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Robert McLister: Markets are waiting for the next direction from central banks, especially the Fed
Published August 15, 2024 • Last updated 3 days ago • 2 minutes reading time
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The Federal Reserve building in Washington, DC Photo by Patrick Semansky/AP Files
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Interest rates on fixed mortgages continue to fall. This includes one- and two-year fixed rates, which have become significantly more expensive compared to three-, four- and five-year fixed rates.
Part of this discrepancy is because the cost lenders pay to fund short-term mortgages has not fallen as quickly as it has for longer-term mortgages. Barring unexpected lender promotions, short-term mortgage rates will not improve significantly until the fall.
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Currently, markets are waiting for the next policy proposal from central banks, especially the US Federal Reserve. We could get wind of this when Fed Chairman Jerome Powell speaks in Jackson Hole next Friday. If he confirms a rate cut in September, bond yields could fall, dragging fixed mortgage rates with them. However, the market has already largely priced in the Fed's easing course.
In the meantime, for rate watchers, it's the same old game of monitoring economic data. Anyone yearning for lower mortgage rates will want to see inflation in Canada continue to fall next Tuesday, U.S. core inflation fall on August 29, and the labor market weaken in the double-meeting of U.S. and Canadian jobs reports on September 6.
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According to forward rates tracked by CanDeal DNA, markets are overwhelmingly expecting a drop in Canada's benchmark interest rate in less than three weeks (September 4). Until then, floating rates will not fall quickly, and leading fixed rates will likely remain within a yawning 10 to 20 basis points of current numbers.
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Robert McLister is a mortgage strategist, rates analyst, and editor of MortgageLogic.news. You can follow him on X at @RobMcLister.
Want to know more about the mortgage market? Read Robert McLister's new weekly column in the Financial Post and find out the latest trends and details on financing opportunities you can't miss.
Mortgage interest rates
The rates shown below are updated by the end of each day and are taken from the Canadian Mortgage Rate Survey by MortgageLogic.news. Postmedia and Imaginative. Online Inc., the parent company of MortgageLogic.news, receive compensation from certain mortgage providers when you click on their links in the charts.
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