Coles Notes at Mortgage Conference from Economists

General Angela Calla 19 Oct

Cole’s Notes on our Annual MPC conference

Inflation is a lagging indicator

Bank of Canada will choose a recession over high inflation (Central Banks worldwide are seen as inflation fighters)

Bank of Canada would rather overshoot (increase more than needed and/or stay higher for longer than needed) despite the economic risk that presents

Currently, the odds of BoC overshooting is 80%

GDP is down 3% on a per capita basis right now

Immigration and $165 Billion in excess savings have saved the economy up until now

Savings have been depleted and people are relying more on credit resulting in more effective monetary policy re higher rates.

With GICS offering over 5%, even those with savings aren’t spending as much as they look to buy GICs with higher returns than what we have seen for years

Spread between BoC and US Fed Reserve is currently only 25bps where typically the spread is 75bps (with Canada being lower)

BoC is more effective with rate increases as Canadians carry more debt and are subject to rate increases sooner (US has 30 year rate terms while we are typically 1-5 year fixed)

Canada has the lowest rate of inflation of the G7 nations (due to our high debt loads and shorter rate terms)

During Covid, about 80% of inflation was driven by supply chain issues – these are now resolved – monetary policy has no impact on supply chain. Retailers used supply chain as an excuse to increase prices and improve profits

Today, 80% of inflation is cause by demand making monetary policy more effective and retailers profit margins are shrinking

80% of the cost of services is wages – labour market is finally normalizing and wage growth is slowing. Fewer people are quitting jobs and changing industries.

Predictions:
Ben predicts that if month over month inflation today comes in at > 2%, expect a rate increase on the 25th – said as of yesterday, odds are 50/50

He expects the overnight rate will settle around 3% (currently 5%) with the first decreases beginning in Jun/July 2024

57% of ALL mortgages in Canada renew in 2025/2026- Rates MUST come down or we are in deep trouble

Expect prices to be under pressure over the next 6 months. More listings with fewer qualified buyers

Don’t expect to see improvements to affordability

Foreign Student population is mis-counted by 250,000 people – when asked where their primary residence is by Stats Can, many report their home country despite living in Canada AND, it’s assumed they will leave the country within 30 days of student visa expiring. Some leave, but many remain applying for extensions, PR, work permits – this accounts for another approx. 750,000 people not being counted

Unless the government gets a handle on housing, there could be rental strikes, civil unrest, increased anti-immigration sentiment. Removing GST on purpose built rentals helps, but not enough. Projects (rental and owner-occupied) suffer lengthy delays exacerbating issues.

 

Angela Calla is an 19-year award-winning woman of influence which sets her apart from the rest. 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 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. 

Canadian Inflation Dips to 3.8% Keeping BoC On The Sidelines

General Angela Calla 17 Oct

Good News On the Inflation Front Suggests Policy Rates Have Peaked

Today’s inflation report for September was considerably better than expected, ending the three-month rise in inflation. Not only did the headline inflation rate fall, but so did the core measures of inflation on a year-over-year basis and a three-month moving average basis. This, in combination with the weak Business Outlook Survey released yesterday, suggests that the overnight policy rate at 5% may be the peak in rates. While I do not expect the Bank to begin cutting rates until the middle of next year, the worst of the tightening cycle may well be over.

Offsetting the deceleration in the all-items CPI was a year-over-year increase in gasoline prices, which rose faster in September (+7.5%) compared with August (+0.8%) due to a base-year effect. Excluding gasoline, the CPI rose 3.7% in September, following a 4.1% increase in August. Looking ahead to the October inflation report, the base effect for headline CPI is favourable, as CPI surged in October 2022. Gasoline prices are down about 7% so far this month. Given the war in the Middle East, however, there is no guarantee that this will hold, but if it does, the October headline CPI could move into the low-3% range.

On a monthly basis, the CPI fell 0.1% in September after a 0.4% gain in August. The monthly slowdown was mainly driven by lower month-over-month prices for gasoline (-1.3%) in September. Goods inflation fell 0.3% from a month earlier, the first time since December 2022, and grew 3.6% from a year ago versus 3.7% in August. Services inflation was unchanged from August, the first time it hasn’t grown on a monthly basis since November 2021, while the rate slowed to 3.9% on a yearly basis, from 4.3% in August.

Yesterday’s Survey of Consumer Expectations showed that perceptions of current inflation remain well above actual inflation.  One reason is the very visible level of grocery and gasoline prices. As the chart below shows, food inflation–though still elevated–decelerated to 5.9% last month, and CPI excluding food and energy fell to a cycle-low 2.8%. Large monthly gains in September 2022, when grocery prices increased at the fastest pace in 41 years, fell out of the 12-month movements and put downward pressure on the indexes.

