Economy Snapshot by Rebecca Awram – March, 2021
RATES
This week I had a realtor ask me if I would work with her clients, they were eager to meet me, as long as I could match the “xxx%” that their Bank was offering them. Obviously if they were happy with their bank, the service, the strategy, the communication, the turnaround times and the knowledge of their rep, they wouldn’t be looking to have someone else match the rate. My response to the realtor might seem harsh, but it’s accurate: “I’m sorry, I just don’t take on clients that are chasing rate. It’s a waste of time, and if I win a client on rate I will just as quickly lose a client on rate. Most lenders end up in about the same place on rate over time anyway, or to lose out on 5 bps affects their payment by eleven dollars per month on a mortgage this size. Focussing on rate is a distraction, the real value is in finding the best mortgage terms, that’s where lenders really vary a lot. I am a strategist and an educator.”
Things I will chase:
– the best mortgage
– the best policies
– the best penalty calculation
– the best porting policy
– lenders with the best customer service and exit policies
– finding a client the most money
– using lenders that can get us 1-2 day approvals, or in some cases even firm approvals before the client writes an offer, allowing us to go in subject free
What I won’t chase:
– rates
– clients
Now, all of that said, it actually IS a good time to lock in a rate somewhere, if you or your client like the fixed rate option. Fixed rates are driven by yields in the Bond Market, and while central banks are holding the overnight rate at record lows (which drives Prime rate and variable rate loans), the bond yields have been rising since early this month and that is putting upwards pressure on fixed rates. The 5 yr Government of Canada bond, upon which mortgage rates are generally tethered, are currently the highest they’ve been since March 2020.
CANADIAN ECONOMY
Inflation concerns are mounting. In a rare move this week, Statistics Canada revised-up it’s estimate of core inflation from just a week ago, at a time when investors are becoming more worried about global price pressures. This has rattled markets a bit, and while inflation is expected to accelerate in the coming months, the government has announced that they see little immediate threat from rising prices, even with extraordinary levels of stimulus coursing through the economy. They predict that inflation will not sustainably return to its 2% target until 2023, despite intermittent surges. We still have unemployment rising, a lockdown continuing in some areas and we are 43rd in the world for vaccine dose rollout. Our slow start on that front will ensure a longer period of economic under-performance. The Canadian dollar is creeping up against the US.
Although the economic outlook is bumpy in the short term, it improves significantly for the second half of the year. Employment is expected to rebound as provinces lift restrictions and vaccinations plans get underway.
US AND GLOBAL ECONOMY
There’s been some very volatile swings in trading this week, but we seem to be back in positive territory with north american stocks setting new all-time highs in February. Bond yields are taking off in the US also, even though their government has committed to keeping easy-money policies unchanged. This is putting upwards pressure on their mortgage rates too. It’s a strong week for the price of oil, and gold is taking a step back. The US dollar is slipping again.
RATES
This week I had a realtor ask me if I would work with her clients, they were eager to meet me, as long as I could match the “xxx%” that their Bank was offering them. Obviously if they were happy with their bank, the service, the strategy, the communication, the turnaround times and the knowledge of their rep, they wouldn’t be looking to have someone else match the rate. My response to the realtor might seem harsh, but it’s accurate: “I’m sorry, I just don’t take on clients that are chasing rate. It’s a waste of time, and if I win a client on rate I will just as quickly lose a client on rate. Most lenders end up in about the same place on rate over time anyway, or to lose out on 5 bps affects their payment by eleven dollars per month on a mortgage this size. Focussing on rate is a distraction, the real value is in finding the best mortgage terms, that’s where lenders really vary a lot. I am a strategist and an educator.”
Things I will chase:
– the best mortgage
– the best policies
– the best penalty calculation
– the best porting policy
– lenders with the best customer service and exit policies
– finding a client the most money
– using lenders that can get us 1-2 day approvals, or in some cases even firm approvals before the client writes an offer, allowing us to go in subject free
What I won’t chase:
– rates
– clients
Now, all of that said, it actually IS a good time to lock in a rate somewhere, if you or your client like the fixed rate option. Fixed rates are driven by yields in the Bond Market, and while central banks are holding the overnight rate at record lows (which drives Prime rate and variable rate loans), the bond yields have been rising since early this month and that is putting upwards pressure on fixed rates. The 5 yr Government of Canada bond, upon which mortgage rates are generally tethered, are currently the highest they’ve been since March 2020.
CANADIAN ECONOMY
Inflation concerns are mounting. In a rare move this week, Statistics Canada revised-up it’s estimate of core inflation from just a week ago, at a time when investors are becoming more worried about global price pressures. This has rattled markets a bit, and while inflation is expected to accelerate in the coming months, the government has announced that they see little immediate threat from rising prices, even with extraordinary levels of stimulus coursing through the economy. They predict that inflation will not sustainably return to its 2% target until 2023, despite intermittent surges. We still have unemployment rising, a lockdown continuing in some areas and we are 43rd in the world for vaccine dose rollout. Our slow start on that front will ensure a longer period of economic under-performance. The Canadian dollar is creeping up against the US.
Although the economic outlook is bumpy in the short term, it improves significantly for the second half of the year. Employment is expected to rebound as provinces lift restrictions and vaccinations plans get underway.
US AND GLOBAL ECONOMY
There’s been some very volatile swings in trading this week, but we seem to be back in positive territory with north american stocks setting new all-time highs in February. Bond yields are taking off in the US also, even though their government has committed to keeping easy-money policies unchanged. This is putting upwards pressure on their mortgage rates too. It’s a strong week for the price of oil, and gold is taking a step back. The US dollar is slipping again
