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Good morning!
As homeowners with variable rate mortgages brace for another expected hike next week from the Bank of Canada, fixed rates are also rising, according to rate insiders.
Rate comparison site Ratesdotca says commercial banks are continuing to raise fixed rates in response to soaring bond yields.
Scotiabank announced last week that it was raising its five-year fixed rate by 25 basis points to 5.69% for 25-year amortization and 5.79% for 30-year amortization, according to Ratesdotca.
TD also announced a 20 basis point increase in fixed rate mortgages, bringing the five-year fixed rate to 5.59%.
According to mortgage rate analyst Robert McLister, “borrowers are experiencing a rate shock, the likes of which we have never seen before.”
In 1981, Canada’s policy rate was multiplied by 3.7, but McLister calculates that the increase this time will be “17x by next year if the bond market’s implied rates are correct”.
“Never have rates made such a disproportionate comeback in such a short time,” he wrote in his weekly newsletter.
McLister said default rates could potentially triple for non-institutional subprime borrowers, who will be hit hardest. According to Ratesdotca, non-bank lenders are also raising fixed rates, by 20 to 30 basis points on average.
Meanwhile, economists are scrutinizing the latest data in a bid to predict how much of a hike we can expect from the Bank of Canada next week.
TD senior economist James Orlando said the bank should be encouraged by its business and consumer outlook surveys, released on Monday, which suggest rate hikes earlier this year have had an impact.
“Given the drop in future sales, we see that companies are seeing a fairly rapid decline in overall demand. This is reflected in future inflation expectations, which have declined across all time horizons,” he wrote in a note.
TD and RBC economists are expecting a 50 basis point hike on October 26, which would bring the Bank’s key rate to 3.75%.
For every 50 basis point increase, a homeowner with an adjustable-rate mortgage can expect to pay about $28 more per month for every $100,000 in mortgage, said Victor Tran, an expected mortgage and realtor for Ratesdotca.
“If the Bank of Canada raises the overnight rate by 50 basis points, which it is expected to do, many investors and those renewing their mortgages in 2022 and 2023 will be hit hard,” he said. declared.
“Rate hikes are already cooling the housing market and another overnight rate hike has the potential to trigger a sale of investment properties.”
But the Bank of Canada could potentially climb even higher, and economists say that hinges on an important piece of data yet to come – tomorrow’s CPI report.
A strong reading on inflation, according to BMO rates and macro strategist Benjamin Reitzes, “will lean 75 basis points higher, while consensus or lower would point to 50 basis points higher.”
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CANADIAN TIRE NOT JUST FOR GUYS Canadian Tire Corp, the century-old supplier of hockey skates and sticks, stood out from the recent scramble of sponsors away from Hockey Canada, making a clean break, saying it was severing all ties with the organization. The move revealed how one of Canada’s largest retailers has moved beyond its men’s store stereotype, said retail consultant and strategist Lisa Hutcheson. Get the full story on an iconic Canadian brand here from Financial Post’s Bianca Bharti. Photo by Peter J. Thompson/National Post
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The Toronto 2022 Global Forum continues
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Today’s data: Canadian housing starts and international securities; US industrial production and capacity utilization; China GDP, Industrial Production, Retail Sales, Fixed Asset Investment
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Earnings: Goldman Sachs, Johnson & Johnson, United Airlines, Netflix
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Canadian business sentiment has fallen the most since the dark days of the start of the pandemic, the Bank of Canada’s business outlook survey showed yesterday. The central bank’s indicator fell to 1.69 in the third quarter, from 4.87 previously. While still positive, this is the largest deterioration in Canadian business confidence since the second quarter of 2020, Bloomberg reports. Adding to the gloom, polls have revealed that most businesses and consumers think a recession is likely within the next 12 months, triggered by higher interest rates and high prices.
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It is a fact that environmental disasters such as floods cause costly damage to Canadian homes every year. But regular maintenance and a few small expenses can prevent more costly permanent damage. Read on as our content partner MoneyWise explains five ways to protect your home from the costly effects of climate change.
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Today’s Posthaste was written by Pamela Heaven (@pamheaven), with additional reporting from The Canadian Press, Thomson Reuters and Bloomberg.
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