Since March we have been treading water with rates, fixed rates have remained flat with bond yields not moving and variable rates have not changed as the BoC did not increase rates as expected in May. With an increase in inflation and flat job numbers there is still only a 50% chance of the BoC increasing rates at the July meeting.
As expected The Bank of Canada did not change rates in May, but the comments with their decision lead many to expect an increase at the meeting in July. However, the US decided to impose tariffs on Canadian steel and aluminum the next day and it clear that NAFTA is on life support so its really anyone’s guess what will happen over the next 2 months. Given the slowing pace of rate increases it looks like there might be only one more this year. The big surprise in the mortgage market was that all the major banks were offering prime – 1% or better, and monolines are still offering rates as low as low at 2.16% (prime – 1.29%) on insured and insurable mortgages. Many consumers are taking the variable option with such deep discounts. I still see the variable rates flat over the next few months until the next BoC increase whenever that might happen.
Based on a flat May job report, a potential NAFTA implosion and pipeline wars between Alberta and BC there are a lot of uncertainties in the market and as such bond yields are exactly the same as they were 90 days ago. As bond yields are down from their mid May highs I can see lenders lowing their fixed rates slightly in June by 5 or 10bp to increase deal flow.