terms to CMHC insured mortgages:

• While making affordable rental housing more available is critical, the NDP believe that the dream of homeownership shouldn’t be forever out of reach for Canadian families. That’s why we will re-introduce 30-year terms to CMHC insured mortgages on entry-level homes for first time home buyers.
• This will allow for smaller monthly payments, freeing up funds to help make ends meet for young families. The party will also give people a hand with closing costs by doubling the Home Buyer’s Tax Credit to $1,500.

For Canadians who are open to innovative paths to homeownership, the NDP says it will provide resources to facilitate co-housing, such as model co-ownership agreements and connections to local resources, and ease access to financing by offering CMHC-backed co-ownership mortgages.

This article was written and published by Ainsley Smith, a writer from Storeys Publishing (2021). To read the full article click here

Angela Calla is a 17-year award-winning woman of influence which sets her apart from the rest. She is without a doubt, a true expert in her field. Alongside her team, Angela passionately assists mortgage holders in acquiring the best possible mortgage. Through her presence on “The Mortgage Show” and through her best-selling book “The Mortgage Code“, Angela educates prospective home buyers by providing vital information on mortgages. 

In August of 2020, at the young age of 37, Angela surpassed $1 Billion dollars in funded personal mortgages. In light of this, her success awarded her with the 2020Business Leader of the Year Award.

Angela is a frequent go-to source for media and publishers across the country. For media interviews, speaking inquiries, or personal mortgage assistance, please contact Angela at hello@countoncalla.ca or at 604-802-3983.

Click  here to view the latest news on our blog. 

Conservatives propose a three-pronged strategy that targets the housing crisis which involves increasing housing supply, tackling money laundering and foreign investors, and making mortgages more affordable.

Increase supply by implementing a plan to build 1 million homes in the next three years by:

• Leverage federal infrastructure investments to increase housing supply. We will:
  • Build public transit infrastructure that connects homes and jobs by bringing public transit to where people are buying homes; and
  • Require municipalities receiving federal funding for public transit to increase density near the funded transit;

• Review the extensive real estate portfolio of the federal government – the largest property owner in the country with over 37,000 buildings – and release at least 15% for housing while improving the Federal Lands Initiative;
• Incent developers to build the housing Canadians both want and need, by:

• • Encouraging Canadians to invest in rental housing by extending the ability to defer capital gains tax when selling a rental property and reinvesting in rental housing, something that is currently excluded; and
  • Exploring converting unneeded office space to housing.
• Continue the Conservative commitment to Reconciliation with Canada’s Indigenous Peoples by enacting a “For Indigenous, By Indigenous” strategy – long called for by Indigenous housing advocates.
  • Canada’s Conservatives are committed to putting a stop to federal paternalism and instead partnering with Indigenous communities and empowering Indigenous Peoples with the autonomy to meet their own housing needs.
• Enhance the viability of using Community Land Trusts for affordable housing by creating an incentive for corporations and private landowners to donate property to Land Trusts for the development of affordable housing.
  • The incentive will mirror that which exists for donating land to ecological reserves.

Root out the corrupt activities that drive up real estate prices and put homeownership out of reach by:

• Implement comprehensive changes to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, and give FINTRAC, law enforcement, and prosecutors the tools necessary to identify, halt, and prosecute money-laundering in Canadian real estate markets.
• Establish a federal Beneficial Ownership Registry for residential property.
• Closely examine the findings and recommendations of the Commission of Inquiry into Money Laundering in British Columbia, which is doing important work, and quickly implement recommendations at the federal level.

To arrest and reverse the inflationary impacts of foreign buyers and speculation in the housing market, the Conservatives say they will ensure that housing in Canada is truly for Canadian citizens and residents first.

To achieve this, the Conservatives say they will:

• Ban foreign investors not living in or moving to Canada from buying homes here for a two year period after which it will be reviewed.
• Instead, encourage foreign investment in purpose-built rental housing that is affordable to Canadians.

