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Why worries about the coronavirus are pushing mortgage rates down –



Economists are busy trying to calculate the potential economic toll of the coronavirus outbreak that’s currently making its way around the world. But there’s one marketplace that is already, quite unexpectedly, quantifying the full force of the bug: mortgages.

Rates for fixed- and variable-rate home loans are based on a variety of factors, but one of the biggest is the price that lenders have to pay to borrow money themselves.

For fixed-rate Canadian home loans, the benchmark that sets the price that consumer rates are based on is the five-year Government of Canada bond.

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Investors who covet bonds like that one do so because they are perceived to be safe. Investors are willing to accept the relatively meagre returns that government debt offers because it’s better than the alternative — losing money on whatever other, riskier investment they would have had to buy instead.

Counterintuitively, the price of a bond and its yield move in opposite directions. So when appetite for bonds goes up, the amount they pay out goes down, because lenders don’t have to offer quite as good a deal to find a buyer for their debt.

The price of bonds tends to increase when people are feeling fearful, a situation that certainly describes the state of affairs today amid a mysterious coronavirus emanating from mainland China that has killed more than 100 people and infected thousands more.

That fear is prompting investors to pour money into the safety of government bonds, and all that buying is pushing down the yield on that debt.

As recently as the start of the year, the yield on the five-year Canadian government bond was about 1.7 per cent. This week, it dipped as low as just above 1.3. In the staid world of bonds, a 40-point drop in a relatively short period is huge, and it’s filtering down into the mortgage market.

Bond yields influence loans

Fixed-rate loans are highly influenced by bond yields, because a mortgage lender makes money on the spread between the bond rate and what they offer to consumers. If the five-year bond yield goes up, they can just pass that cost on to consumers. If it goes down, as it is now, the lender’s cost of borrowing goes down, so they can turn around and lower their rates for consumers to drum up new business.

That’s what seems to be happening.

Fixed-rate loans are falling, according to James Laird, CEO of mortgage broker Canwise Financial and co-founder of rate comparison website While specific rates will vary based on the borrower and what part of the country they’re in, currently the best deal on offer for a five-year fixed loan is 2.64 per cent with a trust company and 2.74 per cent from a big bank. Barely a month ago, those rates would have been roughly 10 to 20 points higher.

While bond yields have fallen by about 40 basis points in that period, that means lenders so far have only passed on about a quarter of those savings to consumers. But that is likely to soon change.

Lenders are always slower to pass on savings than they are to pass on added costs, Laird said, but they can only hold off for so long.

“If bond yields were up by 40 points, you can guarantee far more [lenders] would have changed rates and by a greater amount,” Laird said. “On the way down they’re a little slower … they enjoy thicker margins for a while.”

Coronavirus fears have really only sped up the process of a move toward lower rates that was already underway, he said.

In its policy decision last week, the Bank of Canada elected to keep its benchmark interest rate where it is for now. But by singling out concerns over the job market, international trade and other factors, it’s clear the bank is leaning more toward rate cuts than hikes, Laird said.

Variable-rate mortgages set their rates based on what the Bank of Canada is doing, not bond yields. And based on the central bank’s last statement, traders think there’s about an 80 per cent chance of at least one rate cut by the end of 2020. That means home buyers with variable-rate loans can expect some relief soon, too.

Spring buying

There’s also some seasonality at play in all this. All things being equal, lenders like to hit the ground running on the busy spring home buying season, so Laird often sees rate cuts in mid-February or March, regardless of what bonds are up to. 

The sudden impact of the coronavirus is just causing that to happen a little earlier and a little more dramatically than anticipated.

“It’s not like rates were on the rise and the coronavirus caused them to do a U-turn,” he said. “I’d say this is another area which is putting downward pressure on bond yields, and therefore downward pressure on mortgage rates.”

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Available Nexus appointments Canada



There’s good news for those looking to expedite their border crossing experience.

To mitigate the ongoing backlog issues at Canadian border crossings, border officials have reopened two Nexus and Free and Secure Trade (FAST) enrolment centres in Canada.

It’s the first time any Nexus and FAST offices have been open in Canada since the pandemic began, and federal officials say more offices will be opening in the future.

The Nexus program, which has over 1.7 million members, is designed to speed up the border clearance process for its members, while also freeing up more time for Canadian and U.S. border security agents to tend to unknown or potentially higher-risk travellers and goods.

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The benefit of Nexus is that it allows for those travelling between the two countries to save time, skipping long lineups and using the shorter, dedicated Nexus lanes when crossing the border, as well as designated kiosks and eGates at major airports, and quicker processing at marine crossings.

Reopening these two Canadian centres is the first phase of a larger plan to address the lengthy Nexus and FAST backlog, and will increase availability for applicants to book appointments to interview for Nexus pre-approval, the Canada Border Service Agency said in a statement Monday.

Those looking to get Nexus approval can now schedule interviews, by appointment only, at the Lansdowne, Ont. (Thousand Islands Bridge) and Fort Erie, Ont. (Peace Bridge) enrolment centres, through the trusted traveller programs portal.

Travellers looking to apply will still need to complete a new two-step process, and the Canadian offices don’t mean applicants won’t have to cross the border to finalize the process.

If conditionally approved for Nexus status, travellers can complete the first part of the interview at one of the two reopened Canadian enrolment centres, then complete the second interview portion just across the border at the corresponding U.S. enrolment centres on the other side. For Lansdowne, that’s Alexandria Bay, N.Y., and for Fort Erie, it’s Buffalo, N.Y.