 

Prices for durable goods rose at a slower pace year over year in September (+0.4%) compared with August (+1.4%). The purchase of new passenger vehicles index contributed the most to the slowdown, rising 1.7% year over year in September, following a 3.1% gain in August. The deceleration in the price of new passenger vehicles was partly attributable to improved inventory levels compared with a year ago.

Additionally, furniture prices (-4.6%) and household appliances (-2.3%) continued to decline year-over-year in September, contributing to the slowdown in durable goods. Consumers paid less on a year-over-year basis for air transportation (-21.1 %) in September, coinciding with a gradual increase in airline flights over the previous 12 months.

Other measures of core inflation followed by the Bank of Canada also decelerated.

Bottom Line

According to Bloomberg News calculations, “A three-month moving average of underlying price pressures that Governor Tiff Macklem has flagged as key to policymakers’ thinking fell to an annualized pace of 3.67%, from 4.29% a month earlier.”  While this is still well above the Bank’s 2% target, the global economy is slowing, the Canadian and US economies are slowing, and with any luck at all, the Bank of Canada might see inflation move to within its target range next year. However, the central bank will be cautious, refraining from rate cuts until the middle of next year. The full impact of rate hikes has yet to be felt. The next move by the Bank of Canada could be a rate cut, but not until next year.

Article courtesy of Dr. Sherry Cooper, Chief Economist, Dominion Lending Centres

 

Angela Calla is an 19-year award-winning woman of influence which sets her apart from the rest. 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 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. 

Understanding Responsibilities of being a Co Signer or Guarantor on a Mortgage

General Angela Calla 18 Sep

With changes in qualifying rates, increased housing prices, changes in relationship, it’s not uncommon for a parent, or sibling, aunt or cousin or even strangers to consider working together to achieve there home ownership dreams. The ability to buy a spouse out or even obtain a better mortgage renewal to improve your finances are most Canadians desire and that brings up a very important question.

What will the lenders approve for you to do?

Will they insist that all borrowers are co signer/borrowers? Or ,will they allow a party to the mortgage to go on as a guarantor? Is either of those what the other desires for as they plan for the future?

Being a co-signer or guarantor on a mortgage in British Columbia, Canada, can have significant financial, tax and legal implications. It’s important to understand the pros and cons of each role before making a decision. Here’s an overview of the advantages and disadvantages of being a co-signer vs. a guarantor:

 

Co-Signer:

Pros:

Helps Qualify for the Mortgage: Being a co-signer can help someone who might not otherwise qualify for a mortgage due to insufficient income or credit history. Your strong financial position can strengthen their application.

Shared Responsibility: As a co-signer, you share the responsibility for the mortgage payments and any associated debt. This can provide a sense of security for the primary borrower.

Builds Credit: If the mortgage is paid on time and in full, it can positively impact your credit score, as the account is reported on your credit history.

Cons:

Financial Responsibility: Co-signing makes you equally responsible for repaying the mortgage. If the primary borrower defaults, you’re obligated to cover the payments. This can lead to financial strain or damage your credit if payments are missed.

Risk to Assets: If the primary borrower defaults and the property is foreclosed upon, your assets may be at risk if the sale proceeds don’t cover the outstanding mortgage balance.

Limited Control: You have limited control over the property. You don’t have full ownership rights, but you’re responsible for the debt. This impacts your ability to obtain credit for borrowing for yourself in future as this loas is included in your ratios. Not living in the property also will trigger property transfer tax and future capital gains taxes potentially.

 

Guarantor:

Pros:

Assists with Qualification: As a guarantor, you provide a guarantee that the primary borrower will fulfill their mortgage obligations. This can help them secure the mortgage.

Limited Liability: Your financial liability is limited to the guarantee amount specified in the contract. You’re not automatically responsible for mortgage payments.

Maintain Ownership: Unlike co-signers, guarantors typically do not have any ownership stake in the property, so your personal assets are less likely to be at risk.

Cons:

Risk of Paying: While you’re not automatically responsible for payments, if the primary borrower defaults, you may be called upon to cover the mortgage, which can affect your financial stability. This also will be calculated in your ratios limiting future borrowing power. If not living in the property, property purchase tax and capital gains may be applicable

Credit Risk: Being a guarantor can impact your credit if the primary borrower defaults and you’re called upon to cover the mortgage payments.

Limited Control: Similar to co-signers, guarantors don’t have control or ownership rights over the property.

Difficulty Removing Guarantee: It can be challenging to remove your guarantee from the mortgage, as this typically requires the primary borrower to meet certain financial criteria and refinance the loan.

