Hawkish Bank of Canada Decision

General Mitchell Goode 27 Oct

Bank of Canada Responds To Mounting Inflation: Ends QE and Hastens Timing of Rate Hike
The Bank of Canada surprised markets today with a more hawkish stance on inflation and the economy. The Bank released its widely anticipated October Monetary Policy Report (MPR) in which its key messages were:

  • The Canadian economy has accelerated robustly in the second half.
  • Labour markets have improved, especially in the hard-to-distance sectors. Despite continuing slack, many businesses can’t find appropriate workers quickly enough to meet demand.
  • Disruptions to global supply chains have worsened, limiting production and leading to both higher costs and higher prices.
  • The output gap is narrower than projected in July. The Bank now expects slack to be absorbed in Q2 or Q3 of next year, one quarter sooner than earlier projected.
  • Given persistent supply constraints and the increase in energy prices, the Bank expects inflation to stay above the control range for longer than previously anticipated before easing back to close to the 2 percent target by late 2022.
  • The Bank views the risks around this inflation outlook as roughly balanced.

In response to the Bank’s revised view, it announced that it is ending quantitative easing, shifting to the reinvestment phase, during which it will purchase Government of Canada bonds solely to replace maturing bonds. The Bank now owns about 45% of all outstanding GoC bonds.

The Bank today held its target for the overnight rate at the effective lower bound of 1/4 percent. While this was widely expected, the Bank adjusted its forward guidance. It moved up its guidance for the first hike in the overnight rate target by three months, from the second half of 2022 to the middle quarters–sometime between April and September.
Canadian bond traders had already bet a rate hike would occur in Q1 or Q2. Nevertheless, bond yields spiked at 10 AM today when the Bank released its policy decision (see chart below).
Bottom LineSince the Bank last met in early September, the Government of Canada five-year bond yield has spiked from .80% by a whopping 60 basis points to a 1.40%. That is an incredible 75% rise. A year ago, the five-year bond yield was only .37%.

The Bank believes the surge in inflation is transitory, but that does not mean it will be brief. CPI inflation was 4.4% y/y in September and is expected to rise and average around 4.75% over the remainder of this year. Macklem now believes inflation will remain above the Bank’s 1%-to-3% target band until late next year.

There is also a good deal of uncertainty about the size of the slack in the economy. This is always hard to measure, especially now when unemployment remains elevated at 6.9%, while sectors such as restaurants and retail are fraught with labour shortages. Structural changes in the labour force are afoot. Many former restaurant employees have moved on or are reluctant to return to jobs where virus contagion risks and poor working conditions. There was also a surge in early retirements during the pandemic and a dearth of new immigrants.

Concerning housing, the MPR says the following: “Housing market activity is anticipated to remain elevated over 2022 and 2023 after having moderated from recent record-high levels. Increased immigration, solid income levels and favourable financing conditions will support ongoing strength. New construction will add to the supply of houses and should help soften house price growth”.

 

Article From: https://dominionlending.ca/economic-insights/hawkish-bank-of-canada-decision

 

Bank of Canada Preview: Rate Hike Expectations Growing

General Mitchell Goode 27 Oct

With inflation well above the Bank of Canada’s target level and ongoing supply chain issues, expectations of earlier-than-expected interest rate hikes in 2022 are growing.

For much of the past year, the Bank of Canada had assured markets that interest rate hikes were off the table for at least the next year or longer. In January, the BoC had said, “We remain committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2% inflation target is sustainably achieved…In the Bank’s January projection, this does not happen until into 2023.”

Fast-forward to today, and rate hike expectations are growing by the week, with some seeing the first rate increases by mid-2022.

Scotiabank made headlines last week with its aggressive forecast for four quarter-point rate hikes in 2022, followed by four quarter-point hikes in 2023. That would mean a Bank of Canada target rate of 2.25% by the end of 2023—well above its current level of 0.25%, and higher than any other bank forecast.

No rate hikes are expected when the Bank meets this Wednesday, but all eyes will be on its statement and accompanying Monetary Policy Report for clues of a shifting outlook given the inflation and supply issues mentioned above.

