June 2022 Market & Mortgage Report

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Each Executive Summary Report is for a specific TRREB zone combination and includes a map of the included zones and a 4 page summary for each property type (detached, semi-detached, townhomes, condos)
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The Information / statistics you can find in each Executive Summary Report include:

• Data comparing the – 1, 3, 5 and 10 year sales averages.

• Stats categories – Sales, New Listings, Active Listings, Average Price, Months of Inventory (MOI), Sales to New Listing Ratio (SNLR)

This Month’s Report

In this month’s edition of The Monthly Outline we cover the following topics:

• In the News & Timely Topics – Tax time and mortgages, housing supply shortage, and what’s next from the Bank of Canada.
• Our In Depth Stats Reports
• Current Mortgage Rates & Trends

Tax Time and Mortgages – A Critical Combination

On June 1st, as widely expected, the Bank of Canada once again increased their overnight rate by 0.50% bringing it to 1.50%. Prime Lending Rate increased accordingly from 3.20% to 3.70% (TD Mortgage Prime moved from 3.35% to 3.85%).

Why did the Bank of Canada (BofC) increase their overnight rate? In its statement accompanying the decision, the BofC said: “…CPI inflation reached 6.8% for the month of April – well above the Bank’s forecast – and will likely move even higher in the near term before beginning to ease…The Bank will use its monetary policy tools to return inflation to target and keep inflation expectations well anchored.”

“Canadian economic activity is strong and the economy is clearly operating in excess of demand…job vacancies are elevated, companies are reporting widespread labour shortages, and wage growth has been picking up and broadening across sectors. Housing market activity is moderating from exceptionally high levels.”

With the economy in excess demand, and inflation persisting well above target and expected to move higher in the near term, the Governing Council continues to judge that interest rates will need to rise further.”

What’s next? The Bank of Canada has raised its overnight rate by 1.25% so far in 2022 (currently at 1.50%) and we anticipate an additional 1.50% of increases through the end of the year which we discuss in the below Mortgage Rates & Trends section. The next two Bank of Canada interest rate meetings are scheduled for July 13th and September 7th.

What does this mean for you? Please click the “Read More” button below to read our full commentary on how this increase could impact you if: (1) You have a variable “non-adjustable” mortgage; (2) You have a variable “adjustable” mortgage; (3) You have a fixed rate mortgage; (4) You are looking to secure a mortgage or pre-approval.

Benjamin Tal’s Take on Inflation, Interest Rates, and Real Estate

As mentioned in our May Monthly Outline, we were very fortunate to have Benjamin Tal, Deputy Chief Economist, CIBC World Markets, present at our annual Economic & Condo Market Outloook Event on June 2nd. If you did not have a chance to attend, please send us an email at hello@outline.ca as we are offering a replay of the event on Wednesday, June 22nd (11:30am) and Wednesday, June 29th (1:00pm).

While the event slides were provided to all attendees, we recently came upon an article published by the Real Estate News Exchange that focused on another Benjamin Tal event that did a great job highlighting his key takeaways.

To read the article please [click here] or click on the button below.

Mortgage Rates & Trends

Outline Financial Rate Grid – June 17, 2022

Variable Rate forecast – as variable rates are linked to a lenders’/banks’ prime lending rate, any interest rate movement by the Bank of Canada (BofC) typically results in an immediate change to variable rates. As widely expected, the BofC increased its overnight rate by +0.50% on June 1st and most economists are projecting a further +0.75% (possibly +0.50%) increase when the Bank of Canada meets again on July 13th. The Bank of Canada 2022 meeting dates are as follows:

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Jan 26, 2022 (no increase)
Mar 2, 2022 (+025% increase)
Apr 13, 2022 (+0.50% increase)
Jun 1, 2022 (+0.50% increase)
Jul 13, 2022 (projecting a +0.75% or +0.50% increase)
Sep 7, 2022 (tbd)
Oct 26, 2022 (tbd)
Dec 7, 2022 (tbd)

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At the time of writing, the Big 6 Banks are generally forecasting the Bank of Canada will implement a total of six more 0.25% increases in 2022 (in either 0.25%, 0.50%, or 0.75% increments) and then remain flat in 2023 which would be a total of +1.50% from now through the end of 2023. For reference, the current Bank of Canada overnight rate is 1.50% with lenders’/banks’ prime lending rate at 3.70%. We will continue to monitor these forecasts and update the information when applicable.

Fixed Rate Forecast – 5-year fixed rates typically follow the Government of Canada’s 5-year Bond Yields which is the market’s view/prediction of where interest rates will be in the future.

Bond yields have increased steadily since the start of 2022 moving up to the 3.5% range where they currently sit (the highest point since June 2008). Fixed rates have moved upward in lockstep with the increase in bond yields. It will take time for the recent Bank of Canada rate increases to have their desired impact on inflation and the economy, and in the interim, all eyes will be on the Bank of Canada as they continue to meet throughout the year.

It is our view that in the short term 5-year fixed rates will begin to settle at current levels, however, there is continued risk that bond yields (and fixed rates) could spike higher in the medium term if inflation persists, the US/Fed raises rates faster than anticipated, and/or higher than expected upward pressure on yields given the Bank of Canada’s quantitative tightening measures.

For a customized analysis of which rate or product option might be right for you or your clients, please contact us for more information.

Market Report Downloads

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