Bank of Canada Update: March 18th

Dan Ahlstrand and Clinton Wilkins discussed how the Bank of Canada maintained its key interest rate at 2.25%, reflecting economic uncertainties.

Dan Ahlstrand
The breaking news today came from the Bank of Canada as we continue to watch what’s happening south of the border, but the Bank of Canada has made its decision on interest rates, keeping it was a 2.25% and holding for the next three months. And when these things happen, of course, we go to our authority on the mortgage market, and that is, of course, our friend and host of Mortgage 101, that’s Clinton Wilkins, and he’s in the studio today, buddy, how are you?

Clinton Wilkins
Thanks for having me. Happy Wednesday! It’s not a surprise for me. I mean, there were a lot of things that we were watching, though, and we actually put a poll internally for our team. And, you know, some people thought there might be a decrease. The majority of people thought there was going to be a hold. You know, for me, seeing the inflation numbers yesterday, I think what they came out at, what 1.9% job numbers, very, very soft in Canada, I think there’s a business case. 81,000 jobs. It’s a lot. And, you know, maybe there’s even more, because I think some of that data, you know, takes time to actually come through. There’s a business case to lower the key overnight rate. And, you know, no one really wants to talk about the R word recession, but, you know, we’re here. I think the big concern is what’s going on with oil. You know, wartime, you know that’s going to impact everything if we start seeing oil continue to stay high and maybe even go higher. So I think the bank is not a first mover. Macklem, you know, is not making these first decisions. He’s waiting for more data to come in. I think it’s really, we’re going to watch and see. Obviously, we’re going to continue to watch the GD, P job numbers, and the Fed in the US; they’re having their announcement here later this afternoon. So we’re going to be watching that.

Dan Ahlstrand
I guess you saw a poll here, and it’s pretty significantly leaning one way.

Clinton Wilkins
I think that we need to be cautiously optimistic right now. We’re in a plateau situation. You know, if we have a recession in Canada, there’s a great chance that the Bank of Canada will lower the key overnight rate. But they need to take into account that it’s not just everything else that’s going into inflation; fuel prices are going to have an impact, for sure.

Dan Ahlstrand
Clinton, I continually see stories, I think I might even have seen one last night, about housing prices across the country. The market is depressed in Western Canada, in Upper Canada and and people are worried that they’re not going to be able to get the same amount of value out of their home that for perhaps, that they purchased you and I have talked about this on mortgage 101, a couple of different times you say that that’s, that’s not happening here, at least not yet.

Clinton Wilkins
I can tell you that what’s happening in Ontario and BC is not happening here in Halifax and across Atlantic Canada. If anything, the opposite is happening. You know, our home prices are going up. It’s, it’s a story of supply and demand. We have more demand here in the marketplace than we have home starts. And even home starts across the country are way, way down. People are not building homes because the values are lower. You know, therarees some areas in Ontario where they’re seeing like 25% decreases in where the home prices were from the peak. And you know, maybe those home prices may slide a little bit more. You know, if people need to sell their house for whatever reason, it’s a kind of a race to the bottom; it’s what is a willing seller and a willing buyer to meet. And that’s what the real, true value is. Here. We just don’t have the inventory to support the demand. But that being said, we’re almost praying that we’re two or three days away from Spring. Typically, we see a huge, hug, upstart in the number of listings that’s happening here in Halifax and across the Atlantic. So in the coming days, I would say, by next week, we’re going to see a ton of new listings. I’m cautiously optimistic it’s going to be a good spring market. Our market here, we had a realtor on our show just this month, and we have a more balanced market, so it’s balanced between sellers and buyers. And I think that’s a better place to be, you know, it’s a lot easier to, you know, transact in that type of marketplace. I think some people had some fatigue, you know, during the COVID times, when there were 20 plus offers on some of these homes, itjust becames too challenging to do the transaction. And I think it creates a lot more risk for both sides of the transaction, as well as holding with the Bank of Canada.

Dan Ahlstrand
Clinton, 2.25,% what does that mean for people’s mortgages?