Before becoming a co-signer or guarantor, it’s crucial to carefully review the mortgage agreement and consider consulting with a legal and tax advisor. Additionally, open and honest communication with the primary borrower about their financial responsibility is essential to avoid potential conflicts and financial hardships down the road. It is the borrowers responsibility to ensure they have consulted the appropriate parties prior to funding a mortgage.

Angela Calla is an 19-year award-winning woman of influence which sets her apart from the rest. 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 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. 

Province Caps Annual Rent Increase

General Angela Calla 11 Sep

Province caps annual rent increase well below inflation

For the second consecutive year, B.C.’s maximum allowable rent increase is being set below the inflation rate. The maximum increase for 2024 will be 3.5%.

“Across the country, costs have been increasing — especially for housing — at a rate that’s unsustainable for many people,” said Ravi Kahlon, Minister of Housing. “We know that’s the case for both landlords and renters, and that’s why we’ve found a balance to protect renters while helping to keep rental units on the market.”

The rent cap of 3.5% is well below the 12-month average inflation rate of 5.6% and applies to rent increases with an effective date on or after Jan. 1, 2024. If landlords choose to increase rent, they must provide a full three months’ notice to tenants using the correct Notice of Rent Increase form. B.C. landlords can increase rent only once every 12 months.

The Province has been taking steps to support renters throughout British Columbia. Before 2018, the annual allowable rent increase was based on the inflation rate plus 2%. Following a recommendation by the Rental Housing Task Force, the rent increase was reduced to just the inflation rate. A rent increase freeze was put in place in 2020 and 2021 to support renters during the COVID-19 pandemic. To protect renters from high inflation in 2023, the Province capped rent increases at 2%, well below the 5.4% inflation rate that would have otherwise applied.

“With renters facing a possible rent increase of almost 6%, the government listened to the voice of renters and acted, and I’m so glad they have,” said Spencer Chandra Herbert, Premier’s Special liaison for Renters, former chair of the Rental Housing Task Force and MLA for Vancouver-West End. “We also know people renting out homes are facing increased costs and want to make sure they continue to make places available for long-term renters.”

The 2024 maximum allowable rent increase is significantly less than what it would have been prior to changes made by the Province in 2018 that limited rent increases to inflation. As inflation returns to normal levels, the Province intends to return to an annual rent increase that is tied to B.C.’s Consumer Price Index in future years. Under the previous government, maximum rent increases could include an additional 2% on top of inflation. This change has saved families hundreds of dollars.

Since 2017, the Province has taken steps to better protect renters, including banning illegal renovictions and strengthening the financial penalties for landlords who evict tenants in bad faith. A renoviction is an eviction that is carried out to renovate or repair a rental unit. 

In addition, government provided the Residential Tenancy Branch (RTB) with $15.6 million in additional funding to improve services and reduce delays. The capacity of the RTB’s Compliance and Enforcement Unit was also increased to allow for earlier interventions and to eliminate the need for hearings in the first place.

Quick Facts:

  • If a landlord served a tenant with a Notice of Rent Increase that takes effect in 2023 using the 2024 annual allowable rent increase, it is null and void and the tenant does not have to pay it. They must follow the set rent increase for 2023.
  • The maximum allowable rent increase is defined by the 12-month average per-cent change in the all-items Consumer Price Index for B.C. ending in July the year prior to the calendar year for which a rent increase takes effect.
  • For example, if a rent increase takes effect in 2025, the maximum allowable rent increase is the 12-month average per-cent change in the all-items Consumer Price Index for B.C. ending in July 2024.
  • The 2024 maximum increase for manufactured-home park tenancies will be 3.5%, plus a proportional amount for the change in local government levies and regulated utility fees.
  • The rent increase does not apply to commercial tenancies, non-profit housing tenancies where rent is geared to income, co-operative housing and some assisted-living facilities.

 

Angela Calla is an 19-year award-winning woman of influence which sets her apart from the rest. 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 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. 

Bank of Canada to hold rates steady on Sept. 6; home prices to fall in 2023: Reuters poll

General Angela Calla 30 Aug

BENGALURU, Aug 30 (Reuters) – The Bank of Canada is expected to hold its key interest rate steady at 5.00% on Sept. 6 and stay at that level through at least the end of March 2024, according to a majority of economists in a Reuters poll, with a small but growing minority expecting one more rate rise.

Inflation, which the Canadian central bank targets at 2%, rose more than expected to 3.3% in July, and further price rises continue to be the upside risk to expectations the BoC has already reached its terminal rate.

