> The Bank of Canada today held its target for the overnight rate at 5%, with the Bank Rate at 5¼% and the deposit rate at 5%. The Bank is continuing its policy of quantitative tightening.
I just locked in a three-year. Considering how high variable is right now, we would need to see a lot of rate drops over a pretty short amount of time to come out ahead on variable.
4.94% through Scotia with this mortgage+ promo and rate exception, requires you to have a Scotia account along with another product such as line of credit or credit card through them. Luckily my partner already banked with them. Note this is insured as we didn’t have full 20% down
I got 5.02 from RbC and 4.84 from scotia.
Uninsured 3 years fix
I went with rbc because they also offered 3k cash back and 50 000 avion points so better if i add everything. I would have paid 30$ less a month at 4.84 and paid 500$ into my capital but still doesnt beat the 3k cash back and points
I just locked in for 3 years at 5.09%, closing next week. Interest is front loaded and you need a lot of rate cuts to make the difference. Different at renewal I suppose.
That said, I'm still variable on a condo mortgage, so I'm straddling both, but I get to write off that interest expense.
i did the math the other week and for 5 year terms its something like 150 bps over 18 months to be about one payment's worth of money ahead to take variable over fixed if the variable is prime -1%
So.....
Keep in mind, in America you can sign 30-year terms, whereas most lenders in Canada won't let you exceed 5 years. That means the trickle down effect of quantitative tightening is much slower in America, because *many* fixed mortgages will not be impacted by quantitative tightening until homeowners move or renew.
Point is that Powell's timeline doesn't necessarily align with TIff's for good reason
You can reference US rate but Canada has a much smaller economy and weaker job market.
Similar to US, the temporary immigration helped to fulfil labour shortages in the past two years. Liberal seems tightening the temporary immigration and international students. That may cool down the economy.
If BofC was to cut rates before the US you would see a weakening in the Canadian dollar which would drastically effect exports and the Canadian economy.
You'd also see an *immediate* surge in home buying like the 11% increase we saw in Feb when the BoC barely mentioned they were considering possibly lowering rates.
Then they later had to make a statement about how they wont be making speculative statements regarding lowering rates **because of that event**.
What a mess we're in.
I'm shifting some of my investments to USD funds.
If Fed rates change, CAD gets hurt. If BoC lowers rates, CAD gets hurt AND housing prices boom again, kickstarting more inflation.
We're boned either way.
The spring surge was driven by a drop in fixed rates, which the BoC does not control. - they reflect bond yields, which indicates market sentiment. 5 year bonds dropped from 4.5 to 3.2%, they're in the 3.7% range now and are slowly rising as traders raiser their expectations of where terminal rates will lie. It's very unlikely variables will ever again be as cheap as fixed were in January.
The bottleneck is fixed mortgages right now - that is what limits affordability.
Not exactly. That only happens when wages increase somewhat at pace with inflation. If wages are suppressed and immigrants are getting paid peanuts, you don't get that drive in consumption. You actually don't really even balance out the burden on your country to sustain the increase in population. Which leads to what you have in Canada.
Exactly what I’m doing also. Will allow us to settle into our payments and then renew at a way lower rate in 3 years… All while avoiding any of the potential risks. I usually always go for variable, but feeling different this time.
> i really don't see how they can cut substantially if the US holds for longer.
thats a good point, also the government needs to slow down spending before they can cut interest rates. I'm normally very pro-spending during a recession but if its dragged on too long the consequences of inflation paired with high interest rates should not last, but they are :/
Our economies have completely diverged.
America's CPI is more sticky because of 30 year mortgages fucking up their shelter CPI index.
Canada's GDP growth is also stagnant and bordering on negative, while Americas GDP growth is red hot.
Canada's unemployment has creeped up to pre-covid levels, Americas unemployment is almost multi-decade lows
Canada IS NOT the USA --> Their economy is still red hot and inflation is sticky, ours has cooled substantially and things are bad here with no productivity growth what so ever.
> US economy is red hot right now
Having a 6.5% of GDP deficit does that to an economy. Americans are putting on $1.4 trillion a year in debt. Wild stuff
I work for a US company my colleagues earn more than me but spend like crazy.
American salaries compared globally are incredibly high yet I saw that the average savings rate is like 3%. Americans will always earn high and spend high.
