Happy Holidays

I would like to wish my readers a healthy and happy holiday season.

My next post will be uploaded on January 6. In the meantime, here are links to a few of my most widely read recent posts.

They offer key insights on why the Bank of Canada (BoC) is likely to continue reducing its policy rate, why our fixed mortgage rates may be bottoming out, and why our recent inflation uptick isn’t likely to alter the Bank’s plans:

1. The Bank of Canada Cuts Again (and More Should Still Be on the Way)

This post provides highlights from the BoC’s most recent 0.50% rate cut and explains why I think our variable mortgage rates will decrease further from here.

2. Have Canadian Fixed Mortgage Rates Bottomed? and A Warning About Canadian Fixed Mortgage Rates

These posts outline a significant shift in my mortgage-rate outlook. They explain why I believe that our fixed mortgage rates may have bottomed out and why I believe that five-year fixed rates are worth a fresh look.

3. Why Our Inflation Uptick Is Unlikely to Deter the Bank of Canada’s Rate Cut Plans

This post explains why I think bond-market investors overreacted to our slightly higher-than-expected inflation print for October and why I didn’t think our recent inflation uptick would alter the BoC’s rate-cut trajectory. (That prediction proved correct for the Bank’s meeting on December 11, and my rationale remains applicable to
further cuts.)

The Bottom Line: Government of Canada (GoC) bond yields continued to edge higher last week, pulled along by their rising US Treasury equivalents.

While there is no immediate pressure on our fixed mortgage rates right now in either direction, the GoC bond yields, which they are priced on, have moved steadily higher so far in December.

Variable-rate borrowers saw their rates drop by 1.25% in 2024. The bond market is now only pricing in another 0.50% in cuts in 2025, but I think more will ultimately materialize. This view is based, in part, on the fact that the BoC’s policy rate, which currently stands at 3.25%, has bottomed out at 2% or lower over each of the Bank’s previous five rate-cut cycles. (Hat tip to economist David Rosenberg for that stat.)

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David Larock is an independent full-time mortgage broker and industry insider who works with Canadian borrowers from coast to coast. David's posts appear on Mondays on this blog, Move Smartly, and on his blog, Integrated Mortgage Planners/blog.

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