Bank of Canada Update: April 29th

Dan Ahlstrand and Clinton Wilkins discussed how the Bank of Canada held its interest rate as anticipated amidst geopolitical tensions.

Dan Ahlstrand
I just like to say all eyes are on something, because that’s never the case, but I think many eyes would have been on what the Bank of Canada was going to decide today, because it impacts an awful lot of people. Those with variable mortgages, those who are looking to perhaps get a new one, or buy a house, or maybe downsize, or do all the things that we do with mortgages. And of course, when it comes to mortgages and Bank of Canada rates and interest payments and those kinds of things, we always go to our good friend and our mortgage guru here on the program, and that is Clinton Wilkins. Clinton, how are you?

Clinton Wilkins
I’m doing great today.

Dan Ahlstrand
Let’s get it out there for those who haven’t heard. What happened?

Clinton Wilkins
No change today. The Bank of Canada announced that they were going to do a hold. I think that was highly anticipated. I can tell you, a lot of the comments were coming out last week, though, Dan and I said the Bank of Canada would likely cut the interest rate if it wasn’t for what was going on with the oil situation and their war in Iran. So let’s take that for what it’s worth. Obviously, things can change from time to time. If this situation starts writing itself, I hear some people are like, well, it might be done in a month. It might be done in six months. Who knows? And that’s what’s happening today. But, I think we’re less sensitive; we’re getting desensitized to some of this, the conflict. When it was the tariffs, it was tariff changes, like every day now, I’m like, we don’t really hear that much about tariffs. They’re still going on, and I think they are still also changing, right? But we don’t get as much, maybe information, and it’ll be, I think, similar to what’s going on in Iran. So we’ll see what happens. I am cautiously optimistic. I’m watching GDP, I’m watching the job numbers, and I’m watching inflation. Many indicators are pointing towards the rates going down, in terms of the Bank of Canada and their lowering them. So we’re going to continue to watch it. And their next announcement is on June 10, so it’s what, six or seven weeks away.

Dan Ahlstrand
So Clinton, when there’s that speculation in the market, when we’re in a situation like we were today, and everybody kind of was, was on the same kind of page when it came to what was going to happen with this one, particularly after that war started at the end of February. But we know that there’s that, there’s an announcement coming in June. We have the indications, at least at this point, that in six or seven weeks, a lot of things can happen. I mean, things can change, really.

Clinton Wilkins
It happens very quickly.

Dan Ahlstrand
I think. But with the possibility of a rate cut coming, does that keep people on the sidelines and wait for that? Or do they say, Okay, well, maybe I’ll get into the market now, and I’ll get a variable rate mortgage, because if, even if this thing does come down, at least it’s going to come down, and it will impact my rate.

Clinton Wilkins
Well, I think some people just, in their minds, want to wait, wait, wait, because they think it’s going to be maybe getting cheaper, especially when the rates are high-ish; they’re much better than they were a couple of years ago, but they are still higher than they were maybe five years ago. So I think some people just wait for the last possible moment. And I think that’s detrimental as well. We see clients every single day. And if there were clients that we would have seen that are closing, this month, next month, if we had seen them even like a couple of weeks earlier, we could have potentially given them a lower rate. So I always suggest that borrowers get approval. Get a rate, hold 120 days before that the mortgage needs to fund. And then if those rates go down, then ask your lender, your borrower or your broker for a rate float down. We’re watching these rates every single day, and oftentimes, Dan, in mass, I go, and I float down my entire pipeline with one lender, especially if there’s a big change. And then, closer to closing, usually within 30 days. Then, maybe FCT is instructed if it’s going to be a remote closing, or the lawyer gets instructed. And for us, our workflow is we check and just still make sure that the clients in that best, at the best rate that we can give them. For me, my compensation isn’t directly tied to rates per se. It’s more based on what’s going on with the volume. So, for me, I want to give the clients the best advice, and part of that best advice is giving them the best rate that I have access to. Is it always going to be the lowest? Dan, no, someone will always do it lower. But I think what we provide, which I think is different. I think mortgage brokers, across the board, are very similar. It’s really providing that advice piece. Specifically, if you’re in a variable-rate mortgage, you need to know that someone’s watching it for you. You need to know that they’re providing information. So for today, I will watch these announcements live from the Bank of Canada website and all our clients who are in a variable rate mortgage business partners. We are sending an email, a nd we’re sending SMS, like we are basically overcommunicating to these folks. But then I can also put information in this email, saying what? I think you just need to stay where you are. Or if I think you should make a change, then I can reach out to you, or I can give you some specific information. It is daunting, though, as a homeowner, as someone who has a mortgage, it’s the biggest debt of your life, and it’s the biggest purchase you need. You need to have some solace that someone’s on your team. And I think that’s. Where the value,, of having a mortgage broker is just so important.

Dan Ahlstrand
Clinton, we talked about variable-rate mortgages. We know that they’re very dependent on what the Bank of Canada does. Some others will opt for a fixed rate. And if, absolutely, if we were listening to mortgage 101 last month. And if you missed it, by the way, can grab that off of our website, on in the in the the show’s page, and you can grab our all of the back catalog of mortgage 101, but one of the things that we talked about was the impact of of world events, these geopolitical events, on the bond market, which drives the the variable rate mortgage the fixed rate market.

Dan Ahlstrand
Are we going to win with the Bank of Canada doing this, or if this potential cut happens next time around, does that impact the fixed-rate mortgage market? Or is that more based on what’s happening in the world?

