One more sleep before the highly-anticipated Bank of Canada rate decision.
Whether Governor Tiff Macklem and his deputies pull the trigger Wednesday or not, it seems pretty certain rates will rise within the next few months.
So the real question now is how much the Bank might hike in this cycle and what it means to mortgage holders.
James Laird, co-founder of Ratehub.ca and president of CanWise Financial mortgage brokerage, says lenders in Canada have already started to move their variable and fixed rates higher in anticipation of a Bank of Canada hike.
“However there are still some lenders who have not yet increased rates. Therefore, if you require a mortgage in the next 120 days, it’s best to apply quickly to hold today’s rate,” he said.
Sung Lee, an RATESDOTCA expert and mortgage agent, is also seeing rates rise. Fixed-rate insured mortgages are now ranging from 2.44% to 2.79%, while a few months ago clients were able to get sub-2%, he said.
“It’s possible that we might even see a reduction in variable-rate discounts on top of prime rate increases. Rising rates will have a big impact on borrowers as the cost to access credit continues to get more expensive,” said Lee.
If the Bank raises its overnight rate by 25 basis points tomorrow, a homeowner with a five-year variable rate mortgage of $649,530 at 0.85% amortized over 25 years would see monthly payments rise from $2,404 to $2,477, according to Ratehub.ca’s mortgage calculator.
That’s $73 more per month or $876 per year on their mortgage payments.
If the Bank raises the rate by 50 basis points, monthly payments would rise to $2,551. That’s $147 more per month or $1,764 a year.
If those mortgage amounts sound high, remember that in December 2021, the average house price in Canada was $713,542.
The mortgage market will no longer be able to hide from higher rates this year, says BMO senior economist Robert Kavcic.
“Canadian mortgage rates are like a coiled spring set to unwind, but by how much?” he wrote in a note this week.
“On the five-year fixed side of the market, underlying GoC yields could easily point to further upside of roughly 50 bps or more. On the variable side, 100 bps or more of BoC tightening is in the cards over the course of this year.”
That could mean a rise in the mortgage rate the market is priced off from 1.8% at the end of 2021 to 2.7% by the end of 2022.
As of Monday, the market had priced in up to seven rate hikes by the end of the year, which would bring the Bank’s rate to 2%, according to Bloomberg data.
But some economists think this timeline is too steep.
Stephen Brown of Capital Economics finds the market pricing puzzling, because it assumes the Bank of Canada will hike faster and further than the U.S. Federal Reserve, even though inflation is higher in the States.
Moreover, the makeup of Canada’s economy with its “over-dependence” on interest-rate-sensitive housing is very different from its southern neighbour.
Capital believes that the risks will force the bank to pause its tightening cycle at 1.5%, about 50 basis pointer lower than what the market expects.
Analysts at Pacific Investment Management Co. see the central bank moving just four times this year, in line with expectations for the Fed, reports Bloomberg.
Canada’s high household debt and slack remaining in the labour market despite the jobs recovery will prevent the Bank from pushing rates too far, too fast, Vinayak Seshasayee, a portfolio manager overseeing Pimco’s Canadian fixed-income assets told Bloomberg.
HALIFAX – Ottawa is negotiating a $500-million bailout for Nova Scotia’s privately owned electric utility, saying the money will be used to prevent a big spike in electricity rates.
Federal Natural Resources Minister Jonathan Wilkinson made the announcement today in Halifax, saying Nova Scotia Power Inc. needs the money to cover higher costs resulting from the delayed delivery of electricity from the Muskrat Falls hydroelectric plant in Labrador.
Wilkinson says that without the money, the subsidiary of Emera Inc. would have had to increase rates by 19 per cent over “the short term.”
Nova Scotia Power CEO Peter Gregg says the deal, once approved by the province’s energy regulator, will keep rate increases limited “to be around the rate of inflation,” as costs are spread over a number of years.
The utility helped pay for construction of an underwater transmission link between Newfoundland and Nova Scotia, but the Muskrat Falls project has not been consistent in delivering electricity over the past five years.
Those delays forced Nova Scotia Power to spend more on generating its own electricity.
This report by The Canadian Press was first published Sept. 16, 2024.
TORONTO – Roots Corp. may have built its brand on all things comfy and cosy, but its CEO says activewear is now “really becoming a core part” of the brand.
The category, which at Roots spans leggings, tracksuits, sports bras and bike shorts, has seen such sustained double-digit growth that Meghan Roach plans to make it a key part of the business’ future.
“It’s an area … you will see us continue to expand upon,” she told analysts on a Friday call.
The Toronto-based retailer’s push into activewear has taken shape over many years and included several turns as the official designer and supplier of Team Canada’s Olympic uniform.
But consumers have had plenty of choice when it comes to workout gear and other apparel suited to their sporting needs. On top of the slew of athletic brands like Nike and Adidas, shoppers have also gravitated toward Lululemon Athletica Inc., Alo and Vuori, ramping up competition in the activewear category.
Roach feels Roots’ toehold in the category stems from the fit, feel and following its merchandise has cultivated.
“Our product really resonates with (shoppers) because you can wear it through multiple different use cases and occasions,” she said.
“We’ve been seeing customers come back again and again for some of these core products in our activewear collection.”
Her remarks came the same day as Roots revealed it lost $5.2 million in its latest quarter compared with a loss of $5.3 million in the same quarter last year.
The company said the second-quarter loss amounted to 13 cents per diluted share for the quarter ended Aug. 3, the same as a year earlier.
In presenting the results, Roach reminded analysts that the first half of the year is usually “seasonally small,” representing just 30 per cent of the company’s annual sales.
Sales for the second quarter totalled $47.7 million, down from $49.4 million in the same quarter last year.
The move lower came as direct-to-consumer sales amounted to $36.4 million, down from $37.1 million a year earlier, as comparable sales edged down 0.2 per cent.
The numbers reflect the fact that Roots continued to grapple with inventory challenges in the company’s Cooper fleece line that first cropped up in its previous quarter.
Roots recently began to use artificial intelligence to assist with daily inventory replenishments and said more tools helping with allocation will go live in the next quarter.
Beyond that time period, the company intends to keep exploring AI and renovate more of its stores.
It will also re-evaluate its design ranks.
Roots announced Friday that chief product officer Karuna Scheinfeld has stepped down.
Rather than fill the role, the company plans to hire senior level design talent with international experience in the outdoor and activewear sectors who will take on tasks previously done by the chief product officer.
This report by The Canadian Press was first published Sept. 13, 2024.
VANCOUVER – Mediated talks between the union representing HandyDART workers in Metro Vancouver and its employer, Transdev, are set to resume today as a strike that has stopped most services drags into a second week.
No timeline has been set for the length of the negotiations, but Joe McCann, president of the Amalgamated Transit Union Local 1724, says they are willing to stay there as long as it takes, even if talks drag on all night.
About 600 employees of the door-to-door transit service for people unable to navigate the conventional transit system have been on strike since last Tuesday, pausing service for all but essential medical trips.
Hundreds of drivers rallied outside TransLink’s head office earlier this week, calling for the transportation provider to intervene in the dispute with Transdev, which was contracted to oversee HandyDART service.
Transdev said earlier this week that it will provide a reply to the union’s latest proposal on Thursday.
A statement from the company said it “strongly believes” that their employees deserve fair wages, and that a fair contract “must balance the needs of their employees, clients and taxpayers.”
This report by The Canadian Press was first published Sept. 12, 2024.