To make mortgages more affordable, the Conservatives will:

• Encourage a new market in seven- to ten-year mortgages to provide stability both for first-time home buyers and lenders, opening another secure path to homeownership for Canadians, and reducing the need for mortgage stress tests.
• Remove the requirement to conduct a stress test when a homeowner renews a mortgage with another lender instead of only when staying with their current lender, as is the case today. This will increase competition and help homeowners access more affordable options.
• Increase the limit on eligibility for mortgage insurance and index it to home price inflation, allowing those in high-priced real estate markets with less than a 20% down-payment an opportunity at home-ownership.
• Fix the mortgage stress test to stop discriminating against small business owners, contractors, and other non permanent employees including casual workers.

Finally, the Conservatives say they will never tax Canadians’ capital gains on the sale of a principal residence.

This article was written and published by Ainsley Smith, a writer from Storeys Publishing (2021). To read the full article click here

Angela Calla is a 17-year award-winning woman of influence which sets her apart from the rest. She is without a doubt, a true expert in her field. Alongside her team, Angela passionately assists mortgage holders in acquiring the best possible mortgage. Through her presence on “The Mortgage Show” and through her best-selling book “The Mortgage Code“, Angela educates prospective home buyers by providing vital information on mortgages. 

In August of 2020, at the young age of 37, Angela surpassed $1 Billion dollars in funded personal mortgages. In light of this, her success awarded her with the 2020Business Leader of the Year Award.

Angela is a frequent go-to source for media and publishers across the country. For media interviews, speaking inquiries, or personal mortgage assistance, please contact Angela at hello@countoncalla.ca or at 604-802-3983.

Click  here to view the latest news on our blog. 

Angela Calla is a 17-year award-winning woman of influence which sets her apart from the rest. She is without a doubt, a true expert in her field. Alongside her team, Angela passionately assists mortgage holders in acquiring the best possible mortgage. Through her presence on “The Mortgage Show” and through her best-selling book “The Mortgage Code“, Angela educates prospective home buyers by providing vital information on mortgages. 

In August of 2020, at the young age of 37, Angela surpassed $1 Billion dollars in funded personal mortgages. In light of this, her success awarded her with the 2020Business Leader of the Year Award.

Angela is a frequent go-to source for media and publishers across the country. For media interviews, speaking inquiries, or personal mortgage assistance, please contact Angela at hello@countoncalla.ca or at 604-802-3983.

Click  here to view the latest news on our blog. 

Today the Canadian Real Estate Association (CREA) released statistics showing national existing home sales fell 8.4% nationally from May to June 2021, marking the third consecutive monthly decline. Over the same period, the number of newly listed properties fell 0.7%, and the MLS Home Price Index rose 0.9%, a marked deceleration from previous months.

Activity nonetheless remains historically high, but in contrast to March’s all-time record, it is now running closer to levels seen in the first half of 2020. While sales are now down a cumulative 25% from their peak, and below every other month in the last year, June transactions still managed to set a record for that month (see chart below).

For the second month in a row, sales were lower in every province. The steepest drops were in B.C. (-14.6% m/m) and the Atlantic provinces (down a combined 9.8% m/m). In Ontario, sales fell 9.0% m/m. They posted a much smaller 1.9% m/m drop in Quebec.

June’s decline was helped along by stricter stress test rules implemented at the beginning of the month. We expect these rules to continue to weigh on demand in the near term, although the amount of tightening this time around (+46 bps) pales in comparison to early 2018 (+220 bps), the last time the rules were changed.

The actual (not seasonally adjusted) number of transactions in June 2021 was up 13.6% on a year-over-year basis.

“While there is still a lot of activity in many housing markets across Canada, things have noticeably calmed down in the last few months,” said Cliff Stevenson, Chair of CREA. “There remains a shortage of supply in many parts of the country, but at least there isn’t the same level of competition among buyers we were seeing a few months ago.”

New Listings

The number of newly listed homes edged back a slight 0.7% in June compared to May. In contrast to the past year’s synchronicity in demand and supply trends, the little-changed national new supply figure in June reflected a mixed bag of results, with about half of local markets seeing gains – welcome news for frustrated buyers.

