On hold ... or holding on - Latest from the Bank of Canada's announcement

Rates are in a holding pattern for now.

The Bank of Canada made its April announcement, and to no one’s surprise, it held the overnight lending rate at 5%. There are many signs indicating Canada’s economy is weakening, like rising unemployment. Unemployment increased 0.3% last month to over 6% for the first time since 2017. The composition of employment is also a red flag as we continue to see weakness in private-sector employment being offset by growth in the public sector. There has been more hiring of Public Sector Workers & Civil Servants during Justin Trudeau’s term than any other Prime Minister in recent Canadian history. In the announcement, Tiff Macklem, the BoC governor, left the door open for a potential rate cut in June. This was a shift in language; after months of no indications of possible rate cuts, they are finally not denying the potential for rate cuts to come. The concern now is the diverging economies between Canada and the US. The US inflation numbers were announced this week, and America’s reaccelerating CPI data is leading many to believe that the Federal Reserve will be forced to hold rates in the US for the rest of the year. If the Bank of Canada starts lowering interest rates sooner, international money will flow to the higher rates in the U.S., raising the value of the U.S. buck relative to other currencies, such as the loonie. 30-Year

Amortizations is back, but for who …

Insured 30-year amortizations are returning after a 12-year absence, with a few strings attached. Starting August 1st, insured extended amortizations will be available to first-time buyers purchasing new construction only. That’s right; this is only for first-time buyers who are buying a property under a million dollars, purchasing for the primary residence, and only if it is new construction. First-time home buyers make up about 43% of the home buyers in Canada, and Insured Mortgages make up only 18% of all mortgages. When you factor in how many of those are for new construction primary residences - this may impact 2% of all home buyers. This seems more like political pandering than a real policy change. The idea is to help builders construct new homes while at the same time helping first-time home buyers enter the market. New construction has plummeted with high-interest rates and low demand. While the policy is well-intentioned, the actual impacts will only be felt by a small group of people.