The housing market, where prices surged about 50% during the coronavirus pandemic and have fallen only about 10% from their peak, is also showing signs of a revival, with forecasters in a separate Reuters poll raising price expectations for this year.

For the time being, an expected slowdown in economic growth to 1.1% in the second quarter and a rise in the jobless rate gives Bank of Canada policymakers plenty of room to leave interest rates unchanged next week.

Thirty-one of 34 economists polled Aug. 24-30 expect no change to the central bank’s overnight rate (CABOCR=ECI), with the remaining three expecting a 25-basis-point rise. Interest rate futures are pricing in no change next week, but are nearly split over whether rates rise once more.

“Our base case call at the moment is for them to keep the overnight rate steady at 5.00% … (and) throughout the rest of this year,” said Claire Fan, an economist at RBC.

Fan pointed out that by the October meeting, policymakers will have two more job market and inflation reports to consider.

In the latest poll, eight of 34 economists expect one more rate rise to 5.25% by the end of this year, compared with only one in a July poll. In response to an additional question, 60% of respondents, 12 of 20, said the risk of the central bank raising rates once more from the current level was high.

“We expect the Bank will hold the overnight rate steady at 5.00% through mid-2024 as the full impact of past rate hikes helps push the economy into a moderate recession. Still, additional BoC rate hikes are possible if economic growth is stronger than we anticipate,” said Tony Stillo, the director of Canadian economics at Oxford Economics.

A majority of economists, 24 of 34, expect the central bank will keep its policy rate at the current level or higher until at least the end of March 2024. The median shows 50 basis points worth of cuts by the end of June next year, in line with expectations for the U.S. Federal Reserve.

A scenario in which Canadian interest rates stay higher for longer could increase pressure on highly-indebted households, with almost 20% of Canadian mortgages due for renewal next year.

The Aug. 14-29 poll of 13 property analysts forecast average home prices would fall 5.0% this year, less severe than the nearly 9% drop expected just three months ago. Analysts expected a 12% fall in home prices at the beginning of the year.

“We’re not anticipating further rate increases from the Bank of Canada, but that threat alone is enough to keep buyers on the sidelines for the rest of this year,” said Sal Guatieri, senior economist at BMO Capital Markets.

“It won’t be until early next year … when it becomes clear the bank’s next move is to lower rates, that we’ll see the housing market strengthening once again.”

The prospect of higher mortgage repayments on ever-more expensive property, along with record immigration, is expected to drive further demand for rentals.

When asked what will happen to average rents for the rest of 2023, all 10 analysts said they would either rise slightly (5) or rise significantly (5). A majority of analysts also said rental affordability would worsen over the coming year.

“I think rents will continue to rise across Canada because of the shortage of housing that we’re seeing and the underlying sturdy demand,” BMO’s Guatieri said.

(courtesy of reuters.com)

Angela Calla is an 19-year award-winning woman of influence which sets her apart from the rest. 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 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. 

Tax-Free Gifting to your Children with a Reverse Mortgage

General Angela Calla 30 Aug

Rising house prices and interest rates make it more challenging for young Canadians to start families, own homes, or save. Parents often step in to help, with 35% of first-time buyers receiving financial assistance in a lump sum payment toward their purchase, while 25% of buyers received support on their monthly mortgage payments. HomeEquity Bank offers CHIP Reverse Mortgage solutions for Canadians aged 55+ to leverage home equity to help their adult children.

How can us as Mortgage brokers help parents give their children a leg-up in today’s economic climate?

The Reverse Mortgage can help parents provide a tax-free gift to their children. Let’s take Robert and Jonathan as an example.

 

Angela Calla is an 19-year award-winning woman of influence which sets her apart from the rest. 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 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. 

Access Youth – The Bus is going out into the dark, helped by your contributions

General Angela Calla 30 Aug

 

 

 

Angela Calla is an 19-year award-winning woman of influence which sets her apart from the rest. 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 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. 

BC Wildfires Response – First National

General Angela Calla 21 Aug

As the devastating wildfires in British Columbia continue to pose a significant threat, we understand the importance of providing timely and accurate information to you and your clients. At First National, we are committed to supporting you during these challenging times and want to ensure that you and your clients are equipped with the necessary guidance to navigate through this situation effectively.
In the event that any of your clients are impacted by the ongoing wildfires, it is crucial to take immediate action. Here are the steps your clients will need to follow:

1. Contact their insurance company: Advise your clients to contact their insurance company as soon as possible to open a claim for any fire-related damages to their property. First National does not have the ability to open a claim directly on their behalf.