Clinton Wilkins
Well, start with people with a variable mortgage. That means that there’s not going to be a change. So if you have a variable mortgage that has an adjustable payment, no change to your payment. If you have the type of variable mortgage that your amortization changes, there’s not going to be a change. So the cost of borrowing is going to stay the same. The Bank of Canada is meeting again at the end of April. So obviously, a lot can change between, you know, here, middle of March, at the end of April, the next six weeks, you know, it’s, it’s almost like a reality show. Expect the unexpected. We’re going to continue to watch it, you know, we’re going to have another show for mortgage 101, as well. And, you know, we’ll report the news and what happens between now and then. For me, I’m cautiously optimistic. I don’t want job losses, you know, I want people to be employed in Canada, but I think that’s going to be one of these big, big triggers that we’re going to continue to watch.

Dan Ahlstrand
You and I were discussing several weeks ago. Now, even as this conflict in Iran started to happen.The immediate increase in oil prices and so on. But we were also talking about fixed mortgages in the bond market, because the fixed mortgages live in the bond market.

Clinton Wilkins
We are going the opposite direction, really. So we’ve actually seen some increases, even this week, in the cost of fixed-rate mortgages. That’s just the reality. And you know, I think the popularity of a fixed-rate mortgage, in some cases, is actually decreasing. We did a ton, a ton, a ton of three-year fixed here, even like a year ago, but that really started shifting when the Bank of Canada started lowering the key overnight rate. Yes, right now we’re in a plateau situation. People can plan for a plateau, which is fine, and I think there are just so many upsides to a variable rate mortgage. You can always convert into a fixed,d and if you need to break that variable rate mortgage early, it’s going to be a penalty of only three months’ interest. Sothere ares certainly a lot of reasons why a variable has become more attractive. And you know, it’s not for everybody. You know, you have to have that risk appetite to, you know, want to have, you know, potentially have that upside. But a variable rate mortgage right now is typically much cheaper than what we would see in a fixed rate mortgage. And I would say we’re going to continue to see the divide between where the pricing is on variable and fixed probably increase even further.

Dan Ahlstrand
The last time you and I chatted, we were just on the cusp of having the news of a change here in Nova Scotia with regards to down payments and the credit union plan that the government announced,d that 2% down payment to try and spur some people into the market, or to get back into the market. We’ve had a couple of weeks now to digest it. What, what are you hearing in the community, and what are you hearing in the in the realty market?

Clinton Wilkins
I’ve heard, definitely heard a lot of rumblings. I can even tell you, we chatted with some people who work in the credit unions, and they’re seeing inquiries coming in, but they’re not seeing real, live applications. So again, some of this stuff is a news bite. We’re part of the media. You know, we’re reporting on what’s going on in housing and mortgage and, you know, the economy, but I don’t know if these transactions are going to actually come to fruition. Part of the reason is the pricing piece. So people see what the pricing looks like for a credit union at a 2% down deal, or 5% with a high-ratio insured mortgage from a traditional lender, and sometimes it really does just come down to, you know, the price point. So I’m cautiously optimistic. I think, for me, it’s restrictive, and I think it’s a little bit anti-competitive, that, you know, it’s only credit unions that are going to have access to this program. I think we’ll know more in a few months. You know, going into the spring market, we’re going to see more. We do deal with credit unions. I’m not sure how many transactions we’re going to physically do ourselves, because the bulk of the mortgages that are being done in Nova Scotia, I will venture to say, about 99% are not being done by credit unions. So you certainly think there’s a place for credit unions, and I think there could be a place for this program. But for me, I would rather see the Province of Nova Scotia invest more into the down payment assistance program that worked very well, and that was balanced and fair for all lenders, insurers, you know, and really customers across the province. I’d rather see them invest more money into that program.

Dan Ahlstrand
You can hear Clinton on Mortgage 101 every month here on the show. And you can also pick up the back catalogue of his programs. Our programs are on our website at halifax.citynews.ca. If you want more information from Clinton, where can we reach you?

Clinton Wilkins
Find us online at TeamClinton.ca/radio. We have hundreds of blog posts on there. You can see what Dan and I look like on social media, and we’re also on Spotify, Apple Music, and anywhere where you may want to listen to your podcast. We break our show up into little weekly bits, and we are having it on podcast platforms, so you can certainly listen to us there as well.