The national sales-to-new listings ratio was 69.2% in June 2021, the lowest reading since last August. That said, the long-term average for the national sales-to-new listings ratio is 54.6%, so it remains historically high; although, it has been steadily moderating since peaking at 90.8% back in January (see chart below).

Based on a comparison of sales-to-new listings ratio with long-term averages, more than half of all local markets were in balanced market territory in June, measured as being within one standard deviation of their long-term average. The was a significant shift compared to most of the past year which saw a majority of markets well into seller’s market territory.

There were 2.3 months of inventory on a national basis at the end of June 2021, up from 2.1 months in May and up from an all-time record-low of just 1.8 months in March. That said, it is still very much in sellers’ market territory. The long-term average for this measure is a little over 5 months.

Home Prices

The Aggregate Composite MLS® Home Price Index (MLS® HPI) rose 0.9% month-over-month in June 2021, continuing the trend of decelerating month-over-month growth that began in March. That deceleration was initially seen more so on the single-family side; although, that trend is now also playing out in the townhome and apartment segments.

The non-seasonally adjusted Aggregate Composite MLS® HPI was up 24.4% on a year-over-year basis in June. Based on data back to 2005, this was another record year-over-year increase; although, given how price growth took off in July of last year, this June 2021 reading may end up being the peak for year-over-year growth.

Looking across the country, year-over-year price growth is averaging around 20% in B.C., though it is lower in Vancouver and higher in other parts of the province. Year-over-year price gains in the 10% range were recorded in Alberta and Saskatchewan, while gains are closer to 15% in Manitoba. Ontario is seeing an average year-over-year rate of price growth in the 30% range, however, as with B.C., gains are notably lower in the GTA and considerably higher in most other parts of the province. The opposite is true in Quebec, where Montreal is in the 25% range and Quebec City is in the 15% range. Price growth is running a little above 30% in New Brunswick, while Newfoundland and Labrador are in the 10% range.

Bottom Line

Since peaking in March, home sales are down 25% from the inferno levels early this year, but demand is still historically strong. Despite the steep pullback, seasonally adjusted sales are roughly 18% above pre-pandemic trends. When the economy opens fully and immigration resumes, the underlying fundamentals for housing demand will rise, especially as university students return to campus living, and adult children move into their own nests.

Sales activity will continue to gradually cool over the next year, but it will take higher interest rates to soften the housing market in a meaningful way.

Condo sales in markets such as Toronto and Vancouver have picked up from their pandemic lows in recent months. This is the polar opposite of what happened earlier in the pandemic, when sales of relatively expensive detached units dominated, raising average prices. Moving forward, if condos consume a rising share of the overall sales pie (perhaps through strong demand for these units, slowing sales of detached houses, or some combination of both), compositional effects could continue to weigh on average prices.

This article was published by Dr. Sherry Cooper, read the article on her website here.

Angela Calla is a 17-year award-winning woman of influence which sets her apart from the rest. She is without a doubt, a true expert in her field. Alongside her team, Angela passionately assists mortgage holders in acquiring the best possible mortgage. Through her presence on “The Mortgage Show” and through her best-selling book “The Mortgage Code“, Angela educates prospective home buyers by providing vital information on mortgages. 

In August of 2020, at the young age of 37, Angela surpassed $1 Billion dollars in funded personal mortgages. In light of this, her success awarded her with the 2020Business Leader of the Year Award.

Angela is a frequent go-to source for media and publishers across the country. For media interviews, speaking inquiries, or personal mortgage assistance, please contact Angela at hello@countoncalla.ca or at 604-802-3983.

Click  here to view the latest news on our blog. 

The Bank of Canada raised its inflation forecast in the newly released July Monetary Policy Report (MPR), making it one of the most hawkish central banks in the world. The Bank announced its third action to reduce its emergency bond-buying stimulus program by one-third. The central bank was among the first from the advanced economies to shift to a less expansionary policy last April when it accelerated the timetable for a possible interest-rate increase and pared back its bond purchases. In today’s press release, the Bank announced it would adjust its quantitative easing (QE) program again to a target pace of $2 billion per week of Government of Canada bond purchases–down $1 billion from its prior target of $3 billion per week. This puts upward pressure on bond yields, all other things constant. No doubt, the federal government’s funding of the enormous Covid-related budget deficits has been abetted by the central bank’s bond-buying.