To become conditionally approved, both the CBSA and U.S. Customs and Border Protection (CBP) have to grant approval prior to scheduling the interview portion, and interviews need to be conducted on both sides of the border.

“Nexus and FAST are a win-win for Canada and the United States – and we’re working hard to find creative solutions to reduce wait times, address the backlog and help more travellers get Nexus cards,” said Marco Mendicino, minister of public safety, in a press release. “This new, two-step process is further proof of our commitment to it. We’ll keep finding solutions that leverage technology and streamline renewals.”

Applicants also have the option to complete a one-step process and schedule complete interviews at enrolment centres in the U.S., which may be a preferred option for those who don’t live near the two centres currently open in Canada.

And those who are already members of the Nexus program and are awaiting an interview can renew their membership ahead of its expiry date in order to retain their travel benefits for up to five years.

More centres are expected to open at select land border crossings in the future, as this initial phase carries on, CBSA says.

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China slams U.S. Inflation Reduction Act for ‘disrupting international trade, investment’



The Chinese Ministry of Commerce on Thursday criticized the U.S. for disrupting international trade and investment by adopting the Inflation Reduction Act (IRA), urging the U.S. to fulfill its obligations under WTO rules.

The criticism came after the Chinese delegation attending a meeting of the World Trade Organization (WTO) Council for Trade in Goods expressed serious concern over the ‘discriminatory and distorted subsidy provisions’ of the U.S. IRA, as well as its series of policies that disrupt the global semiconductor industry chain and supply chain.

The meeting of the WTO Council for Trade in Goods was held in Geneva between November 24 and 25.

Speaking at a press conference in Beijing, Ministry of Commerce Spokeswoman Shu Jueting said that China’s response is an exercise of its rights as a WTO member to challenge the trade measures of another member and their impact on such an occasion.

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“In its speech, the Chinese side expounded on the suspected violations of WTO rules by the relevant provisions of the U.S. law from a professional perspective, noted that the U.S. approach has seriously disrupted international trade and investment while undermining the stability of the global industrial and supply chains, and expressed grave concern over the U.S. application of double standards and acts of bullying regarding international trade rules,” Shu said.

“China urges the U.S. to strictly fulfill its obligations under WTO rules and earnestly safeguard the authority and effectiveness of the multilateral trading system,” she said.

Stressing that the world today is facing multiple challenges including setbacks in economic globalization and a sluggish economic recovery, Shu reiterated China’s commitment to opposing unilateralism and stabilizing global industrial and supply chains.

“China is ready to work with other members to follow through on the outcomes of the WTO 12th Ministerial Conference (MC12), engage fully and deeply in the reform of the WTO, stand against unilateralism and protectionism, and support the WTO in better playing its role, so as to contribute to stability of the global industrial and supply chains and recovery of the global economy at an early date,” said the spokeswoman.

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Civil rights group says Vancouver has at least one secret Chinese police station



A Spanish civil rights group says Vancouver has at least one secret police station operated by Chinese authorities.

The group Safeguard Defenders said in a report in September that there were Chinese police operations around the world, including three in Toronto, and the updated report names another 48 locations.

Safeguard Defenders, a not-for-profit human rights group, said two of the new locations are in Canada: one in Vancouver and the second unknown.

The group’s previous investigation looked into the expansion of “long-arm policing” and transnational repression imposed by the Chinese government.

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Its latest report, titled “Patrol and Persuade,” gathered more evidence on how these police station function and their “persuasions of return” strategies, the group said in its report.

“Patrol and Persuade also documents the silent complicity of a number of host countries, instilling a further sense of fear into targeted communities and severely undermining the international rules-based order,” Safeguard Defenders said in an online statement.

Its previous report alleged employees from the overseas police system use intimidation and threats to enforce the “involuntary” return of immigrants back to China for persecution.

The group claimed that between April 2021 and July 2022, Chinese police “persuaded” 230,000 claimed fugitives to return to China.

No one from the Chinese Embassy was immediately available for comment on the new information, but it has previously described the offices as volunteer-run service stations to process things like driver’s licences.

The report said the newly documented Vancouver-based police station is being operated by authorities from Wenzhou, a port and industrial city in China’s Zhejiang province.

It said most of the newly documented stations were set up starting in 2016, directly refuting the government of China’s previous statements that the operations were started in response to the COVID-19 pandemic.

“New information shows at least one illegal ‘persuasion to return’ operation run through the Wenzhou station in Paris, France; and at least 80 cases where the Nantong overseas police system assisted in the capture and/or persuasion to return operation,” the report said.

The group claimed their work prompted at least 12 countries, including Canada, to launch investigations into local police stations.

A series of recommendations have been listed by Safeguard Defenders for all governments to consider, such as educating local law enforcement on the methods used by the operators and imposing costs on entities and individuals involved in the repression efforts.

Prime Minister Justin Trudeau said last month he raised the issue of interference directly with Chinese President Xi Jinping at the G20 summit in Indonesia.

Xi later berated him for informing the media about their conversation.

The RCMP said in early November that it is investigating the issue, and officials told MPs in early October that they were aware of the claims by the group.

This report by The Canadian Press was first published Dec. 5, 2022.

This story was produced with the financial assistance of the Meta and Canadian Press News Fellowship.

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