Dave Larock in Interest Rate Update, Mortgages and Finances
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The latest Canadian employment report sure got the market’s attention last Friday.
It showed that our economy added a whopping 40,600 new jobs last month, which was well above the 10,000 new jobs that the consensus had been expecting. The five-year Government of Canada (GoC) bond yield, which our five-year fixed mortgage rates are priced on, shot up nearly 10 percent after the report was released.
While there were some encouraging developments in our March employment report, the underlying data are notoriously volatile and are regularly revised in subsequent months. David Parkinson at the Globe and Mail noted Stats Can’s claim that its initial March estimate is deemed accurate to within 29,800 jobs two-thirds of the time. In particular, the 18,900 rise in net new jobs in Alberta last month seems ripe for revision, to the point where I am wondering whether someone added instead of subtracted when tallying that province’s result.
Here are the highlights from our latest report:
The initial market reaction to our latest employment report was quite bullish, but I think that enthusiasm will be tempered after a more detailed look at the data for the reasons outlined above (and the March report seems particularly ripe for revision, especially with the jump in Alberta employment).
Five-year GoC bond yields rose by two basis points last week, closing at 0.72% on Friday. Five-year fixed-rate mortgages are available in the 2.39% to 2.59% range, depending on the terms and conditions that are important to you, and five-year fixed-rate pre-approvals are offered at rates as low as 2.69%.
Five-year variable-rate mortgages are available in the prime minus 0.30% to prime minus 0.40% range, which translates into rates of 2.30% to 2.40% using today’s prime rate of 2.70%.
The Bottom Line: I don’t think that Friday’s surge in the five-year GoC bond yield will be sustained or that the BoC is likely to alter its monetary-policy approach in response to the March employment data. As such, despite the market’s initial response, I don’t expect our March employment data to have a material impact on either fixed or variable mortgage rates going forward.
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