The pace of purchases of Canadian government bonds was as high as $5 billion last year. The central bank acquired a net $320 billion of the securities since the start of the Covid-19 pandemic. The bank owns about 44% of outstanding Canadian government bonds.

The Bank of Canada has said it wants to stop adding to its holdings of government bonds before it turns its attention to debating rate increases. Still, officials chose not to accelerate the projected timeline for a possible hike today.

In holding the overnight rate at the effective lower bound of .25%, the Governing Council reaffirmed its “extraordinary forward guidance” that the Canadian economy still has considerable excess capacity. The recovery continues to require extraordinary monetary policy support. “We remain committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2% inflation target is sustainably achieved,” the central bank said in the policy statement. In the Bank’s July projection, this happens sometime in the second half of 2022.

Swaps trading suggests investors are fully pricing in a rate hike over the next 12 months and a total of four over the next two years, which would leave Canada with one of the highest policy rates among advanced economies. This puts the Bank of Canada ahead of the Fed in raising interest rates. Chair Powell told Congress today that the US economy isn’t ready for bond tapering. “Reaching the standard of ‘substantial further progress’ is still a ways off,” he said in prepared remarks. In the U.S., investors aren’t pricing in any rate hike over the next year and only two over the next two years.

July Monetary Policy Report

The Bank revised its forecast for Canadian GDP growth this year from 6.5% in the April MPR to 6.0% because of the more restrictive third-wave pandemic lockdown in the second quarter. Growth is now expected to pick up strongly in the third quarter of this year. Consumer confidence has returned to pre-pandemic levels, and a high share of the eligible population is vaccinated. As the economy reopens, consumption is expected to lead the rebound, increasing spending on services such as transportation, recreation, and food and accommodation.

Housing resales have moderated from historically high levels but remain elevated (Chart below). Other areas of housing activity—such as new construction and renovation—remain strong, supported by high disposable incomes, low borrowing rates and the pandemic-related desire for more living space.

CPI Inflation Boosted By Temporary Factors

The Bank revised up its inflation forecast for this year but asserted once again that inflation would return to 2% in 2022. This is a controversial call consistent with central-bank mantras around the world. The BoC said, “Three sets of factors are leading to this temporary strength. First, gasoline prices have risen from very low levels a year ago and are above their pre-pandemic levels, lifting inflation. Second, other prices that had fallen last year with plummeting demand are now recovering with the reopening of the economy and the release of pent-up demand. Third, supply constraints, including shipping bottlenecks and the global shortage of semiconductors, are pushing up the prices of goods such as motor vehicles.

The BoC expects CPI inflation to ease by the start of 2022 as the temporary factors related to the pandemic fade. Economic slack becomes the primary factor influencing the projection for inflation dynamics thereafter. The uncertainty around the outlook for the output gap and inflation remains high. Because of this, the estimated timing for when slack is absorbed is highly imprecise. In the projection, this occurs sometime in the second half of 2022. After declining to 2% during 2022, inflation is expected to rise modestly in 2023 as the economy moves into excess demand. The excess demand and resultant increase in inflation to above target are expected to be temporary. They are a consequence of Governing Council’s commitment to keeping the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2% inflation target is sustainably achieved.

Inflation is expected to return toward the target in 2024. The projection is consistent with medium- and long-term inflation expectations remaining well-anchored at the 2% target. Both businesses and consumers view price pressures as elevated in the near term. A large majority of respondents to the summer 2021 Business Outlook Survey now expect inflation to be above 2% on average over the next two years. Nonetheless, firms view higher commodity prices, supply chain bottlenecks, policy stimulus and the release of pent-up demand as largely temporary factors boosting inflation higher in the near term.

