Stress Test Changes

General Angela Calla 22 Nov

What is a stress test?

You may have heard the term ‘stress test’ but didn’t really know what that means.  Essentially, in June of 2021 the federal government required that any mortgage qualify at a rate of 5.25% or 2% higher than the contract value with the attempt to protect borrowers if rates increase.  With rates well above the 5.25%, borrowers are now being stress tested at current rates, plus 2% which in most cases if 8% or higher.

 

What’s the change?

The update will remove the stress test requirement for insured mortgage renewals only, including in cases where someone is switching lenders.

 

How does that make things different for borrowers?

Currently, if you’re worried about not being able to pass the stress test, you may feel pressure to stay with your existing lender, even if they don’t have the most competitive rates.

 

Don’t make this mistake, lenders are offering higher rates and not great terms upon renewal and in our ever-changing market that is the difference in your wealth protection and creation as our market shift.

Need more information, reach out to us at callateam@countoncalla.ca.

 

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. 

Mortgage Renewal Review

General Angela Calla 22 Nov

Friends don’t let friends renew their mortgage without talking to our team first!

One of our clients was out for a hike with a friend, and of course they were talking mortgages, inflation, and family.  In this discussion, they discussed how long it took for them to get an approval from their bank and how high the rate appeared to be.

They made an introduction to us, and we quickly were able to see this client qualified for a better rate.

In summary, from that simple review they saved $169 in monthly cashflow totaling $10,140.00 over the next 5 years of money in your pocket.  This change increased the amount paid to the principal by $3,868 and reduced the interest paid by $14,048.00.  This is a swing of saving of $17,916 over the term!

When we get the opportunity to review any mortgage, you can count on, unbiased advice, options, privacy, credit protection and if rates go down prior to funding, we automatically review every file before closing to ensure the lowest cost of borrowing for your profile. If its best for you to stay with your existing lender or plan, that is exactly what we reinforce for you.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 Fell to 3.1% (y/y) In October, Ensuring the BoC Holds Rates Steady

General Angela Calla 22 Nov

Good News On the Inflation Front Suggests Policy Rates Have Peaked

Today’s inflation report showed a continued improvement, mainly due to falling year-over-year (y/y) gasoline prices. The October Consumer Price Index (CPI) rose 3.1% y/y, down from the 3.8% rise in September. There were no surprises here, so markets moved little on the news. Excluding gasoline, the CPI rose 3.6% in October, compared to 3.7% the month before.

The most significant contributors to inflation remain mortgage interest costs, food purchased at stores, and rent.
Canadians continued to feel the impact of rising rent prices, which grew faster (y/y) in October (+8.2%) than in September (+7.3%). The national increase reflected acceleration across most provinces. The most significant increases in rent prices were seen in Nova Scotia (+14.6%), Alberta (+9.9%), British Columbia (+9.1%) and Quebec (+9.1%).
Property taxes and other special charges, priced annually in October, rose 4.9% yearly, compared with a 3.6% increase in October 2022. The national increase in October 2023 was the largest since October 1992, with homeowners paying more in all but one province, as municipalities required larger budgets to cover rising costs. Property taxes in Manitoba (-0.3%) declined for the third consecutive year, mainly due to reduced provincial education tax.

While goods prices decelerated by -1.6% as prices at the pump fell, prices for services rose 4.6% last month, primarily driven by higher prices for travel tours, rent and property taxes.

While grocery prices remained elevated, they also continued their trend of slower year-over-year growth, with a 5.4% increase in October following a 5.8% gain in September. While deceleration continued to be broad-based, fresh vegetables (+5.0%) contributed the most to the slowdown.

Excluding food and energy, inflation fell to 2.7% in October, down a tick from the September reading. Two other inflation measures closely tracked by the Bank of Canada–the so-called trim and median core rates–also eased, averaging 3.6% from an upwardly revised 3.8% a month earlier.

Bottom Line

According to Bloomberg calculations, another critical measure, a three-month moving average of underlying price pressures, fell to an annualized pace of 2.96% from 3.67% a month earlier. It’s an important metric because Bank of Canada Governor Tiff Macklem has said policymakers are tracking it closely to understand inflation trends.

Today’s news shows that tighter monetary policy is working to bring down the inflation rate. In its Monetary Policy Report last month, the Bank of Canada expected the CPI to average 3.5% through mid-2024. Cutting its economic forecast, the Bank forecasted it would hit its 2% inflation target in the second half of 2025.

