I never thought I would hear the words “I think Justin’s a good person who’s doing a good job,” out of Donald Trump’s mouth, but there it is, and at the last minute NAFTA was settled with a stupid new name USMCA (Got to love how this was a key US negotiating point to put the USA first). The good news is that Canada escaped mostly intact and opening up the dairy industry to the US should lower prices to consumers.
September provided a mixed bag of news, including a loss 51k net jobs wiping out all of August gains, a rate increase by the Federal Reserve in the USA and the signing of the new NAFTA agreement, leading many to expected the Bank of Canada will increase rates at their next meeting in October. I agree there will be one more increase this year and one or two more in 2019 getting the Bank of Canada rate to either 2.25% or 2.5% by the end of 2019. The major banks have remained steady with their variable rates at prime – 0.8%, and monolines are still offering rates as low as low at 2.46% (prime – 1.24%) on insured and insurable mortgages. Many consumers are taking the variable option with such deep discounts. I still see the discount offered on variable mortgages to remain flat over the next few months, even though prime is increasing.
Fixed Rates are going up soon, with some lenders even increasing rates in the last 24 hours after the NAFTA deal was reached. In the past 30 days the 5 year bond yield has increase by 25bp, but lenders for the most part has not increased rates at the same pace. The last time bond yields were at 2.4%, was way back in 2011 and it only looks with the NAFTA agreement and threat of auto tariffs being dropped that they will continue to increase. Given all this “good” news I expect rates to increase by 20bp to 30bp over the next 30 days.
Shawn Stillman, CPA, CA
Mortgage Outlet Inc. #12628