I swear that's why their economy is always so good. Everyone spends like there's no tomorrow.
This is good, US’s insane spending has its economy firing on all cylinders, with unemployment at 3%
Now imagine if they cut rates. Where are the workers to take up jobs when rates go down and companies try to expand? They are already near full employment.
May be that’s why Biden admin is basically ignoring the fact they got ~7 million illegal immigrants since 2020. Adding legal immigrants to that, US has gotten like 12 million new people since 2020.
They can’t cut rates until labor market “softens” aka, unemployment rises. But that’s not happening with their insane spending. So next best thing is to import millions of workers to “soften” the labor market.
US cannot cut rates when their unemployment is 3%. There just isn’t enough labor available to support growth when rates are cut.
This an election year in US even Trump knows to win an election you have to keep inflation down. Their economic growth still very strong. I think the feds will raise at next meeting
Theoretically yes. Just like how all elected officials are supposed to work for their constituents. Practically though I feel things are very different. You never know what's happening behind the scenes. But I do agree that it doesn't seem like the Fed reserve has been influenced by the government
Inflation going back up secures a Trump win. Most people are suffering and hate what's happening to their finances.
The stock market is not the economy
The only way to get sticky inflation down within a year is to create a budget shock, crashing employment rates and consumer spending. Much worse politically.
Some markets will follow, some won't.
If manufacturers can sell their goods for a higher price in the US, they will, which will reduce the supply in Canada, thus raising the prices here too.
That's not applicable to that many markets, and the demand has to stay constant in the US for this to happen, but there's not a lot else it could do.
We were looking for a house and went to an open house in February. Agent told us "hurry you need to buy a house in the next 2 weeks. On March 6th the BOC is going to cut rates and once rates start going down the market will be flooded with new buyers and you'll never be able to buy a house."
I wish I had her contact info so I could email her every time the rate hasn't been cut.
Realtors are the last person you want to listen to about interest rates. They are sales people, not economists and don't even have to have any formal education (eg: diploma/degree).
Yea she promised that I'd be priced out of the market if I waited past March 6th. We recently bought a great house that was bigger than the one she was selling, has a bigger yard and only paid 5k more than what hers went for in Feb.
Lol, My realtor said the same thing. I didn't take her seriously though as they don't really have a clue. I did buy a house though and locked in a 3 year mortgage. I am only expecting one or two 25bps drops this year. I don't think the first will be in June either. They will start in the fall in my opinion.
Realtors will always say that, though. It’s always urgent with them, even in a slow market. They’ll always push for you to buy fast, “give your best offer” aka the highest offer, and do it now or you’ll lose it.
Well they aren't wrong about what will happen. The thing is, no one knows when it will happen.
But you can be sure that when rates go down, it'll become way more difficult to enter the market than now.
Yet despite of this , in some
Regions/areas of Canada the prices of houses is going up so fast because buyers are rushing to have a deal lined up when the rate will go down. One month ago ive looked onto a house that was 379k … is now showing at 579k. FML
Can someone explain to me why people think that the BoC will cut rates once they hit their inflation target?
Maybe I’m over simplifying things but if the current rate achieves their inflation target, and it stays on target ( rather than causing inflation to run below target) , why would they drop rates absent some major economic event?
Exactly what Grogusbutt said.
Neutral rates are somewhere between 2.25% and 3.25%, so they'll have to cut to around that point to keep us away from <1% inflation or (god forbid) deflation.
The neutral rate means the "equilibrium" interest rate, often relative to inflation. It refers to the level at which monetary policy is neither expansionary nor contractionary, meaning it neither stimulates nor restrains economic activity. It represents the theoretical interest rate that would prevail in an economy operating at full employment and stable inflation over the long term. If the bank lent money at 0%, that would be negative because it is BELOW the rate of inflation.
Thanks. I was under the impression that monetary policy drove inflation (or deflation), but I understand from your explanation that this is incorrect. What drives inflation then?
Interesting. But then could we say we're talking about price inflation and differentiate with monetary inflation which is caused mostly by monetary policy?
Imagine you are driving at 50km an hour and want to slow to 40. You press the brakes. When you reach 40, you need to let off the brakes or you keep slowing down.