Here’s a look at what some economists expect from the BoC at its Wednesday meeting:

On further winding down of Quantitative Easing (QE):

  • TD: “This winding down of emergency stimulus isn’t a shock for Canadians. The Bank of Canada has been leading the pack, cutting its government bond purchases over the last year and completely ending programs that were no longer needed (mortgage bond purchases, for example). We expect the Bank to make another reduction in its bond purchases in October and cease all net-new purchases at the beginning of 2022.” (Source)

On rate hike expectations:

  • BMO: “The interest rate landscape is shifting rapidly amid the sustained strength in a wide variety of inflation measures. Short-term bond yields have bolted higher as inflation has surged to the fastest pace in decades in many economies. Markets are now pricing in almost four rate hikes by the Bank of Canada by the end of 2022, compared with almost nothing just two short months ago.” (Source)
  • Desjardins: “Without the BoC even blinking, the 5‑year yield, one of the most influential rates in Canada’s financial ecosystem, is up nearly 47 basis points since early September. We expect it to rise by about 30 more basis points by the time the BoC finally hikes rates, meaning tightening is already underway. Which begs the question of why many appear to feel that the BoC should be in a rush.” (Source)

On inflation:

  • BMO: “Canadian inflation has broadened out from an initial rebound in beaten-down prices (gasoline) and reopening pressures (airfares, hotels), to supply-constrained items (autos, appliances), to homes, and now to food. We now expect headline inflation to average 3.3% both this year and next—in perspective, inflation has not averaged 3% for a single year since 1991, let alone two years in a row.” (Source)
  • RBC: “Central banks are acknowledging inflation will be more persistent than previously expected, but there’s little they can do to resolve supply chain bottlenecks and rising energy prices. Most continue to focus on supporting a complete economic recovery.”  (Source)
  • NBC: While other central banks (most notably, the BOE) have begun sounding the alarm on inflation, [Bank of Canada Governor] Tiff Macklem appears committed to the Bank’s transitory inflation narrative, reiterating this view in recent weeks. As such, we’re not looking for a significant change in tone, though we will likely get an acknowledgement of stronger-than-expected price hikes to date and potential upside risks ahead.” (Source)
  • Desjardins: “…our estimates show that the annual inflation rate reached a cyclical peak in September and could start to decline slowly in the coming months. Despite this encouraging prognosis, the risks of inflation continuing to rise in the coming months or remaining at its peak for longer are quite high.” (Source)

On GDP forecasts:

  • RBC: “We expect the central bank will revise its near–term GDP projections lower in October. It was previously looking for 6% growth in 2021, whereas our latest call is 5.1%. Our forecast remains consistent with the bank’s guidance that economic slack will be absorbed in the second half of next year, though there’s some risk that time-frame will be pushed back depending on how much of the recent growth shortfall is seen being made up in 2022.” (Source)
  • NBC: “With growth stumbling recently, a markdown to the GDP outlook seems all but certain.” (Source)

 

Big 6 Bank Interest Rate Forecasts

Target Rate:
Year-end ’21		 Target Rate:
Year-end ’22		 Target Rate:
Year-end ’23		 5-Year BoC Bond Yield:
Year-end ’21		 5-Year BoC Bond Yield:
Year-end ’22
BMO 0.25% 0.50% NA 1.10% 1.35%
CIBC 0.25% 0.50% 1.25% NA NA
NBC 0.25% 1.00% 1.50% 1.30% 1.90%
RBC 0.25% 0.75% NA 1.10% 1.65%
Scotiabank 0.25% 1.25% 2.25% 1.40% 1.95%
TD Bank 0.25% 0.50% 1.50% 1.15% 1.75%

 

Article From: https://www.canadianmortgagetrends.com/2021/10/bank-of-canada-preview-rate-hike-expectations-growing/

 

Parents to the Rescue: Average Size of Gifted Down Payments Rises to $82,000

General Mitchell Goode 27 Oct

As home prices have risen sharply in recent years, so too has the amount of down payment assistance parents are willing to give their kids.

For those parents who choose to assist their adult kids with the purchase of their home, the average amount of that financial gift has risen to $82,000, according to a research note released today by CIBC economist Benjamin Tal.

That amounts to an estimated $10 billion in down payment assistance from parents over the past year, accounting for 10% of total down payments, Tal says.

While the individual gift amount sounds large—particularly to homebuyers who aren’t fortunate to receive down payment help from their family—the amount has risen almost exactly in tandem with home prices over the years.

From 2015 to 2021, the size of the average gifted down payment rose at an annual pace of 9.7% per year (from $52,000), two percentage points faster than home price inflation, Tal noted.