Given today’s data and the likely significant slowdown in Q3 GDP growth, released on November 30, and the Labour Force Survey for November the following day, policy rates have peaked. Governor Tiff Macklem will give a speech on the cost of high inflation in New Brunswick tomorrow, and the subsequent decision date for the Governing Council is December 6th. The Bank’s inflation-chopping rhetoric may be relatively hawkish, but the expectation of rate cuts could spur the spring housing market.

The economists at BMO have pointed out that “three provinces now have an inflation rate below 2%, while only three are above 3%, so much of the country is already seeing serious signs of stabilization. (Unfortunately, the two largest provinces have the fastest inflation rates—Quebec at 4.2% and Ontario at 3.3%).” There is no need for the Bank to raise rates again, and they could begin to cut interest rates in the second quarter of 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. 

Calling all prospective First Time want to be HomeOwners, Newcomers, and Realtors!

General Angela Calla 20 Nov

I hope you’re talking about the First Home Savings Account (FHSA)!

If you and your partner each open a First Home Savings Account (FHSA) and contribute the maximum contribution amount for 2023 of $8,000, you’ll receive a $16,000 tax deduction that you can use to reduce your taxable income. Don’t delay!  Not opening one this year will loose the contribution room.

When you buy your first home, you’ll be able to withdrawal your entire FHSA balance tax-free and not be required to repay any withdrawals like you would when using a Home Buyers Plan (HBP) through a Registered Retirement Savings Plan (RRSP).

If you don’t end up buying a house? No problem, you can roll your FHSA balance into your RRSP and not pay any taxes or fees.

Regardless if you’re buying your first home next week, next month or next year, our office would love to share more information on how a FHSA can help you accomplish your goal of buying your first home. 🙋🏼‍♂️🏡

Let’s make sure we elevate financial literacy for our fellow Canadians

Email: angela@countoncalla.ca

 

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. 

Client Appreciation Movie Night – November 9, 2023

General Angela Calla 20 Nov

We had the best time taking over the entire 3 theatres and having a cozy movie night with some of our clients that could make it out. My heart ❤️ is so full to be able to share a flick, some laughs, hugs and appreciation to be a part of our mortgage family. Going into my 20th year in business, I lead with my heart and love to share doing my favourite things together.  From food, to movies and events! Other fun facts about the evening because we have the coolest clients ever: Pizza Peels are used as paddles in some circumstances 🤣 and we even got to be the first movie one of our clients ever got to go to. One thing I missed we all had a good laugh about is I did not sing the Anthem to welcome everyone into the theatre 🎭 🤣🤣

 

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. 

November Newsletter

General Angela Calla 7 Nov

Welcome to the November issue of my monthly newsletter!

As we get closer to the end of the year, we have some tips for your upcoming mortgage renewal, plus how to winterize your home!! Also, hear the economic forecast straight from our Chief Economist, Dr. Sherry Cooper.

Mortgage Renewal Benefits

Is your mortgage coming up for renewal? Do you know about all the incredible options renewing your mortgage can afford you?

If not, I have all the details here on how to make your mortgage renewal work for you as we start to think about 2024.

Get a Better Rate
Are you aware that when you receive notice that your mortgage is coming up for renewal, this is the best time to shop around for a more favourable interest rate? At renewal time, it is easy to shop around or switch lenders for a preferable interest rate as it doesn’t break your mortgage. With interest rates expected to come down as we move into the New Year, taking some time to reach out to me and shopping the market could help save you money!

Consolidate Debt
Renewal time is also a great time to take a look at your existing debt and determine whether or not you want to consolidate it onto your mortgage. For some, this means consolidating your holiday credit card debt into your mortgage, for others it could be car loans, education, etc. Regardless of the type of debt, consolidating into your mortgage allows for one easy payment instead of juggling multiple loans. Plus, in most cases, the interest rate on your mortgage is less than you would be charged with credit card companies.

Start on that Reno
Do you have projects around the house you’ve been dying to get started on? Renewal time is a great opportunity for you to look at utilizing some of your home equity to help with home renovations so you can finally have that dream kitchen, updated bathroom, OR you can even utilize it to purchase a vacation property!