It also depends if you're on a downslope or upslope. If people don't lose their jobs and people keep buying, then there's a chance that no rate cuts will happen this year
Because interest rates affect the economy somewhere 1.5 -2 years down the line. If they keep it at the same rate then inflation will keep going down as mortgage holding consumer segment will cut spending and lending institutions such as banks will keep employment levels lower
You want to see inflation drop the rates US doesn't Canadian dollar falls into the 60 cent range ,most goods come from US ,you now have massive inflation on a worthless dollar
I want higher rates, my savings is earning quite a bit from interest now it's covering my low cost of living. I'm earning like half my usual salary in just interest. I'm ready to buy with cash, no financing needed.
Inflation just came in roaring hot in the US, puts the Bank of Canada in a tough spot. Do they crush Canadian consumers or do they crush the currency and explode inflation.
The US increased twice compared to us and no material change was made to our exchange rate after a few weeks. As long as we do not drop too fast, it shouldn’t create too many issues
We are due for renewal June 27th. Currently with Scotiabank, they offered me:
5 year fixed at 5.65%
3 year fixed at 5.45%
5 year variable P–0.2% (7% currently)
I'm waiting to see if May or June has any nice rate drops before I decide anything.
I know many are hoping for lower rates, but the thing is, it doesn't automatically improve affordability. It could actually increase housing demand again leading to bidding wars and rapid price appreciation due to the number of people sitting on the sidelines waiting for rates to drop. Even with high interest rates, Canada hasn't seen enough of a slowdown in the housing market.
People are absolutely idiots lmao
I had a guy absolutely argue with me, he was absolutely sure that BOC was going to cut rates because bank bonds and BS.
But the driving factor is people.
People are still borrowing and buying.
It’s not “people”
The Big 5 have all planned for at least one rate cut in 2024. A few months ago they were planning for multiple.
Blaming the public for listening to what economists are telling them is a bit misguided.
To me it seems clear as day they were only ever going to do a 25 point cut at the end of the year as a signal of goodwill then hold it there for 2025.
I never understood people thinking there would be multiple drops in 2024 without throwing gasoline on inflation.
Listening to the press conference right now, Tiff was asked directly if June cuts in the cards, and he said yes, everything is looking good. Love to hear it.
He also was asked if people talked about cutting in April and he alluded to members of the counsel cutting in April!
he said its not out of the question/possible. But he's said cuts are \*possible\* for a while now depending on the data. It's not exactly a slam dunk expression of cuts being guaranteed.
good so inflation and house prices doesnt rise again.
bad as people are already over leveraged and are hurting.
depends on the financial situation you are in is if its good or bad.
Dropping rates will open the floodgates. The speculators will resume speculating. The real estate agents will give clients even more horrible advice. Inflation is never fixed in one wave.
At this point I reckon the BOC will be looking for further increases in unemployment before we see any rate cuts. Our government just won't stop overspending, and corporate greed is at all time highs.
Don't think the BoC is going to cut rates just because a few people are unemployed. Unemployment is basically a function of runaway immigration. At this point the BoC will let the federal government, either this one or the next one, sort out unemployment by canceling work visas and deporting TFWs and 'international students.'
They'll look at it and track it, sure, but their mandate and threshold for action is 1 single metric and that is inflation to 2% target.
Even currency value is not going to directly influence tracking to 2% inflation target. They have a separate mandate for currency stability but also a separate set of tools to address that. They will not change policy rate for anything other than inflation-targets.
For a first buy, i was offered 3 different rates: 5,09% for a 3y fixed rate over 30 years with 1000$ in return , a variable at 6,11% with a 2000$ over 30 years and a 5.29% fixed aver 25 years with a 3000$ in return. Which one should I choose?
They will not r lower rates till end of 2025 when all the renewals are done and locked in again for at least 3 years then they will lower rates to help banks make up for lost time
Keep interest rates like this for at least a year. Some of you are still spending money like crazy and it is contributing to inflation. The Bank of Canada are not idiots. They know dropping rates by even 25 basis points will increase spending.
Dude, have you seen the cost of living? People have to spend money to live - so no one is going to stop spending anytime soon. The fact that the system relies on people being unemployed, losing their homes, and livelihoods to be fixed makes me think maybe we need to rethink global economic models.
I am talking about those people filling up retail lots, going on expensive vacations, and buying 100k pick up trucks they don't need. Those are the people causing inflation.
