Canada is technically in a recession if you go by old economics textbooks. But that’s just a weak reason to dream of future rate cuts.
Friday’s GDP report was distorted by quirky factors in the metals market and preliminary April growth looks much stronger.
Given this and high inflation uncertainty, markets are still fully pricing in a Bank of Canada rate hike by the end of the year, according to derivatives data from the London Stock Exchange Group (LSEG). And that may not change unless there is miraculous peace in the Persian Gulf and oil becomes much cheaper.
In the meantime, the mortgage market has made some minor changes to base rates – nothing dramatic.
First, we saw a five basis point increase in several of the cheapest nationally advertised landline offerings. A fixed rate over five years now starts at 4.24 percent without insurance or almost four percent if insured.
However, three-year terms remain the public favorite and are at least 10 to 20 basis points less for uninsured borrowers than for five-year terms; for insured borrowers it is around 4.04 percent and more.
On the variable side, where rates are rising after today’s recession talk, several banks improved their discounts by at least five basis points this week.
But keep an eye on core inflation in Canada and the US as it will determine the fate of interest rate floaters. A “peace agreement” between the United States and Iran offers hope on this front, but it does not guarantee anything.
Robert McLister is a mortgage strategist, interest rate analyst and editor of MortgageLogic.news. You can follow him on X at @RobMcLister.
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