Dave Larock in Monday Interest Rate Update, Mortgages and Finance, Home Buying, Toronto Real Estate News
Editor's Note: Dave's Monday Morning Interest Rate Update appears on Move Smartly weekly. Check back weekly for analysis that is always ahead of the pack.
Last week ended with another disappointing Canadian employment report.
Statistics Canada estimated that we gained only 200 new jobs in July. The details in the report showed that we lost 60,000 full-time jobs and generated almost the same number of new part-time jobs to take their place. Not surprisingly, average wage growth continued to sputter along, struggling to keep pace with inflation.
If you’re looking for a silver lining in what was a mostly dark-cloud report, consider that we added 11,500 new manufacturing jobs last month, at least temporarily reversing the steady erosion of jobs in that sector (which has shrunk by approximately 15,000 over the past year). Also, average hours worked increased for the month, which might be an early signal of rising demand for labour if there is any follow through in the coming months.
The Canadian dollar fell on the news, and while that will help make our exports more competitive over the long run, the immediate impact will be higher import prices.
Over the short term, a cheaper Loonie increases the cost of materials and equipment that our manufacturers must import for use in their production processes. The benefits of a more competitive currency are taking longer to accrue, and may not actually fuel a labour-market recovery when they materialize. Our export manufacturing sector was devastated by the Great Recession and its recovery won’t just be a matter of existing companies ramping up production in response to recovering demand. Many of our export manufacturers shuttered their businesses altogether and, while we are seeing the first signs of recovery in this sector, there is no guarantee that tomorrow’s export manufacturers will be as labour intensive as yesterday’s were. The Phoenix that rises from these ashes may look very different indeed.
Five-year Government of Canada bond yields rose by five basis points last week, closing at 1.51% on Friday. Five-year fixed-rate mortgages are available in the 2.79% to 2.94% range and five-year fixed-rate pre-approvals are offered at rates as low as 2.99%.
Five-year variable-rate mortgages are available in the prime minus 0.75% to prime minus 0.60% range, depending on the terms and conditions that are important to you.
The Bottom Line: Our employment data are consistent with an economy that is struggling to create real momentum and it is hard to envision any meaningful uptick in fixed and variable mortgage rates until that changes.
David Larock 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, Move Smartly, and on his own blog: integratedmortgageplanners.com/blog Email Dave