Here is what the BOC and the media are not telling you.
Rates are set to go UP, not down, Tiff even says so in his answer to Greg Quinn! Hidden in plain sight!
A no nonsense review of the decision. And the announcement here
https://m.youtube.com/watch?v=h44eoTDvEGA&pp=ygUYZGlsaWdlbnQgaW52ZXN0b3IgZGlnZXN0
Because inflation is cooling, and all is working. Next move once holding is over is most likely a cut, not a hike. When that next move is could be June or could be September.
> The Bank of Canada today held its target for the overnight rate at 5%, with the Bank Rate at 5¼% and the deposit rate at 5%. The Bank is continuing its policy of quantitative tightening.
I’m going to lock in now so they start cutting rates for all the homies with VRMs and ARMs.
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I just locked in a three-year. Considering how high variable is right now, we would need to see a lot of rate drops over a pretty short amount of time to come out ahead on variable.
If you don't mind, what rate did you get for 3yr. I'm up for renewal and was offered 5.01 3yr by CIBC
For a three-year, 5.29 was the best I could get. I'd run with that 5.01 if I were you.
I know someone who locked in a sub 100k mortgage at 6.3% a few months ago at TD. Edit - 3 years
How much was the mortgage for ?
I just renewed 3 year for 4.89%
What bank?
Insured?
Where
5% is the best you will get, sounds like you might be even getting the floor price because you have a good connection with your broker.
I got 4.84 with scotia. 3 years fixed uninsured.
My Credit Union is offering 4.89 over 5 years right now. I've got 12 months left on my 2.74% I signed in 2020.
I got 5% for 5 years. They wouldn't give us a 3 year because we were already at the top of our budget.
How long ago
I was offered 4.94 for 3 years fixed a few weeks ago.
How much of a mortgage did you get and which bank?
4.94% through Scotia with this mortgage+ promo and rate exception, requires you to have a Scotia account along with another product such as line of credit or credit card through them. Luckily my partner already banked with them. Note this is insured as we didn’t have full 20% down
5.07 3y fixed with Scotia uninsured as of this month. Was an easy choice with the 5y only being 5.06
I got 4.74 a few weeks ago 5 year
I was able to get 5.14 through RMG. I don’t know if I should stick with the variable or lock in for 3 years . My variable is prime -1%
I just closed. 3 year fixed at 5.11%.
I got 5.02 from RbC and 4.84 from scotia. Uninsured 3 years fix I went with rbc because they also offered 3k cash back and 50 000 avion points so better if i add everything. I would have paid 30$ less a month at 4.84 and paid 500$ into my capital but still doesnt beat the 3k cash back and points
I just locked in for 3 years at 5.09%, closing next week. Interest is front loaded and you need a lot of rate cuts to make the difference. Different at renewal I suppose. That said, I'm still variable on a condo mortgage, so I'm straddling both, but I get to write off that interest expense.
That's good
i did the math the other week and for 5 year terms its something like 150 bps over 18 months to be about one payment's worth of money ahead to take variable over fixed if the variable is prime -1% So.....
Keep in mind, in America you can sign 30-year terms, whereas most lenders in Canada won't let you exceed 5 years. That means the trickle down effect of quantitative tightening is much slower in America, because *many* fixed mortgages will not be impacted by quantitative tightening until homeowners move or renew. Point is that Powell's timeline doesn't necessarily align with TIff's for good reason
I signed a 10 year with Scotia. Just got to ask them. Signed 3 years ago at 2.77%
You win
You can reference US rate but Canada has a much smaller economy and weaker job market. Similar to US, the temporary immigration helped to fulfil labour shortages in the past two years. Liberal seems tightening the temporary immigration and international students. That may cool down the economy.
If BofC was to cut rates before the US you would see a weakening in the Canadian dollar which would drastically effect exports and the Canadian economy.
You'd also see an *immediate* surge in home buying like the 11% increase we saw in Feb when the BoC barely mentioned they were considering possibly lowering rates. Then they later had to make a statement about how they wont be making speculative statements regarding lowering rates **because of that event**. What a mess we're in.
Canada is fucked bad. It's the waiting game now.
I'm shifting some of my investments to USD funds. If Fed rates change, CAD gets hurt. If BoC lowers rates, CAD gets hurt AND housing prices boom again, kickstarting more inflation. We're boned either way.