Bottom Line

Only time will tell if the Bank of Canada is correct in believing that inflation pressures are temporary. Financial markets will remain sensitive to incoming data, but for now, bond markets seem willing to accept their view. The 5-year GoC bond yield has edged down from its recent peak of 1.0% posted on June 28th to a current level of .936%. As well, the Canadian dollar has weakened a bit, to US$0.7993, since the release this morning of the BoC policy statement. The loonie, however, remains among the strongest currencies this year vis a vis the US dollar.

Read the original article published by Dr. Sherry Cooper here on her website.

Angela Calla is a 17-year award-winning woman of influence which sets her apart from the rest. She is without a doubt, a true expert in her field. Alongside her team, Angela passionately assists mortgage holders in acquiring the best possible mortgage. Through her presence on “The Mortgage Show” and through her best-selling book “The Mortgage Code“, Angela educates prospective home buyers by providing vital information on mortgages. 

In August of 2020, at the young age of 37, Angela surpassed $1 Billion dollars in funded personal mortgages. In light of this, her success awarded her with the 2020Business Leader of the Year Award.

Angela is a frequent go-to source for media and publishers across the country. For media interviews, speaking inquiries, or personal mortgage assistance, please contact Angela at hello@countoncalla.ca or at 604-802-3983.

Click  here to view the latest news on our blog. 

Article written by Jessy Bains – can be viewed here

The gap between variable and fixed-rate mortgages has widened (Photo by Jeff J Mitchell/Getty Images)

Low rates have helped fuel the real estate rally and today, Ratehub.ca says the best 5-year variable rate on its site dropped to 0.98 per cent, which it says is the lowest 5-year variable-rate mortgage in Canadian history.

The rate is available through the site’s in-house lender CanWise Financial and is open to homebuyers with less than 20 per cent for a downpayment, or those that had less than 20 per cent down on renewal.

It comes with a 20 per cent prepayment option, 120-day rate hold, is portable and assumable, and the penalty to break is three months of interest.

“We are really excited to be able to offer the lowest rate in Canadian history because it will save our customers so much in interest,” said Ratehub.ca.

Today’s announcement means the gap between fixed and variable-rate mortgages has widened. Ratehub.ca says the best fixed-rate on its site is 1.74 per cent, which is 0.76 percentage point higher than the best variable rate.

The Bank of Canada embarked on a series of cuts to its key overnight rate to help the economy cope with the effects of the COVID-19 pandemic. Ratehub.ca says Canada’s central bank would need to raise rates three times to bring this variable rate in line with the best fixed rates. It would have to keep going for the variable rate to be higher.

The overnight rate isn’t likely to be raised any time soon, as the Bank of Canada has been indicating and not until its inflation targets have been met.

“We remain committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved. In the Bank’s April projection, this happens sometime in the second half of 2022,” said the Bank of Canada in a release when it announced its most recent rate decision.

Ratehub.ca says a homeowner who puts down 10 per cent on a $500,000 home with today’s new 5-year variable rate amortized over 25 years ends up with a monthly mortgage payment of $1,744.

In the first year, that’s $20,927 of which $16,463 is principal and $4,464 is interest. Over the 5-year term, $104,633 is paid, of which $83,947 is principal and $20,686 is interest.

Angela Calla is a 17-year award-winning woman of influence which sets her apart from the rest. She is without a doubt, a true expert in her field. Alongside her team, Angela passionately assists mortgage holders in acquiring the best possible mortgage. Through her presence on “The Mortgage Show” and through her best-selling book “The Mortgage Code“, Angela educates prospective home buyers by providing vital information on mortgages. 

In August of 2020, at the young age of 37, Angela surpassed $1 Billion dollars in funded personal mortgages. In light of this, her success awarded her with the 2020Business Leader of the Year Award.

Angela is a frequent go-to source for media and publishers across the country. For media interviews, speaking inquiries, or personal mortgage assistance, please contact Angela at hello@countoncalla.ca or at 604-802-3983.

Click  here to view the latest news on our blog. 

Published by the Tri-Cities Chamber of Commerce 2021

The Government of British Columbia has just announced BC’s Restart Plan and outlined the road the recovery.

BC’s Restart – a four-step plan to bring BC back together will be a slow and gradual return to a more normal life, with safety and health protocols such as mask-wearing and physical distancing remaining in place and mandatory during the initial two steps of the plan.

