Bank of Canada – No Movement on Interest Rates | January 24th 2024

Clinton Wilkins joins CityNews with Rob Snow to talk about the latest Bank Of Canada Update for January 2024. Clinton provides some insight on what no movement of interest rates means for mortgage lenders.

Clinton Wilkins
Clinton Wilkins here! Here’s an update about the latest Bank of Canada announcement.

No Movement on Interest Rates

Rob Snow
No move on interest rates as expected from the Bank of Canada, but also no word on when interest rates would start going down. For what that means for mortgage rates, we’re joined by Clinton Wilkins of the Clinton Wilkins Mortgage Team at Centum Home Lenders in Dartmouth. Hi, Clinton!

Clinton Wilkins
How you doing? Rob?

Rob Snow
I’m great. What did you think of the announcement?

Clinton Wilkins
You know what I wasn’t surprised. But I think a lot of Canadians were hoping for the rate to be reduced. I think, we were cautiously optimistic that obviously the rate was going to hold. But I think some people were just ready for the rate to start being reduced, which is not going to happen just yet.

Rob Snow
Yeah, the governor of the Bank of Canada Tiff Macklem said, you know, we’ve come a long way, certainly in the fight against inflation, but the battle is not won, yet. So it would be premature to talk about interest rate cuts right now, at the central bank level. What does that mean for mortgage rates?

Clinton Wilkins
Well, right now, as we know, inflation is still very high at 3%. You know, obviously, it’s been going down. But, the reports in December were that, inflation was beyond the target. I think the interest rates have started to soften in terms of a fixed rate product. Even in the back half of last year, we saw some reductions. And I can tell you even going in here until January, we are starting to see some interest rates that start with a four; which I think is very promising news for Canadians and for mortgage borrowers. There’s a lot of Canadians that have their mortgage coming up for renewal. I think the stat is that in the next two years, about half of Canadians are having their mortgages renewed. And many of these Canadians are renewing into interest rates that are much higher than the rates that they would have been coming out of. So, I think there’s certainly some concern out there. And I think everyone is cautiously optimistic that this plateau will continue. And hopefully, by the summer months, we’re going to start seeing some rates being reduced. One of the chief economists for one of the big banks, actually with Scotia Bank, said that we think the rates are going to even be reduced maybe 100 basis points this year. And they think maybe that medium mark is about 200 basis points less than where they’re at. I think all the economists think that it’s going to be a little bit of a slow burn between now and seeing these rates being reduced. But I’m optimistic that by the end of 2025, we may be more in a median market. I think that would be a prime rate somewhere in that 4% mark.

Rob Snow
So what are some rates now? Give us some examples of what some popular mortgage rates would be right now, Clinton,

Clinton Wilkins
I would say one of the most popular products that we’re seeing every day is a three year fixed rate. And I think those rates certainly have been being reduced, you can get a three year fixed now in a low 5% range, which I think is really great news. When we were talking last year, a lot of the rates were in the 6% and 7% range. So I think seeing a rate in a low 5% is great. Canadians we’re just so programmed to taking a five year fixed. And I think we have to be very cautious with our rate selection, and really seek the advice of an unbiased mortgage professional right now, because there is so much variety in the rates. And I would say there are almost more differences between rates and lenders now than there was before. The rates are still moving very quickly, there’s been a lot of pressure on bond yields, which has brought some of these rates down. And I’m optimistic that they’re going to continue, hopefully, on a downward trend. You really need to think about the product that you’re taking now because just imagine if you do take a five year fixed rate; and right now you can sometimes get a five year fixed sometimes as low as 4.99 for example, you’re going to be stuck with that product for that five year period of time. So in a couple years, when wanting to break it, when we better rates in that 3% range, you could pay a very significant penalty if you want to exit that term early. And this is why we’re seeing more consumers coming in to ask for a variable rate mortgage product. They certainly have become more popular ever since we’ve been in this plateau situation. More people want to take a variable rate. Yes, these variable rate mortgages are more expensive than their counterparts and the fixed, but the reason that a client would want to take this variable rate is it gives them some more flexibility. If you were to break that mortgage early, you’d pay a penalty for only three months interest. And the real upside on this variable is you can always convert it into a fixed when these fixed rates come down to a better place where rates are to your suiting.

Mortgage Rates and Options For Renewal

Rob Snow
And what kind of spreads are differences are you seeing right now between the high ratio mortgages versus the mortgages that aren’t high ratio?

Clinton Wilkins
So high ratio mortgages, the rates are always the lowest. The one thing that I would really encourage our listeners to look into is to see if you have a mortgage that’s coming up for renewal, that was previously conventional. In addition to your property value being less than a million dollars, you can technically do what we call an insurable transfer from lender to lender. So, you could leave the lender that you’re at, go into a new lender, and it would be insurable. Now you don’t need to pay any insurance, to the Housing Corporation, it is not going to cost you any extra money. But you’re able to access these best rates. And the insurable rates at 65% of the property value are the same rates, that we’re able to get on these high ratio transactions. So the other day, Rob, just to give you an example, we were able to get a rate for a client on a five year fixed, because that’s the product that they really wanted. We were able to get 4.89% on a five year fixed. So we are certainly seeing some terms, starting with a four, which I think is very encouraging news for Canadians.

Rob Snow
So the news reporters at the news conference in Ottawa today, they tried several times to pull it out of Macklin, when are you going to lower rates when he go into lower rates? He wouldn’t give it up. You could sway him from from that.

Clinton Wilkins
I think part of the reason that it’s hard to get out of him. He basically fell on his sword saying that the rates were going to be low for a long, long time. So I think now he’s even more extra cautious to give any hints or tips.

Canadian Mortgage Rates and their Potential Decrease

Rob Snow
But what’s the consensus in the in the mortgage industry right now when lower rates could come?

Clinton Wilkins
I think the consensus in the mortgage industry, and even talking to economists, they are projecting that we’re going to see the rates start softening in the summer. So I think, going into June, July, August, we’re going to be into a lower rate environment. And I think overall, we think the rates are going to be somewhere around 100 basis points less, and that means 1% less than where we’re at now.

Rob Snow
Right, Okay! Very interesting on Bank of Canada Day. Thank you so much, Clinton Wilkins, great to hear from you. Thanks!

Clinton Wilkins
Thanks for having me Rob! Have a great day. If you’ve liked what you’ve heard, and you want to learn more, feel free to visit us online at teamclinton.ca