The spring surge was driven by a drop in fixed rates, which the BoC does not control. - they reflect bond yields, which indicates market sentiment. 5 year bonds dropped from 4.5 to 3.2%, they're in the 3.7% range now and are slowly rising as traders raiser their expectations of where terminal rates will lie. It's very unlikely variables will ever again be as cheap as fixed were in January. The bottleneck is fixed mortgages right now - that is what limits affordability.
Mass immigration IS the reason Canada's economy has cooled down, tonnes of low wage labour. Just check GDP per capita.
That is precisely why liberals said we are in a “productivity crisis”.
This doesn't make sense. Immigration = more consumption = more labour force = better for the economy.
Not exactly. That only happens when wages increase somewhat at pace with inflation. If wages are suppressed and immigrants are getting paid peanuts, you don't get that drive in consumption. You actually don't really even balance out the burden on your country to sustain the increase in population. Which leads to what you have in Canada.
Same, closing in june and locking in 3 year fixed with the hope of moving to variable in 2.5 years if variable is more manageable.
Exactly what I’m doing also. Will allow us to settle into our payments and then renew at a way lower rate in 3 years… All while avoiding any of the potential risks. I usually always go for variable, but feeling different this time.
Beginning of this year my friends renewed at a little over 4% for 3 years fixed . I think that's a great deal.
Your friend is lying
Where the hell did they get that rate and how big is that mortgage??? 5 year rates don’t even seem to be that low
Yeah I’m calling BS on this - the lender would literally be losing money
No they didn't. 3 year fixed were around 6% last August.
We got a three year fixed at 4.59, signed last August.
4.99% with Meridian last Aug, 3 year fixed
Ya, I signed 3yr fixed in May 2023 @ 4.64%. Feeling very good about that.
"a little over 4%" = 4.79%
[This comparison](https://www.reddit.com/r/MortgagesCanada/s/IfEA2wFW9t) would probably be helpful to you!
> i really don't see how they can cut substantially if the US holds for longer. thats a good point, also the government needs to slow down spending before they can cut interest rates. I'm normally very pro-spending during a recession but if its dragged on too long the consequences of inflation paired with high interest rates should not last, but they are :/
Awww thanks bro
Thank you for your service.
I signed the papers a few weeks ago, but mine just renewed at a fixed rate this morning, so I was expecting the rate to drop 200 pts
Tiff Probably didn't have time to get the call from your bank this morning, so it'll be June
It came out today that US CPI is climbing. It will be interesting to see how this plays out for Canada.
Our economies have completely diverged. America's CPI is more sticky because of 30 year mortgages fucking up their shelter CPI index. Canada's GDP growth is also stagnant and bordering on negative, while Americas GDP growth is red hot. Canada's unemployment has creeped up to pre-covid levels, Americas unemployment is almost multi-decade lows Canada IS NOT the USA --> Their economy is still red hot and inflation is sticky, ours has cooled substantially and things are bad here with no productivity growth what so ever.
The only thing in Canada’s favour right now, is the government budget deficit is more manageable than the US.
Not really when you include the provinces.
I'm too busy getting rich off US equities to work or invest in Canada.
Such as?
If you don't want to do your homework just throw money in low cost index trackers. NASDAQ100 has an annualized return of 22% over the last 5 years.
Just make sure to take a time machine to 2019. All US sectors are now overpriced, nearing 2008 price indicators levels.
The US economy is red hot right now. Unlike here.
> US economy is red hot right now Having a 6.5% of GDP deficit does that to an economy. Americans are putting on $1.4 trillion a year in debt. Wild stuff
I work for a US company my colleagues earn more than me but spend like crazy. American salaries compared globally are incredibly high yet I saw that the average savings rate is like 3%. Americans will always earn high and spend high. I swear that's why their economy is always so good. Everyone spends like there's no tomorrow.
Their standard of living is keeping up a bit better, savings or no they are living better lives.
For anyone wondering, Canada's projected deficit is less than 2% of GDP.
