Bank of Canada Update: October 29th

Clinton Wilkins discussed the current state of the mortgage market, highlighting that interest rates are expected to decrease further, with the Bank of Canada’s key rate now at 2.25%.

Dan Ahlstrand
Welcome back to Mortgage 101 goes this weekend, and it is financial wellness, it’s not today, not Financial Literacy Month. November is Financial Literacy Month, and we will be focusing on that at least. Our next guest will be focusing on that when we listen to him on the weekend. And that, of course, is mortgage 101. Our mortgage guru, as we call him. And I can call you that now, Clinton, because two months ago, I think you said, when the last time you and I did a show together, you said that the bank rates were going to go down three times, and so far, you’ve been bang on.

Clinton Wilkins
Bang on, bang on. So let’s see if my prediction continues to hold right. I mean, again, this is just what I know today, and the situation could be very different tomorrow. Just look at this whole Doug Ford/Trump commercial situation. Things can literally change overnight. But I’m taking the information we’re reading. I’ll call myself a bar stool economist, and I’m so lucky to be here with our listeners and sharing that information. Last week, I was in Ottawa for the National Mortgage Conference. I sit on a board for Mortgage Professionals Canada, so I’m able to represent the mortgage industry, and really can represent the interests of Canadians from Atlantic Canada on this board, which is awesome, and they had Benjamin Tall, the chief economist from CIBC. And one of the things that he said, there are a couple of things that I really took home, but he said, no one’s talking about the R word. The R word’s a bad word. I guess it doesn’t matter what word you’re thinking of, but the R word that he was referring to was recession, and that we are actually in a recession, even though no one’s talking about it, but we are actually living in it.

Dan Ahlstrand
Well, the technical term is a decline in GDP over two quarters, and we’ve seen that.

Clinton Wilkins
We are in a classic recession. And that brings its other concerns, when we’re talking about job numbers, and when we’re talking about inflation, the odd thing is, it’s challenged to be challenging to be in a recession when the inflation is also increasing a little bit. Some of these numbers are artificially, maybe propped up or pushed down by some of the things, like the carbon tax. But I think going into the new year, it’s going to be really important that we keep that inflation low and just focus on what’s going on here at home. There’s so much noise in the media in general, around what’s going on in the US. Yes, we are very tightly tied to what’s going on. One of the other things that he said, and his listeners might enjoy this one, is that Trump is the Ozempic of the US economy. So that’s the one thing that he’s done. He’s shrunk their economy and essentially put them into recession. Yes, there are impacts in Canada, and I never thought we’d talk about the US politics so much, but there’s such a direct impact on what’s going on here at home as well, particularly.

Dan Ahlstrand
With tariffs and the economy. Tiff Macklin is just speaking, in fact, he’s speaking right now, saying that the tariffs, the US tariff regimeareis having an impact on the Canadian economy. Therefore, the inflation goes up, and then because of that, the Bank of Canada has to react and lower interest rates by another quarter point. We’re at 2.25 now, Clinton. What does that mean for my variable mortgage?

Clinton Wilkins
The bank’s primary, by and large, is going to be 4.45 now, and that may be impacted today. Some lenders won’t impact that until the first of the month. Luckily, the first of the month is just right around the corner. So if you’re in a variable rate mortgage product and you have an adjustable payment, your payment is actually going to go down, which is awesome. That’s going to give you more cash flow in your household. If you have the type of variable-rate mortgage where your payment stays static, that means your amortization is going to get shorter. So that’s the type of product that I have. I think I’ve shared with our listeners, I’m in a variable-rate mortgage product. I have a good risk tolerance. Historically, about 60% of Canadians are in fixed-rate mortgages, and about 40% are in variable or shorter-term mortgages. And, anybody that’s in a variable, I think they’re going to be very happy today, Dan and I think anybody that’s looking to buy a home, they’re looking to do a renewal, a refinance, overall, the cost of borrowing is going to be less. The one thing I do want to give a shout out to is that just because the bank account lowered the key rate, that doesn’t mean fixed rates are going to go down. In a lot of cases, the bond market has already priced in this change. So I think we’re going to see fixed rates maybe stay steadier. Historically, variable rates have been much lower than fixed, even if we look over the last 25 years, but the last year or two, it hasn’t been the case. But now the world is writing itself. Now now a variable rate mortgage, by and large, is going to be at a lower borrowing cost than a fixed rate. So we’re back to more of a normal pricing scheme. We’ll call it.

