Dave Larock in Monday Interest Rate Update, Mortgages and Finances
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Last Friday we received the latest Canadian employment report, for March, and it showed that our economy grew by 28,700 new jobs last month.
This was an upside surprise when compared to the consensus economist estimate of “no change” for the month, although the details of the report were mixed:
Looking at the health of our employment landscape more broadly, our participation rate now hovers at 65.9%, which is very near a thirteen-year low. (As a reminder, the participation rates measures the percentage of working-age Canadians who are either employed or are actively looking for work.) While this ongoing trend has been primarily attributed to our aging work-force demographic, with Canadians aged 55+ returning to the workforce in droves lately, it appears that our participation rate still responds to cyclical changes in our economic momentum at the margin. That should reassure the Bank of Canada (BoC) that our labour force can absorb rising demand for labour for some time yet, and that should help keep a lid on the cost of labour, which is one of the most important drivers of inflation.
Five-year Government of Canada (GoC) bond yields rose by six basis points last week, closing at 0.79% on Friday. Five-year fixed-rate mortgages are offered in the 2.54% to 2.64% range, and five-year fixed-rate pre-approvals are available at rates as low as 2.69%.
Five-year variable-rate mortgages are available in the prime minus 0.65% to prime minus 0.80% range, depending on the terms and conditions that are important to you.
The Bottom Line: The BoC uses our employment data as a gauge of how much room our economy has to grow before inflationary pressures start to kick in. Despite the headline surprise in the latest employment data, it is unlikely that the March report will do much to alter the Bank’s overall view of the health of our economy and as such, the latest data should not have a material impact on our fixed and variable mortgage rates over the near term.
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