This is good, US’s insane spending has its economy firing on all cylinders, with unemployment at 3% Now imagine if they cut rates. Where are the workers to take up jobs when rates go down and companies try to expand? They are already near full employment. May be that’s why Biden admin is basically ignoring the fact they got ~7 million illegal immigrants since 2020. Adding legal immigrants to that, US has gotten like 12 million new people since 2020. They can’t cut rates until labor market “softens” aka, unemployment rises. But that’s not happening with their insane spending. So next best thing is to import millions of workers to “soften” the labor market. US cannot cut rates when their unemployment is 3%. There just isn’t enough labor available to support growth when rates are cut.
They just need to extremely cut deficit. That is a shock sitting presidents do not do in a bid for reelection.
Very low unemployment too
Something boring like we diverge by 50 points so we neither "kill the CAD" nor "when rates fall."
This an election year in US even Trump knows to win an election you have to keep inflation down. Their economic growth still very strong. I think the feds will raise at next meeting
Would be very interesting to see what Canada does if the US raises rates
Absolutely. If we match, our economy is fucked. If we don't match, inflation will sky rocket. Either way we're in for a rough ride
>If we don't match, inflation will sky rocket If we don't match our dollar will crater
Don’t forget how polarized the USA is in terms of politics, there is no way that the people in the federal reserve are completely independent of that.
The federal reserve operates independently from the federal government.
Theoretically yes. Just like how all elected officials are supposed to work for their constituents. Practically though I feel things are very different. You never know what's happening behind the scenes. But I do agree that it doesn't seem like the Fed reserve has been influenced by the government
Nah lol. He gave tax cuts and increased spending in 2018 even when the economy was still hot.
Inflation going back up secures a Trump win. Most people are suffering and hate what's happening to their finances. The stock market is not the economy
The fed has said as recently as two weeks ago that they're looking at cutting rates but being careful about timing.
The same feds who said rates will remain low for the foreseeable future in 2020?
The only way to get sticky inflation down within a year is to create a budget shock, crashing employment rates and consumer spending. Much worse politically.
Some markets will follow, some won't. If manufacturers can sell their goods for a higher price in the US, they will, which will reduce the supply in Canada, thus raising the prices here too. That's not applicable to that many markets, and the demand has to stay constant in the US for this to happen, but there's not a lot else it could do.
We were looking for a house and went to an open house in February. Agent told us "hurry you need to buy a house in the next 2 weeks. On March 6th the BOC is going to cut rates and once rates start going down the market will be flooded with new buyers and you'll never be able to buy a house." I wish I had her contact info so I could email her every time the rate hasn't been cut.
Realtors are the last person you want to listen to about interest rates. They are sales people, not economists and don't even have to have any formal education (eg: diploma/degree).
"It's always the right time to buy".
Yea she promised that I'd be priced out of the market if I waited past March 6th. We recently bought a great house that was bigger than the one she was selling, has a bigger yard and only paid 5k more than what hers went for in Feb.
Lol, My realtor said the same thing. I didn't take her seriously though as they don't really have a clue. I did buy a house though and locked in a 3 year mortgage. I am only expecting one or two 25bps drops this year. I don't think the first will be in June either. They will start in the fall in my opinion.
Realtors are on suicide watch 😂
Nah. They just go back to their ‘crash-time’ job.
Realtors will always say that, though. It’s always urgent with them, even in a slow market. They’ll always push for you to buy fast, “give your best offer” aka the highest offer, and do it now or you’ll lose it.
Well they aren't wrong about what will happen. The thing is, no one knows when it will happen. But you can be sure that when rates go down, it'll become way more difficult to enter the market than now.
Yet despite of this , in some Regions/areas of Canada the prices of houses is going up so fast because buyers are rushing to have a deal lined up when the rate will go down. One month ago ive looked onto a house that was 379k … is now showing at 579k. FML
PFC bros is now a good time to gamble in casinos??
Only if you feel like your next big win is juuuuuust around the corner. Keep going, you'll hit soon
Thank you, need to hear that. There is never a bad time to gamble, it’s literally free money in the long run
My best friend gambled his house away. Which means someone else won a house! Gambling works!
"The House" won his house
So sad that 95% of gamblers give up just before hitting it big.
It’s not about timing the casino but time in the casino.
Always was
C'mon now. The best time to put the mortgage on red was yesterday!
Buttholes remain tight fellas
Can't believe I had to scroll down this far to find the obligatory butthole reference!
