Bank of Canada Update: July 30th

Clinton Wilkins joins Todd Veinotte on News 95.7 to discuss the Bank of Canada keeping its benchmark interest rate at 2.75% for a third consecutive decision.

Bank of Canada Interest Rate Decision

Todd Veinotte
All right, we will get to your calls in just a little bit, but first, we’re going to talk about the fact that the Bank of Canada is holding its benchmark interest rate steady at 2.75% for a third straight decision as the central bank grapples with tariff uncertainty. Joining us here in the studios is Clinton, our mortgage guru, to talk about all this. Clinton, thanks for joining the show. So what are your thoughts on this?

Clinton Wilkins
I think people were expecting a hold. We put a little survey up on our Instagram. We like to do this once in a while. And the bulk of our connections thought that it was going to be a hold. People thought it was gonna be a hold or 25 basis point reduction. I think the hold really is dictated by what we’re seeing in the job numbers as well as the inflation numbers. So, neither of these things is indicative of seeing the rates being lower. I think borrowers in general are hoping for lower rates. It’s just the job numbers and the inflation that don’t dictate the rates being lower. I think going into the fall, things can change anytime, and things change so quickly, especially with what’s going on in the US, and the bank is doing these meetings and making these decisions, and they’re looking at everything. So, I’m optimistic that we’re going to see the rates continue to go down, but when are we going to see them go down? It may now even be into 2026, just depending on what happens with the job numbers and with inflation.

Impact of Tariffs on the Canadian Economy

Todd Veinotte
Right, and how about the tariff situation and that uncertainty? What are your thoughts on all that’s kind of hanging over our heads, casting a big shadow over the economy in general?

Clinton Wilkins
Well, I think our listeners couldn’t even clearly articulate what’s going on with tariffs. I don’t even know. From day to day, it’s changed so many times. And, there have been so many deadlines, and things have been pushed back and changed, and maybe the baseline is going to be a 15% tariff, I don’t know, but that is going to impact what’s going on in Canada. And I think the biggest economic driver is going to be what’s going on with our GDP and what’s what happens with our trade so depending on what happens with tariffs, we may see more of a recession type situation, and if we do that’ll be something that the bank account is going to take into consideration and lower that key overnight rate to spur spending.

Todd Veinotte
Yeah, for sure. So look, as far as mortgages go, and we were chatting before we went on air, and you were talking about the fact that your business is doing well, and business is up, but a lot of people are it’s at refinance, or is it when, when their mortgage renews? Is it when you’re getting a lot of action?

Clinton Wilkins
Huge. This is the number one thing that we’re doing every day, Todd. It’s refinances. And I’ve never seen refinances like I’ve seen right now. I’ve been doing this for almost 21 years. Now. We’ve done over 6000 transactions, but a lot of refis are happening, and consumers are doing refinances at renewal, but they’re also doing refinances mid-term for a variety of reasons. People want to lower their monthly output of their mortgage payment. They are concerned about the interest rates, but taking the longer amortization is helping them balance out these less, these higher rates. And a lot of these borrowers that we’re talking to, it’s a temporary extension, is the way that they’re thinking about it. They’re re-amortizing to 25 or even 30 years to bring down that monthly payment, but not forever. They’re saying, Okay, we’re going to do this for three years or five years, and when the rates are lower in the future, we’re planning on bringing our amortization back down to 20 years, or 15 years, or 10 years, or whatever works for them. So that’s what we’re seeing. And when people are doing these refinances, Todd, they’re pulling equity out. Oftentimes, they’re consolidating unsecured debt. Sometimes they’re doing renovations, sometimes they’re doing investments. Sometimes they’re just adding a different product, like a home equity line of credit. But these borrowers that we’re talking to that bought a house more than three years ago have a lot of equity in their homes, in most cases, especially these borrowers that bought homes before 2020, let’s be real, the property values have gone up a lot. I don’t think they’re going up as quickly as they were in terms of price point. I don’t know if the price point’s softening, per se, it’s just not increasing as quickly as it was.

Todd Veinotte
Yeah, thank goodness for the fact that they’ve got equity and the price point has gone up, because that’s the only way that you’d be able to refinance, right?

Equity and Mortgage Renewal Cliff

Clinton Wilkins
You can only refinance up to 80% of the market value of the property like, for example, if a property value today is 500,000 and a property value, the way that we think about the value is, what could someone sell their home for? So let’s just say, for example, just for rough numbers, it’s 500,000 the maximum mortgage that someone could do would be 400,000 and from that, they need to pay out any existing mortgage or secured debt, like a home equity line of credit that they would have. So the delta would be what they could exceed in terms of new available credit. So. And I think that’s sometimes confusing to borrowers, like, sometimes I talk to borrowers who bought a home even, like, two years ago, but they only put down 5% and then we asked them, Okay, well, what could you sell your home for? There’s just no equity to be able to take out. So it’s really that 80% rule is really, really key.