Dan Ahlstrand
We saw people during the aftermath of the pandemic, Clinton, when interest rates were, I’m not going to say super high, but they were more than they are today. Get into some edging up, even on like 7% right? And getting into the shorter term. Mortgages into one-year two two-year renewals and in the fixed area so that they could have a little bit of stability and know how much their mortgage is going to be at the end of the day. Those are, are coming due now and then; this might be a good opportunity for a conversation about renewing that mortgage and getting into maybe a variable product.

Clinton Wilkins
I have customers who reach out to me every day about potentially breaking their mortgage early, especially some of the ones that we did, like two and three years ago. Some of these borrowers are coming out of rates at like 6%, 5% and now we can get them maybe in the low fours, maybe in the threes. And it’s not necessarily about lowering their cost of borrowing, Dan, it’s about lowering the monthly output of principal and interest. That’s really what a lot of these borrowers are most concerned with today. Oftentimes, if you break your mortgage early, you’re going to pay a penalty, and that penalty is probably offset by the lower borrowing cost. But every payment that you’re making is made up of a principal and an interest payment, and if you have a lower monthly payment, and I think that’s oftentimes a win for a lot of households, because everyone’s stretched. And it’s not just the mortgage interest rates that are stretching people. It’s fuel. It’s the cost of groceries. Groceries, everything that we are buying today, costs more than it did a year ago, by and large. And so I think that if we can bring the actual monthly output of mortgage payments down, whether that’s playing with the amortization, whether that’s getting a lower interest rate. That’s helpful for a lot of households, because there’s only so many dollars to go around.

Dan Ahlstrand
The Canadian Real Estate Association, last week, I think it was, without some new data, Clinton said that house prices across the country are dropping above 5% you’ve discussed this before and on your show on Mortgage 101, saying that Halifax tends to lag behind that a little bit. What are you seeing here in the market?

Clinton Wilkins
I wouldn’t even say it’s lagging. Dan, I think we’ve gone the other way. So in Halifax, our average house price is still up, like over 3% on average here, where there are areas in Ontario that are down 25% 17%, BC down. And a lot of the other cities across the country, down, down Halifax, we’ve gone the other way, partially because we never had those big increases. It might feel like we’ve had big increases, because the values really have gone up since 2019, 2020, but we haven’t seen the increases that they had. A lot of these areas had double-digit growth for years, where, yes, we had more, maybe thoughtful and planful growth. We’re talking about 3% 5% which is more sustainable, and we’ve continued to see some growth in the price, primarily because of the lack of supply. Yes, we’re seeing more homes getting listed, and the homes are sitting maybe on the marketplace a little bit longer than they were before, but any of those homes that are around that $600,000 mark, which is about the median mark, they are selling, and they are selling quick still here in Halifax, and really across Atlantic Canada, anywhere that’s around the median, that’s moving in other markets, it’s not the case. So, in terms of a safe or bet, in terms of real estate, it certainly has been Halifax, and it certainly has been Atlantic Canada. We haven’t kept up with the amount of demand in terms of new units. Yes, we see a lot of apartments going up, even right around the studio here at 95 seven. There are towers in the sky that were not here five years ago. There’s a lot more rental units coming on board, which is helping with the overall demand to satisfy it here in Halifax, because, just think the little old lady and the little old man that would have potentially gone into an apartment, there were no apartments to have, and the cost of the apartments, obviously, is very high. But some of that’s writing itself, and more and more of that real estate is getting listed, which is the right type of real estate, oftentimes for first-time homebuyers.

Dan Ahlstrand
Clinton Mortgage 101 is coming up this weekend. What’s on tap for this month’s edition?

Clinton Wilkins
Well, we’re going to be in November by the time the show is on this Saturday and Sunday, and it’s Financial Literacy Month. And financial literacy is just so, so important. Dan, and I’m glad to be a part of the conversation. Overall, the financial literacy of Canadians is very low. And I think by us even talking about this, and having this on the show, we’re breaking down some barriers. I hope people go home tonight and they talk about the Bank of Canada, talk about your income, talk about your assets, talk about your credit, break some of these barriers down at the dinner table. And I think those healthy conversations will certainly help increase financial literacy across the board. And I’m glad that we’re able to be a part of the conversation. And we’re just really getting it kicked off because we’re going to do two shows here in November for Financial Literacy Month. We’re doing our show that’s going to be on Saturday and Sunday, and then we’re doing a special live show here at the end of the month.

Dan Ahlstrand
So I’m glad that we’re able to do that again. Mortgage 101, this weekend goes at 11 o’clock. Clinton, thanks for holding you to that extra.

Clinton Wilkins
Well, I’ll put the prediction on for January. There you go.

Dan Ahlstrand
Clinton Wilkins, you can hear him on Saturday and on Sunday at 11 o’clock, right here on 957 News Radio.