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Why worries about the coronavirus are pushing mortgage rates down – CBC.ca

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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.

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 RateHub.ca. 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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Bimbo Canada closing Quebec City bakery, affecting 141 workers

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MONTREAL – Bakery company Bimbo Canada says it’s closing its bakery in Quebec City by the end of the year, affecting about 141 workers.

The company says operations will wind down gradually over the next few months as it moves production to its other bakeries.

Bimbo Canada produces and distributes brands including Dempster’s, Villaggio and Stonemill.

It’s a subsidiary of Mexico-based Grupo Bimbo.

The company says it’s focused on optimizing its manufacturing footprint.

It says it will provide severance, personal counselling and outplacement services to affected employees.

This report by The Canadian Press was first published Sept. 19, 2024.

The Canadian Press. All rights reserved.



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NDP to join Bloc in defeating Conservatives’ non-confidence motion

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OTTAWA – The New Democrats confirmed Thursday they won’t help Pierre Poilievre’s Conservatives topple the government next week, and intend to join the Bloc Québécois in blocking the Tories’ non-confidence motion.

The planned votes from the Bloc and the New Democrats eliminate the possibility of a snap election, buying the Liberals more time to govern after a raucous start to the fall sitting of Parliament.

Poilievre issued a challenge to NDP Leader Jagmeet Singh earlier this week when he announced he will put forward a motion that simply states that the House has no confidence in the government or the prime minister.

If it were to pass, it would likely mean Canadians would be heading to the polls, but Singh said Thursday he’s not going to let Poilievre tell him what to do.

Voting against the Conservative motion doesn’t mean the NDP support the Liberals, said Singh, who pulled out of his political pact with Prime Minister Justin Trudeau a few weeks ago.

“I stand by my words, Trudeau has let you down,” Singh said in the foyer outside of the House of Commons Thursday.

“Trudeau has let you down and does not deserve another chance.”

Canadians will have to make that choice at the ballot box, Singh said, but he will make a decision about whether to help trigger that election on a vote-by-vote basis in the House.

The Conservatives mocked the NDP during Question Period for saying they had “ripped up” the deal to support the Liberals, despite plans to vote to keep them in power.

Poilievre accused Singh of pretending to pull out of the deal to sway voters in a federal byelection in Winnipeg, where the NDP was defending its long-held seat against the Conservatives.

“Once the votes were counted, he betrayed them again. He’s a fake, a phoney and fraud. How can anyone ever believe what the sellout NDP leader says in the future?” Poilievre said during Question Period Thursday afternoon.

At some point after those comments, Singh stepped out from behind his desk in the House and a two-minute shouting match ensued between the two leaders and their MPs before the Speaker intervened.

Outside the House, Poilievre said he plans to put forward another non-confidence motion at the next opportunity.

“We want a carbon-tax election as soon as possible, so that we can axe Trudeau’s tax before he quadruples it to 61 cents a litre,” he said.

Liberal House leader Karina Gould says there is much work the government still needs to do, and that Singh has realized the consequences of potentially bringing down the government. She refused to take questions about whether her government will negotiate with opposition parties to ensure their support in future confidence motions.

Bloc Québécois Leader Yves-François Blanchet hasn’t ruled out voting no-confidence in the government the next time a motion is tabled.

“I never support Liberals. Help me God, I go against the Conservatives on a vote that is only about Pierre Poilievre and his huge ambition for himself,” Blanchet said Thursday.

“I support the interests of Quebecers, if those interests are also good for Canadians.”

A Bloc bill to increase pension cheques for seniors aged 65 to 74 is now at “the very centre of the survival of this government,” he said.

The Bloc needs a recommendation from a government minister to OK the cost and get the bill through the House.

The Bloc also wants to see more protections for supply management in the food sector in Canada and Quebec.

If the Liberals can’t deliver on those two things, they will fall, Blanchet said.

“This is what we call power,” he said.

Treasury Board President Anita Anand wouldn’t say whether the government would be willing to swallow the financial implications of the Bloc’s demands.

“We are focused at Treasury Board on ensuring prudent fiscal management,” she said Thursday.

“And at this time, our immediate focus is implementing the measures in budget 2024 that were announced earlier this year.”

This report by The Canadian Press was first published Sept. 19, 2024.



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Anita Anand sworn in as transport minister after Pablo Rodriguez resigns

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OTTAWA – Treasury Board President Anita Anand has been sworn in as federal transport minister at a ceremony at Rideau Hall, taking over a portfolio left vacant after Pablo Rodriguez resigned from cabinet and the Liberal caucus on Thursday.

Anand thanked Rodriguez for his contributions to the government and the country, saying she’s grateful for his guidance and friendship.

She sidestepped a question about the message it sends to have him leave the federal Liberal fold.

“That is a decision that he made independently, and I wish him well,” she said.

Prime Minister Justin Trudeau was not present for the swearing-in ceremony, nor were any other members of the Liberal government.

The shakeup in cabinet comes just days after the Liberals lost a key seat in a Montreal byelection to the Bloc Québécois and amid renewed calls for Prime Minister Justin Trudeau to step down and make way for a new leader.

Anand said she is not actively seeking leadership of the party, saying she is focused on her roles as minister and as MP.

“My view is that we are a team, and we are a team that has to keep delivering for our country,” she said.

The minority Liberal government is in a more challenging position in the House of Commons after the NDP ended a supply-and-confidence deal that provided parliamentary stability for more than two years.

Non-confidence votes are guaranteed to come from the Opposition Conservatives, who are eager to bring the government down.

On Thursday morning, Rodriguez made a symbolic walk over the Alexandra Bridge from Parliament Hill to Gatineau, Que., where he formally announced his plans to run for the Quebec Liberal party leadership.

He said he will now sit as an Independent member of Parliament, which will allow him to focus on his own priorities.

“I was defending the priorities of the government, and I did it in a very loyal way,” he said.

“It’s normal and it’s what I had to do. But now it’s more about my vision, the vision of the team that I’m building.”

Rodriguez said he will stay on as an MP until the Quebec Liberal leadership campaign officially launches in January.

He said that will “avoid a costly byelection a few weeks, or months, before a general election.”

The next federal election must be held by October 2025.

Conservative Leader Pierre Poilievre said he will try to topple the government sooner than that, beginning with a non-confidence motion that is set to be debated Sept. 24 and voted on Sept. 25.

Poilievre has called on the NDP and the Bloc Québécois to support him, but both Jagmeet Singh and Yves-François Blanchet have said they will not support the Conservatives.

Rodriguez said he doesn’t want a federal election right away and will vote against the non-confidence motion.

As for how he would vote on other matters before the House of Commons, “it would depend on the votes.”

Public Services and Procurement Minister Jean-Yves Duclos will become the government’s new Quebec lieutenant, a non-cabinet role Rodriguez held since 2019.

This report by The Canadian Press was first published Sept. 19, 2024.

— With files from Nojoud Al Mallees and Dylan Robertson

The Canadian Press. All rights reserved.



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