Mortgage Fun and Games

By the time you read this, there will have been another announcement from the Bank of Canada regarding the prime rate. Since this story was filed well before that date I would have needed a crystal ball to say what’s next. My gut instinct told me that with all the crazy stuff going on of late that the rates would either hold firm or even go up a quarter point. So to get some background info for this I reached out to Brad Vokins. Brad is a local mortgage specialist with Dominion Lending Centres. He’s been at it for 20 years so he really knows his stuff. I will let him explain why things are so tenuous right now:

Just a little over a month ago, the Canada five-year bond was down as low as 2.5% and as of today, it’s at 2.97%. You are starting to see an increase in rates across the board with some lenders starting to increase insured rates as high as 4.34% and conventional rates as high as 4.64% compared to 3.99% - 4.44% Before the inflation release on Tuesday, 70% of traders were betting on rate cut by the bank in Canada in June. That has now dropped to 40%. The annual inflation rate in Canada fell to 1.7% in April of 2025 from 2.3% in the previous month, slightly above market expectations of 1.6%, but still reflecting the softest increase in consumer prices in seven months. The slowdown was driven by a decline in energy prices as the removal of the consumer carbon tax. On the other hand, costs accelerated for travel tours, groceries, household operations, furnishings, and equipment, and recreation, and education. The trimmed-mean core CPI, which is closely followed by the BoC for underlying inflation, unexpectedly accelerated to 3.1%, the highest in two years. The CPI trimmed mean is a measure of core inflation, which is designed to provide a more accurate picture of underlying inflationary pressures by removing the effects of temporary or volatile price changes (source:Statistics Canada) This report will reinforce the Bank of Canada's cautious stance on easing to mitigate the impact of tariffs. Traders have lowered bets that the central bank will cut rates at its next meeting, putting the odds under 40% compared with nearly 70% before the release. It will be a close call for the Bank of Canada, but even if they don't cut rates in June, more rate cuts this year are likely.

How’s that? Clear as mud? The thing is with all the madness going on: tariffs, potential layoffs, cost of living and more, things have never been more tenuous. Which leads to a VERY cautious market. Add to that the fact there seem to be more listings hitting the market and what should have been transitioning to a buyer’s market has become almost no market at all. With exceptions of course. I always say what I do know is what I don’t know and to always expect the unexpected. The Real Estate market has been all that and more in the last few years. It would be nice to get back to a balanced market. But I wouldn’t expect that to happen anytime soon. We will just have to wait it out and see what’s next.