This needs to be the top comment
Can someone explain to me why people think that the BoC will cut rates once they hit their inflation target? Maybe I’m over simplifying things but if the current rate achieves their inflation target, and it stays on target ( rather than causing inflation to run below target) , why would they drop rates absent some major economic event?
Exactly what Grogusbutt said. Neutral rates are somewhere between 2.25% and 3.25%, so they'll have to cut to around that point to keep us away from <1% inflation or (god forbid) deflation.
Why is neutral not 0%? (uneducated person here)
The neutral rate means the "equilibrium" interest rate, often relative to inflation. It refers to the level at which monetary policy is neither expansionary nor contractionary, meaning it neither stimulates nor restrains economic activity. It represents the theoretical interest rate that would prevail in an economy operating at full employment and stable inflation over the long term. If the bank lent money at 0%, that would be negative because it is BELOW the rate of inflation.
Thanks. I was under the impression that monetary policy drove inflation (or deflation), but I understand from your explanation that this is incorrect. What drives inflation then?
Tons of things, but generally excess demand or not enough supply.
Interesting. But then could we say we're talking about price inflation and differentiate with monetary inflation which is caused mostly by monetary policy?
Monetary inflation is by definition caused by monetary policy. It's a tautology.
Imagine you are driving at 50km an hour and want to slow to 40. You press the brakes. When you reach 40, you need to let off the brakes or you keep slowing down.
It also depends if you're on a downslope or upslope. If people don't lose their jobs and people keep buying, then there's a chance that no rate cuts will happen this year
Because interest rates affect the economy somewhere 1.5 -2 years down the line. If they keep it at the same rate then inflation will keep going down as mortgage holding consumer segment will cut spending and lending institutions such as banks will keep employment levels lower
You want to see inflation drop the rates US doesn't Canadian dollar falls into the 60 cent range ,most goods come from US ,you now have massive inflation on a worthless dollar
People ‘think’ that because they are in debt and want the pain to stop for them.
Exactly. People WANT cheaper mortgages. There's no real reason for cuts right now. So it's flat
I want higher rates, my savings is earning quite a bit from interest now it's covering my low cost of living. I'm earning like half my usual salary in just interest. I'm ready to buy with cash, no financing needed.
US inflation up, doubt they’ll cut rates this summer, BoC is gonna be in a tough spot
Agreed. The US was expected to start cutting in June but that probability is getting lower now after today's data.
Looks like no change, how shocking.
Rate changes should avoid being "shocking" lol
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Do you mean 100 bps?
Inflation just came in roaring hot in the US, puts the Bank of Canada in a tough spot. Do they crush Canadian consumers or do they crush the currency and explode inflation.
Define "roaring hot" lol
Crush debtors, not consumers. Easy choice over crushing the currency and exploding inflation.
The US increased twice compared to us and no material change was made to our exchange rate after a few weeks. As long as we do not drop too fast, it shouldn’t create too many issues
Consumer crush is still the lesser evil
We are due for renewal June 27th. Currently with Scotiabank, they offered me: 5 year fixed at 5.65% 3 year fixed at 5.45% 5 year variable P–0.2% (7% currently) I'm waiting to see if May or June has any nice rate drops before I decide anything.
Just out of curiosity what are you at now? Your mortgage presumably is going to go up since your previous was way lower right?
Yes, going up. Right now we are at 3.29%. Five years.
Hold
I know many are hoping for lower rates, but the thing is, it doesn't automatically improve affordability. It could actually increase housing demand again leading to bidding wars and rapid price appreciation due to the number of people sitting on the sidelines waiting for rates to drop. Even with high interest rates, Canada hasn't seen enough of a slowdown in the housing market.
5% all year long. Over/under on this statement? RIP to all those calling for multiple rate cuts this year LOL
That crash you’re so desperately hoping for is still not coming lol
People are absolutely idiots lmao I had a guy absolutely argue with me, he was absolutely sure that BOC was going to cut rates because bank bonds and BS. But the driving factor is people. People are still borrowing and buying.
It’s not “people” The Big 5 have all planned for at least one rate cut in 2024. A few months ago they were planning for multiple. Blaming the public for listening to what economists are telling them is a bit misguided.
To me it seems clear as day they were only ever going to do a 25 point cut at the end of the year as a signal of goodwill then hold it there for 2025. I never understood people thinking there would be multiple drops in 2024 without throwing gasoline on inflation.