Todd Veinotte
Yeah, there was concern about this kind of cliff that people are going to be hitting because we know that people borrowed money quite inexpensively in 2020. At that type of time, Canadians were drunk on cheap money, and there was this concern that the people would be hitting a bit of a wallhead. Has that happened?

Clinton Wilkins
This renewal cliff? I think it was kind of a catch in the media. I think for some borrowers, they’re feeling the pinch, but I think they’re feeling the pinch even before renewal. We’re seeing borrowers who bought a home five years ago. Yes, the interest rates have gone up, but everything else has gone up, except their pay. So they’re feeling it at the grocery store. They’re feeling it at the gas station. They’re feeling it, buying other consumer goods. They’re feeling that their monthly costs are higher now than they once were, and then when the mortgage comes up for renewal, it’s adding that kind of insult injury in some of these cases. And some borrowers are choosing to sell their homes. I think that we’re seeing more listings come up. I’d be curious to hear what the realtors think, but I’m just looking on MLS for more properties for sale, and I think properties for sale for more days, and the purchase agreements that we’re seeing coming into our office seem to be more balanced. We were really in a seller’s market here in Halifax, where sellers had all the power. The buyers had really no power either, buying it, not buying it. And, they were looking at bidding wars. Now, I think it’s more balanced from a buyer’s and a seller’s perspective, which I’m here for, as somebody who works in the industry that supports people buying real estate, having a balanced market, where everyone’s happy, is the ideal situation. And I hope that that continues. And our biggest struggle was that we had a lack of inventory. But I’m seeing more, and I’m seeing more come up every day, so I think that’s positive, and there certainly are a lot of buyers out there. Because let me tell you, we’ve done a lot of preapprovals this year, and we’re just kind of waiting for people to get Purchase Agreements together. So, I think we’re gonna see more activity even going into the fall.

Down Payment Options

Todd Veinotte
Yeah, and people get as far as down payments go, you can borrow your down payment. Is that true?

Clinton Wilkins
You can do your down payment. Even from a line of credit or a credit card, that’s certainly doable. You could be gifted it from the “Bank of Mother and Father.” But the Nova Scotia down payment assistance program is huge. And we see a lot of first-time home buyers, depending on what their total income is in the household, to be able to access this Nova Scotia Down Payment Assistance Program, and the program is different across the province, but on the Nova Scotia website, it has all the constraints depending on what county you’re in. Different counties have different limits based on the purchase price as well as the household income. So, something to think about as a first-time home buyer. And, when we’re doing these preapprovals, we’re talking to people about their lives and what their plans are. And, some borrowers are saying, well, it’s going to make more sense if I can put down 20% and I’m going to wait a year or two years to do it. And I kind of use this adage to say, these people that bought these homes with 5% down in 2020, they’re way further ahead than the people that wait five years to try to put down 20% today, because the purchase price is what the purchase price is. We’re less concerned about the rate, what we say, and we use this adage that you’re marrying the home, but you’re only dating the rate. But it’s kind of the same when we’re talking about a down payment. Yes, it’s a sunk cost from the Canadian Mortgage and Housing Corporation stage in our Canada guarantee if you put down less than 20% but the cost of real estate today is likely going to be much less than the cost of real estate will be in the future.

Todd Veinotte’s
So, what is the typical five-year fixed rate right now?

Clinton Wilkins
We’re seeing them in the low fours, like four and a quarter ish is the current rate products, whether you’re taking a three-year or five-year fix, you’re taking a variable. All the rates are primarily in the fours. A couple of months ago, Todd, things were kind of edging down in that 399 range, which optically looks good. The difference between the 399 and 49 is not a big difference. But optically, the 399 kind of looked exciting. But a lot of lenders have increased their rates. It’s really due to what’s going on in the bond market. So I think in terms of what a borrower could expect, four and a half percent, four and a quarter, maybe low fours, just depending on what the situation is. But that’s pretty much across many different rate products. It doesn’t matter if you’re doing a three-year five five-year, or variable, you’re going to see rates in that type of range.

Todd Veinotte
Okay, and a reminder that the Bank of Canada is holding its benchmark interest rate steady at 2.75% for a third straight decision. And I suppose we’ll wait and see what happens in September. Any predictions on that?

Clinton Wilkins
Or I’m either going to say we’re going to see a 25 basis point reduction, or it might be a hold. I mean, I’m going to be watching the job numbers. We’re watching GDP and I’m gonna be watching and see what goes on with inflation. So we’ll be reporting on our show. Our show will be on again, Mortgage 101, will be on again in August. I’m sure we’ll talk more about what’s going on in the bank. You can, and the economy will then for sure.

Todd Veinotte
All right, we’ll get your calls when we come back.