Change Your Mortgage Product
Are you not happy with your existing mortgage product? Perhaps you’re finding that your variable-rate or adjustable-rate mortgages are fluctuating too much and you want to lock in! Alternatively, maybe you want to switch to variable as interest rates start to level out. You can also utilize your renewal time to take advantage of a different payment or amortization schedule to help pay off your mortgage faster!

Change Your Lender
Not happy with your current lender? Perhaps a different bank has a lower rate or a mortgage product with terms that better suit your needs. A mortgage renewal is a great time to switch to a different bank or credit union to ensure that you are getting the value you want out of your mortgage if you are finding that your needs are not currently being met.

Regardless of how you feel about your current mortgage and what changes you may want to make, if your mortgage is coming up for renewal or is ready for renewal, please don’t hesitate to reach out to me! I’d be happy to discuss your situation and review any changes that would be beneficial for you to reach your goals; from shopping for new rates or utilizing that equity! I can help you find the best option for where you are at in your life now and help you to ensure future financial success.

Winterizing Your Home

We Canadians are no strangers to the chill of the winter season!

As we shift into the final few months of 2023, now is a great time to check your home before the cold front hits. Below I have included a few tips that could help you save on bills, prevent future repair costs, and be more comfortable all winter long.

  • Inspect Your Fireplace: There is no better time than now to have your fireplace inspected to ensure optimal efficiency and heat output. Whether you have a wood-burning, gas, or electrical fireplace, proper maintenance can go a long way for your heating bill!
  • Maintain Your Furnace: While you’re having your fireplace inspected, don’t forget to maintain your furnace! If your furnace is getting up there in age, you may want to also consider replacing it as typically newer furnaces are more efficient than the previous generation, which could help save on energy costs. Either way, ensuring your furnace is in working order will guarantee top output and a cozy winter!
  • Clean The Gutters: The last thing you want is your gutters to be clogged when the snow hits! Cleaning your gutters from Fall leaves and other debris will help ensure proper drainage for melting snow. For those who want to go the extra step, consider gutter guards which can help keep out unwanted objects from your gutters.
  • Examine Your Roof: While you’re prepping your gutters for the winter, it is a good idea to also examine your roof. A few things to look for include broken or missing shingles, damaged flashing, staining from water leakage, and ventilation.
  • Consider a Programmable Thermostat: According to experts, a degree drop in your home temperature can measure up to 1% on your heating bill. For those of us who don’t like to have cold feet all season, smart thermostats are a great way to keep warm and optimize your energy savings! Ideally, you want to set your thermostat to turn on in the morning, off when you go to work, and back on in the evening to ensure a toasty welcome.
  • Insulate Windows: Always be sure to check your windows for any gaps or water leakage and get them resealed as soon as possible. If you live in a particularly cold location, consider swapping out your windows to double-paned glass for an added layer of insulation. Another tip to keep the cold from seeping in through your windows is swapping out your curtains for a heavier, thermal-lined set which can do wonders!
  • Check Your Pipes: Checking pipe joints for leaks that could cause rot and damage will save you trouble in the future. Repair any cracks you find, especially those around electrical outlets and alarm system lines. You can also consider foam pipe insulation, which is fairly easy to install and could help prevent energy loss and potential water damage from frozen pipes.
  • Stock Up on Supplies: There are a few things you might want to consider stocking up on ahead of time for the winter season, such as flashlights and batteries, ice melt, extra pet food and canned goods, and an emergency storm kit that includes an extra flashlight, candles, portable radio, water, and snacks.

With a little preparation, you can keep your home in good shape without needing to feel the cold bite of winter!

Economic Insights from Dr. Sherry Cooper

The Canadian economy is showing continued signs of slowing as inflation decelerates. This opens the door for a continued pause in rate hikes. Indeed, with any luck, the Bank might have finished its tightening cycle.

One more rate hike is possible, especially if continued Middle East tensions lead to a sustained oil price increase, but the odds are against it.

This does not suggest, however, that interest rates will decline anytime soon. Headline inflation in September was posted at a 3.8% year-over-year pace, well above the Bank’s 2% target. Wage inflation remains at roughly 5%, and inflation expectations remain high.

However, the economy is slowing, and excess demand in labour markets is waning. Third-quarter economic growth is likely to be less than 0.5%, and leading economic indicators are pointing to a further slowdown in the final quarter of this year and the first quarter of 2024.