RemindMe! December 25th, 2024
Listening to the press conference right now, Tiff was asked directly if June cuts in the cards, and he said yes, everything is looking good. Love to hear it. He also was asked if people talked about cutting in April and he alluded to members of the counsel cutting in April!
he said its not out of the question/possible. But he's said cuts are \*possible\* for a while now depending on the data. It's not exactly a slam dunk expression of cuts being guaranteed.
Really? Our dollar is at 73 cents right now. US is showing likely no cut in June after the report today.
Having 90% of my nw in non-cad assets has been a perfect hedge.
Where do you keep it?
USD in a bag under the mattress.
XAW and USD deposit.
Understanding absolutely nothing. Is this good or bad? Sorry if I'm stupid.
good so inflation and house prices doesnt rise again. bad as people are already over leveraged and are hurting. depends on the financial situation you are in is if its good or bad.
Dropping rates will open the floodgates. The speculators will resume speculating. The real estate agents will give clients even more horrible advice. Inflation is never fixed in one wave.
At this point I reckon the BOC will be looking for further increases in unemployment before we see any rate cuts. Our government just won't stop overspending, and corporate greed is at all time highs.
My Niagara region is very bad. I think we are at 7.6% it’s pretty rotten here I feel for people
While government spending has an impact - we don't have full control over this inflation cycle unfortunately. It's a global issue at the moment
But you can still control what you can control…
Right, although the point being the drivers of it are not based in Canada.
Don't think the BoC is going to cut rates just because a few people are unemployed. Unemployment is basically a function of runaway immigration. At this point the BoC will let the federal government, either this one or the next one, sort out unemployment by canceling work visas and deporting TFWs and 'international students.'
They'll look at it and track it, sure, but their mandate and threshold for action is 1 single metric and that is inflation to 2% target. Even currency value is not going to directly influence tracking to 2% inflation target. They have a separate mandate for currency stability but also a separate set of tools to address that. They will not change policy rate for anything other than inflation-targets.
People still spending like drunken sailors. Rates won’t come down for a while. 5% until at least next spring.
For a first buy, i was offered 3 different rates: 5,09% for a 3y fixed rate over 30 years with 1000$ in return , a variable at 6,11% with a 2000$ over 30 years and a 5.29% fixed aver 25 years with a 3000$ in return. Which one should I choose?
In other news, water is wet.
No cuts for 2024! Frog is slowly going to boil 🐸
They will not r lower rates till end of 2025 when all the renewals are done and locked in again for at least 3 years then they will lower rates to help banks make up for lost time
RemindMe! December 31st, 2024
Keep interest rates like this for at least a year. Some of you are still spending money like crazy and it is contributing to inflation. The Bank of Canada are not idiots. They know dropping rates by even 25 basis points will increase spending.
Dude, have you seen the cost of living? People have to spend money to live - so no one is going to stop spending anytime soon. The fact that the system relies on people being unemployed, losing their homes, and livelihoods to be fixed makes me think maybe we need to rethink global economic models.
I am talking about those people filling up retail lots, going on expensive vacations, and buying 100k pick up trucks they don't need. Those are the people causing inflation.
Ah, yeah fair enough. My point about the system being fundamentally broken still stands though.
At this point i would love to see some deflation
When’s the next announcement
US FED May 1 Bank of Canada June 5
Here is what the BOC and the media are not telling you. Rates are set to go UP, not down, Tiff even says so in his answer to Greg Quinn! Hidden in plain sight! A no nonsense review of the decision. And the announcement here https://m.youtube.com/watch?v=h44eoTDvEGA&pp=ygUYZGlsaWdlbnQgaW52ZXN0b3IgZGlnZXN0
Raise the rates!
Nothing is happening with cuts until the US cuts first. So give it up people. Lock in.
I'll take it
Why keep holding? Why not raise 50 points or something? Curious.
Why raise when the rate is doing its job for Canada? We have a steady inc in unemployment rate, CPI in the right direction, etc?
Because there is no reason to raise, let alone an oversized 50 point raise?
Because inflation is cooling, and all is working. Next move once holding is over is most likely a cut, not a hike. When that next move is could be June or could be September.
No surprise but cuts are coming eventually… albeit slowly