2. Inform First National: To enable us to provide the necessary support and assistance, your clients will need to contact First National to let us know that they’ve made a claim with their insurance company. First National can be reached by phone at 1.866.557.5509, or your clients can submit a ticket through My Mortgage. Your client will need to provide:
• The name of their insurance company
• The adjuster’s name and contact information
• The nature/scope of the damage their home has experienced
Once this information has been submitted, a dedicated First National Insurance Representative will contact your client to work closely with them and their insurer to ensure that all appropriate actions are taken.

There may be temporary or short-term financial assistance options available to eligible clients. We will work closely with them to explore any potential options.

Thank you for your continued trust and partnership. Together, we will ensure the well-being of your clients.

Angela Calla is an 19-year award-winning woman of influence which sets her apart from the rest. 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 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. 

Canadian Headline Inflation Rises to 3.3%, But Core Inflation Shows Promise

General Angela Calla 15 Aug

July Headline Inflation Rose to 3.3%, But Core Inflation Improved

The Consumer Price Index (CPI) rose 3.3% y/y in July, up from a 2.8% rise in June. The acceleration in headline inflation was widely expected due to a base-year effect on gasoline prices, as a sizeable monthly decline in July 2022 (-9.2%) no longer impacts the 12-month movement. Excluding gasoline, the CPI rose 4.1% from 4.0% in June.

The mortgage interest cost index (+30.6%) posted another record year-over-year gain and remained the most significant contributor to headline inflation. The all-items excluding mortgage interest cost index rose 2.4% in July.

The CPI rose 0.6% in July, following a 0.1% gain in June, mainly due to higher monthly prices for travel tours, with July being a peak travel month. On a seasonally adjusted monthly basis, the CPI rose 0.5%.

Food price inflation eased last month but remains sticky.​

The core inflation measures will hearten the Bank of Canada. CPI-trim eased to 3.6% y/y in July, continuing the downtrend following the November 2022 peak. CPI-median held steady at 3.7%.

The sizable slowdown in other economic indicators suggests that Q2 GDP growth slowed to roughly 1.0% in the second quarter–markedly below the 3.1% pace posted in Q1. Labour markets are also easing with a meaningful drop in job vacancies and a rising unemployment rate.

Bottom Line

It is now likely that when the Bank of Canada meets again on September 6, the Governing Council will announce a pause in rate hikes. They will promise to remain ever vigilant, but there is a good chance that the overnight policy rate has peaked at 5%–up 1900% since March 2022.

We will unlikely see the first drop in the policy rate until June of next year. The Bank will proceed slowly, taking rates down by 25 bp increments. The low in the policy rate will probably be around 3%, well above the pre-pandemic level of 1.75%.

(Article courtesy of Dr. Sherry Cooper, Chief Economist, Dominion Lending Centres)

 

Angela Calla is an 19-year award-winning woman of influence which sets her apart from the rest. 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 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. 

Weaker Than Expected Jobs Report Portends No Rate Hike By BoC

General Angela Calla 9 Aug

The Long-Awaited Labour Market Slowdown

The Canadian economy shed 6,400 jobs in July, far weaker than the 25,000 gain that was expected. The jobless rate was 5.5%, the third consecutive monthly rise. This likely improves the chances the Bank of Canada will remain on the sidelines in September.

Wage inflation, however, re-accelerated, moving back to 5.0%. This, combined with the continued stickiness in core inflation, will keep interest rates high for longer.

July’s data follows a surprise gain of 59,900 in June and a 17,300 loss in May, showing that employment is a notoriously volatile series. Nevertheless, it provides the fodder for Macklem to pause again after two consecutive rate hikes.

A downturn in June’s manufacturing, wholesale, and retail data has buoyed the Bank’s hopes that the 475 basis point rate hikes have slowed the economy, especially as preliminary figures for June showed the economy contracting for the first time this year. Inflation rates for the same month moderated to 2.8%, fitting within the central bank’s target range for the first time since March 2021.

 

Policymakers scrutinize indicators to determine if the current interest rates are sufficiently high to temper economic growth. They perceive substantial wage increases as inconsistent with their goal of reducing inflation to the 2% target. Even amidst recent significant strikes from workers demanding improved remuneration, the outlook hints at a potential slowdown in wage growth. This could be driven by increased immigration, which expands the workforce while the demand for labour diminishes.

 

Bottom Line

The chances of a rate hike on September 6 have diminished significantly. However, more data is yet to come with July inflation on August 15 and the Q2 GDP figure on September 1.

(Courtesy of Dr. Sherry Cooper –Chief Economist, Dominion Lending Centres)

Angela Calla is an 19-year award-winning woman of influence which sets her apart from the rest. 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 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. 

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