Canadian consumers, weighed down by record debt loads and high prices, are tightening their purse strings. Savings rates have fallen, and retail sales per capita have slowed markedly. Sales were down in six subsectors: car dealers, furniture, electronics, and appliance retailers.

Canadians are quickly rolling back their purchases of goods as more households face mortgage payment renewals. The Bank of Canada consumer survey suggested that families expect more adverse effects ahead as an increasing volume of mortgages come due for renewal or refinancing.

Businesses are also tightening their belts as the recent Bank of Canada Business Outlook survey showed considerable weakness. The Bank is counting on softening demand to translate into a slower inflation rate in the coming months.

I expect the central bank to cut interest rates in mid-2024, gradually taking the overnight policy rate down. In the meantime, housing markets will continue seeing a surge in new listings and more favourable buying opportunities.

 

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. 

Should you refinance your mortgage with todays high rates? 

General Angela Calla 20 Oct

Should you refinance your mortgage with todays high rates?

Refinancing your mortgage can be an excellent way to pay off high-interest credit card and other consumer debt, improve your household cash flow, complete projects/home renovations, contribute to your retirement plan or children’s education, and many other purposes.

We have dedicated ourselves to education over the last 20 years as Canadians prior to understanding the true cost of borrowing believed rates should be the primary focus, but not the be-all-end-all, and does require some perspective.  I write all about this in my book, The Mortgage Code – that can be purchased here on Amazon or Audible.

We had one client when purchasing the family home say “I’d sell my mother-in-law to save an extra 0.25% on my mortgage rate.”

However, after 5 or 10 years of being a homeowner, there are almost always unforeseen expenses such as, but not limited to, kids, pets, repairs, family, bills, and the list goes on and on and on.   When you are facing high consumer credit card balances and interest rates, we will argue that cash flow becomes the top priority and not the mortgage interest rate.  While mortgage rate will always be a factor, it becomes less and less important.

In 2023, inflation and rising interest rates have put so much pressure on household budgets (especially if you have a variable or adjustable rate mortgage).

If your home has increased in value and you have enough equity in your property, you may be able to consolidate all of your debt into a new mortgage and help your household cash flow.

Keep in mind, that there will be costs associated when refinancing your mortgage.

1.  Your existing mortgage will most likely have at minimum a 3-month interest penalty

2.  There may and most likely be a legal cost to re-register the mortgage.

3.  An appraisal may be required

4. Long-term interest costs.  In most refinances, more time will be added to the mortgage, the mortgage payment will increase to accommodate all of the debt payouts and the long-term interest cost will also increase.

You will need to weigh the costs and the benefits to see what is right for your own personal situation.  However, if you can free up $1,000 – $3,000 per month in household cash flow, it could be a real benefit to your family and their lifestyle.

Contact us directly to learn what is possible and specifically applicable to you.

Example of current rates *OAC:

5-year fixed insured: 5.39%

5-year conventional: 5.94%

5-year variable Insured – 6.30%

HELOC:  Prime + 0% or 7.20%

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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. 

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. 

Speaking Engagements – Angela Calla Mortgage Team

General Angela Calla 18 Oct

This October The Angela Calla Mortgage Team was speaking with a group of lawyers whom areas of practice range from

Real Estate Conveyancing, Family Law, Wills & Estates and Corporate Law

In this high level overview of our everchanging economic market we discussed

How lenders determine and offer interest rates

What the difference is among lenders and how that impacts borrowers long term

How those who are Navigating Divorce can find better solutions and work on what matters for there future qualifications.

How Self Employed Canadians don’t have to put purchases on hold and are ready sooner rather than later with the right mortgage product, and math breakdown.

How Debt Consolidation benefits borrowers cashflow

How a Reverse Mortgage can best to utilized as a wealth building and protecting tool, to navigate divorce, help children, help business owners, and cover healthcare needs while

Why Mortgage Insurance s offered from lenders, broker and planners and how they differ. Also its usage with Buy & Sell Agreements and review in Divorce /Estate Planning

What the banks agenda is with certain offerings vs actual consumer value.

Private Mortgages, when should someone not take them, or when should they.

If you are a professional firm who advises clients on any of the above, please reach out to us directly for educational opportunities for the clients you support to improve the financial literacy of our community

 

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. 

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