Monday Morning Rate Update (May 9, 2011)

David Larock in Mortgages and Finance, Home Buying

Last Friday’s jobs report from Statistics Canadawas a mixed bag. The headline number of 58,000 new jobs in April was an upside surprise, but most of the new jobs were part time (41,000), and public sector job growth continues to outpace private sector job growth, which is an unhealthy long-term trend. Ontario was the big winner with 55,000 new jobs, but again, 46,000 of those were part time. While this report continues some recent positive economic momentum and brings our overall full-time employment numbers back to pre-recession levels, our participation rate is still about 1% below capacity. While many analysts are using this report as further evidence that the Bank of Canada will start increasing short-term rates in July, 2011, I think the jury will  still be out until we get a better sense of what our second quarter GDP numbers look like. 

The U.S. non-farm payroll report was also released on Friday. It showed 244,000 new jobs, which is below the 250,000 to 300,000 needed to replace lost jobs and reduce overall unemployment (thus, the overall unemployment rate rose from 8.8% to 9%). While all of the gains were from private sector hires, many were part-time and 62,000 of these were McJobs (literally…McDonald’s went on a huge hiring binge). Meanwhile, the public sector shed another 24,000 jobs, contracting for the sixth straight month. While a growing private sector and shrinking public sector make for a good long-term trend, it also means that the U.S. private sector will be driving the Job Creation bus by itself for the foreseeable future. In other words, more tough times ahead.   

Five-year Government of Canada bond yields continued to trend downwards last week and as expected, lenders began to drop their fixed rates. Five-year fixed-rate mortgages are back below 4% and credit unions are leading the charge. Our latest employment report didn’t move the market much, and spreads finished slightly lower on Friday to close out the week.

Lenders held their variable-rate discounts for another week, so prime minus .80% or better can still be had (for now). 

The bottom line: The only way today’s super low variable rates will leave you better off in the long run is if you use today’s savings to pay off your mortgage faster. To better understand why, and to see just how much impact this technique can have, check out last week’s post called The Power of Prepayment.

David Laro
ck is an independent mortgage planner and industry insider specializing in helping clients purchase, refinance or renew their mortgages. David's posts appear weekly on this blog ( and on his own blog ( Email Dave

Mortgage     |    

Toronto’s most authoritative real estate insights, delivered right to your inbox.