Clinton Wilkins
Oftentimes, it’s anticipated, so sometimes it’s already priced in. Dan, we’re watching these bond markets and what’s going on with the yields all the time. And this is where I think there’s a lot of confusion out there. Lately, the fixed rates have edged up a little bit; it’s like it’s all to do with the cost of funds, and that can translate into a variable rate mortgage, because although the rate is tied to what’s going on with the Bank of Canada, you still have a discount to prime. So right now, maybe a good variable rate mortgage is at prime minus 75 or something like that. We’ll just use aita as an example. Maybe it’s 3.6 or 3.7%, but that spread is really the guarantee that a borrower is going to get for their contract life. The fixed rates are tied directly to that bond market as well. It’s the cost of funds for these lenders to be able to advance it and say, Okay, I’m going to borrow these funds at x, and this is how much the borrower is going to pay. Now, those funds, then the cost of funds, have been going up, and that’s what’s being translated over to borrowers. Mortgage. The cost of borrowing overall hasn’t been going up, but maybe fixed rates are higher. And I think that’s where it’s important to know, and that’s why it’s important to have a rate hold. If you’re planning on making a purchase, you should have apre-approvall know at least what rate you’re going to get, and then hopefully by the time you make a purchase, maybe those rates will go down, and we can give the borrower a lower rate. I think it’s the same if you’re going to do a refinance, or if you’re going to do a mortgage renewal and switch to a different lender, get it done early. And then if the rates get better, then you can benefit from having a lower rate. But sometimes it gets worse, so it’s better to have it early and know you have what you have, and you like, and you’re happy with the setup of your product. And there are so many different products out there. And I think that’s where it also becomes daunting. I see this analysis paralysis. I’ll use, I think consumers are getting more educated, partially because of our show, Mortgage 101, we’re pumping out a lot of information, but as much as we are educating people, there’s a lot of disinformation or misinformation out there as well. It’s like, let’s talk about your previous show when you had the doctor on. I’m sure doctors’ worst nightmare is like, people going on women, WebMD, and, diagnosing themselves, I think, is the same thing. Sometimes, when you’re doing mortgage lending, a nd you’re dealing with a mortgage broker, sometimes you’re looking at our information, or sometimes it’s information that’s from another region in Canada, and it doesn’t apply to what we’re doing here in Halifax and across our region in Atlantic Canada.

Dan Ahlstrand
Last question, Clinton, we know we’re in a bit of an affordability crunch, not a bit. We’re in an affordability crisis. And, energy rates are high, power rates, water rates, grocery store, we know all of that. And, there are some people out there who may have, in the past, held on to a recreational property or a cottage or a camp or whatever. And this is the time of the year when people start to think about them, because they’re opening them up. And, should I get out of these? Or maybe there are some out there that are perhaps looking to get into the recreational property market? Is it any different than getting a mortgage on a house, to get a mortgage on a recreational property?

Clinton Wilkins
Typically, a mortgage on a primary residence is going to be the easiest one to get. Dan, by and large, Canadians pay their mortgage payments, but when things start going wrong, they’re letting that cottage go first, or maybe they’re letting that rental property go. People want to stay in their homes and like, let’s let’s be frank, we have a squeeze on the amount of supply here. People need a place to live. So, things could be going very wrong in someone’s life, but maybe it’s a credit card payment that they’re letting slide, or their car alone, but I would say, if things are going sideways, they’re selling the cottage first. Hopefully, we still have a lot of demand here in this marketplace, and in Halifax, it still is a seller’s market. There are other areas of the province where maybe the market is more balanced, which is great. We still need more supplies. So I think if there are more listings, we’re going to see more transactions here in Atlantic Canada. I was so lucky to host Mortgage Professionals Canada. We had our Atlantic symposium here this week in Halifax. We had over 380 mortgage professionals, and a lot of them from across the country came to our region. So. Staying and spending money. We had the Minister of Finance for Nova Scotia on, and we also had the Minister of Housing from Nova Scotia and New Brunswick, as well as the regulators from Nova Scotia and New Brunswick. So we had a lot of government presence at this conference. And, the one thing that we kept on talking about was how we can get more Canadians into homes here. We have a lot of talent base here. How can we make sure they’re going to bestickiery? We need to get them into home ownership. And I think a lot of that starts with these first-time home buyers. So the more listings we have, especially with these homes, sub 600,000, it’s going to get more of these first-time home buyers into the market. And as we know, spring is typically the busiest real estate market in terms of trading. So we’re cautiously optimistic that we’re going to continue to see more listings and there’s going to be more activity in the market. And from a government perspective, we also had Mayor Fillmore on, and he gave an address. It’s really about, I think, cutting that red tape. How can we get these development fees down, and how can we get more shovels in the ground? We need all types of housing here. We have a lot of apartments coming online, but not enough, maybe single-family homes, townhomes or Maltese that are being built to support the amount of demand here that we have in Halifax and across HRM and really across our region, in Nova Scotia and in New Brunswick.

Dan Ahlstrand
If somebody wants to reach out to you, Clinton, or learn more about you or what you do, what’s the best way to do that?

Clinton Wilkins
The best way to reach me is on our website at Team clinton.ca/radio, again, there are hundreds of blog posts on there. You can see what Dan and I look like. There are links to our social media. And we’ll be back here, I guess. I think next week, for Mortgage 101, and to give a little shout-out, we’re going to be talking about reverse mortgages. So I know Mother’s Day is coming, and Father’s Day is around the corner as well. How can you support retirees and help them stay in their homes, and best support their finances? So we’ll talk a lot about that as well.

Dan Ahlstrand
That is Clinton Wilkins, our mortgage guru. We’re going to take a break when we come back.