The step-by-step plan will follow approximate timelines and will ease people and businesses slowly out of the pandemic.

Scroll down to find information on the following:

• Step 1 – May 25, 2021
• Step 2 – June 15, 2021
• Step 3 – Early June (Earliest Date: July 1)
• Step 4 – Early September (Earliest Date: September 7)

An overview of the four steps can be found below:

Click here to open image.

See the BC Government website for full details.

Step 1 – May 25, 2021

Step 1 begins on May 25, 2021, with at least 60% of the adult population having received Dose 1, along with stable COVID-19 case counts and COVID-19 hospitalizations.

PHO guidance under Step 1 is as follows:

• Physical distancing and masks continue to be required in public indoor settings.
• If you or anyone in your family feels sick stay home and get tested immediately.

Under Step 1, the following restrictions will be in place:

• Personal Gatherings
  • Maximum of five visitors or one household allowed for indoor personal gatherings.
  • Maximum of 10 people for outdoor personal gatherings.
• Outdoor Gatherings
  • Maximum of 10 people for seated indoor organized gatherings with safety protocols.
  • Maximum of 50 people for seated outdoor organized gatherings with safety protocols.
• Travel
  • Recreational travel only within travel region (travel restrictions extended).
  • Non-essential travel between regions continues to be restricted.
• Business
  • Indoor and outdoor dining for up to six people with safety protocols (not restricted to your household or bubble).
  • Liquor served until 10PM.
• Offices and Workplaces
  • Start gradual return to workplaces.
  • Employers must continue to have a COVID-19 Safety Plan and daily health check in place.
• Sports and Exercise
  • Indoor low-intensity group exercise allowed with limited capacity.
  • Outdoor games and practices for both adults and youth group/team sports allowed.
  • No spectators at any indoor or outdoor sports activities.

Step 2 – June 15, 2021 

Step 2 will begin when 65% or more of the adult population has received Dose 1, cases continue to decline, and COVID-19 hospitalizations are declining.

The earliest date for Step 2 is expected to be June 15, 2021.

PHO guidance under Step 2 is as follows:

• Physical distancing and masks continue to be required in public indoor settings
  If you or anyone in your family feels sick stay home and get tested immediately.

Under Step 2, the following restrictions will be in place:

• Personal Gatherings
  • Outdoor personal gatherings up to 50 people (birthday parties, backyard BBQs, block parties).
  • Playdates.
• Organized Gatherings
  • Indoor seated organized gatherings of up to 50 people with a COVID-19 Safety Plan.
• Travel
  • Provincial travel restrictions lifted.
  • Recreational travel within BC allowed.
  • BC Transit and BC Ferries offers increased service as needed.
• Business
  • Liquor served until midnight.
  • Banquet halls can operate with limited capacity and a COVID-19 Safety Plan
• Offices and Workplaces
  • Continued return to the workplace.
  • Small, in-person meetings allowed
• Sports and Exercise
  • Indoor high-intensity group exercise allowed with reduced capacity.
  • Indoor games and practices for both adults and youth group/team sports allowed.
  • No spectators at any indoor sports activities.
  • Outdoor spectators up to 50 allowed.

Consultation begins in Step 2 for the next steps regarding:

• Indoor and outdoor organized gatherings
• Easing restrictions for businesses

Step 3 – July 1, 2021

Step 3 will begin when 70% or more of the adult population has received Dose 1, cases are low, and COVID-19 hospitalizations are declining.

With British Columbians achieving nearly 80% adult Dose 1 vaccine coverage and COVID-19 case counts continuing to decline, the Province is safely moving to Step 3 of its four-step restart plan on July 1, 2021.

Moving to Step 3 will also signal the end to the longest provincial state of emergency in BC’s history, which will be lifted on June 30 at 11:59PM.

