The markets have been busy this week, with U.S. stocks hitting record highs and investors shifting out of bonds into equities. July inflation in the U.S. came in at 2.7%, the same as the month before, but core inflation is still over 3%. That’s kept the Federal Reserve cautious, though U.S. Treasury Secretary Scott Bessent is urging them to move faster, calling for a half-percent rate cut in September and more cuts after that. Secretary Scott Bessent believes rates should be lowered by at least 1.5% to 1.75% in total, and that they might have started cutting already if recent data showing weaker job growth had been available sooner.
While this is U.S. news, it matters for Canadians because our central bank, the Bank of Canada, watches the Fed closely. If the Fed cuts aggressively, it eases pressure on our rates to stay high and may even encourage the Bank of Canada to speed up its own rate cuts. Right now, Canadian mortgage rates are still weighing heavily on buyers and homeowners renewing their mortgages. Many Canadians who bought or refinanced at rock-bottom rates a few years ago are now feeling the squeeze. A round of rate cuts here would mean lower fixed and variable mortgage rates, which could bring some much-needed breathing room. This chart below outlines how fixed rates have remained relatively flat over the last 6 to 9 months.
Interest Rate Chart
For current homeowners, especially those facing renewal in the next year or two, rate cuts could soften the shock of moving from an ultra-low mortgage rate to today’s higher environment. Refinancing might also become more appealing if rates drop enough to make it worth the switch. Sellers, meanwhile, could benefit from renewed market activity and stronger buyer demand.
New construction news:Â The value of national building permits fell 9.0% in June. This is of particular concern as the housing sector employees a substantial number of people and permits are indicative of future homes being built in the pipeline. The government has indicated it needs aggressive housing starts to fix the housing shortage and so this statistic points to further issues in this area.
If you need more information regarding mortgages or if you need any advice on your personal situation please contact our office at 604-556-3893 or email at alex.kotai@ymscanada.ca.
For more information on our mortgage products and your preferred Abbotsford Mortgage Broker please visit our website at www.ymscanada.ca.
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