PHO guidance under Step 3 is as follows:

• Increased social contact
  If you or anyone in your family feels sick stay home and get tested immediately

Mask guidance under Step 3 is as follows:

• Masks are recommended in public indoor settings for all people 12 and older who are not yet fully vaccinated
  • Those who receive the vaccine are fully vaccinated 14 days after Dose 2
  • Some people may choose to continue to wear a mask after they’re fully vaccinated and that’s okay
• The mask mandate order under the Emergency Program Act will be lifted on July 1, and no proof of vaccination will be needed

As BC moves from Step 2 to Step 3, here are some of the new things that you can do:

• Personal Gatherings
  • Return to usual for indoor and outdoor personal gatherings
  • Sleepovers
• Organized Gatherings
  • Indoor organized gatherings 50 people or 50% capacity, whichever is greater
  • Outdoor organized gatherings 5,000 people or 50% capacity, whichever is greater
  • No capacity limits or restrictions on religious gatherings and worship services
  • Fairs, festivals and trade shows return to normal with a Communicable Disease Plan
• Travel
  • Canada-wide recreational travel.
• Business
  • Restaurants and Bars:
    • No group limits for indoor and outdoor dining, events allowed
    • Return to normal liquor service hours
    • No socializing between tables
  • Nightclubs:
    • Up to 10 people seated at tables, tables 2 m apart
    • No dancing, no socializing between tables
  • Casinos:
    • Reduced capacity
    • Gaming stations can operate at approximately 50% capacity
• Offices and Workplaces
  • Continued return to the workplace
  • Seminars and bigger meetings allowed
  • Additional safety precautions required in higher-risk workplaces
• Sports and Exercise
  • All indoor fitness classes allowed, normal capacity
  • Gyms and recreation facilities, normal capacity
  • Outdoor spectators 5,000 people or 50% capacity, whichever is greater
  • Indoor spectators 50 people or 50% capacity, whichever is greater

During Step 3, businesses, offices, and workplaces will gradually transition from a COVID-19 Safety Plan to a new Communicable Disease Plan, with guidelines for these plans released by WorkSafeBC. These guidelines were developed in consultation with public health and businesses will continue to be supported by WorkSafeBC and the PHO as they transition.

View the Communicational Disease Prevention Plan Guidelines released by WorkSafeBC here.

These plans will continue to include physical barriers in many business and retail settings. Capacity limits, formal health screening tests and directional arrows, as well as other physical distancing measures, will no longer be required. However, they may still be used during this transition period.

Step 4 – Early September (Earliest Date: September 7)

Step 4 will begin when more than 70% of the adult population has received Dose 1, cases are low and stable (contained clusters), and COVID-19 hospitalizations are low.

The earliest date for Step 4 is expected to be September 7, 2021.

PHO guidance under Step 4 is as follows:

• Masks in public indoor settings a personal choice
• Normal social contact
• If you or anyone in your family feels sick stay home and get tested immediately.

Under Step 4, the following restrictions will be in place:

• Personal Gatherings
  • Return to normal personal gatherings and social contact.
• Organized Gatherings
  • Increased capacity at large organized gatherings, like a concert.
• Travel
  • Canada-wide recreational travel.
• Business
  • Businesses will continue to operate based on the new COVID-19 safety guidelines and their updated COVID-19 Safety Plan.
• Offices and Workplaces
  • Workplaces fully reopened.
• Sports and Exercise
  • Return to normal sports competitions with an updated COVID-19 Safety Plan in place.
  • Increased outdoor and indoor spectators.

Angela Calla is a 17-year award-winning woman of influence which sets her apart from the rest. She is without a doubt, a true expert in her field. Alongside her team, Angela passionately assists mortgage holders in acquiring the best possible mortgage. Through her presence on “The Mortgage Show” and through her best-selling book “The Mortgage Code“, Angela educates prospective home buyers by providing vital information on mortgages. 

In August of 2020, at the young age of 37, Angela surpassed $1 Billion dollars in funded personal mortgages. In light of this, her success awarded her with the 2020Business Leader of the Year Award.

Angela is a frequent go-to source for media and publishers across the country. For media interviews, speaking inquiries, or personal mortgage assistance, please contact Angela at hello@countoncalla.ca or at 604-802-3983.

Click  here to view the latest news on our blog.