And while the size of down payment gifts for first-time buyers has risen, the share of parents willing or able to offer that assistance hasn’t much changed, with under 30% of first-time buyers saying they received help.

“This is not a new phenomenon,” Tal said, adding the share was closer to 20% in 2015 and has gradually risen since then. “Interestingly, the share of first-time homebuyers receiving help did not rise during the pandemic.”

The assumption may be that only first-time buyers tend to receive down payment gifts from their families, but the reality is that existing homeowners are also receiving help as they move up the property ladder, according to the data. Just under 9% of so-called “mover-uppers” received parental help with their down payment, but the total amount of assistance is substantially higher for them at $128,000 as of September 2021.

Where is the money coming from?

In his report, Tal poses the question that’s on many of our minds: “How do parents come up with this money?”

Many will assume parents are taking the money from their own home equity line of credit (HELOC), which has presumably skyrocketed in value over the last couple of years. But that’s not quite the case, Tal explains.

“Based on Equifax information, we estimate that only 5.5% of gifting parents use debt to finance gifting…Therefore, it seems that a large portion of the gifting comes from parents’ savings, which of course grew notably during the pandemic—allowing for the increases in the size of the average gift,” he wrote. “Given the trend and the size of gifting, it is clear that this phenomenon is becoming an important factor impacting housing demand and therefore home prices in Canada.”

During a speech at Mortgage Professionals Canada’s Virtual Mortgage Symposium earlier this month, Tal said down payment gifts are a “major force” impacting the mortgage industry.

“Those parents are encouraging their kids to get into the market and take advantage of this window of opportunity of low interest rates,” he said. “So, there was this sense of urgency to get into the market, and that’s exactly what we have seen over the past year and a half.”

He added that the number of parents co-signing for mortgages has also increased 45% compared to before the pandemic.

Additional findings

The report revealed a number of other noteworthy findings:

  • Two-thirds: The percentage of first-time buyers who received a gift and said that gift was the primary source of their down payment.
    • $104,000: The average size of the gift when it’s the primary source of the down payment for first-time buyers.
    • $157,000: The average size of the gift when it’s the primary source of the down payment for “mover-uppers.”
  • In Toronto:
    • First-time buyers received an average of $130,000 from family members as of Q3 2021.
    • Mover-uppers received an average gift of nearly $200,000.
  • In Vancouver:
    • First-time buyers received on average gift of $180,000 from parents
    • Mover-uppers received an average gift of nearly $340,000
  • Down payment gifting is most common in Ontario: over 30% of first-time buyers report receiving assistance.
  • Gifting is least common in Prince Edward Island: under 15% of first-time buyers there received a gift.

Article From: https://www.canadianmortgagetrends.com/2021/10/parents-to-the-rescue-average-size-of-gifted-down-payments-rises-to-82000/

 

What’s Next for your Home After a Separation?

General Mitchell Goode 27 Oct

What’s Next for your Home After a Separation?

Growing up, most people dream about living a fairytale with a wonderful partner and a life of bliss. Unfortunately, real life is not always a fairytale and not every relationship lasts forever. In fact, latest statistics show that 38 percent of all marriages in Canada end in divorce.

Separating, whether through divorce or ending a common law relationship, is never an easy step. Losing someone close to you (whether for the better or not) is hard – but it doesn’t have to mean losing your home too. Most individuals who are going through a separation feel as though they are forced to sell their home and split the equity depending on your agreement, but there is another way.

spousal buy-outs

Spousal buy-outs are one of the mortgage industries best kept secrets and we want to blow the lid on this great alternative! While not everyone will want to remain in their home, many individuals may opt to remain rooted – especially for those with children who are already enrolled in school and happy in their neighborhood. This is where the Spousal Buy-Out Program comes in.

Backed by all three of Canada’s mortgage insurance providers (Canada Mortgage and Housing Corporation, Sagen™ and Canada Guaranty), this program is designed to allow one party to refinance the shared home up to 95 percent of its appraised value. In order to qualify, both you and your ex-partner must currently be on the deed to the property. As a one-time opportunity, the Spousal Buy-Out Program can also be used to pay off other debts outside the separation agreement, further assisting with the transition.

Now you may be thinking “I wish I could, but I can’t afford it”. Well, don’t sell yourself short just yet! We understand the cost of purchasing a home, whether outright or from your partner, can be high. Fortunately, The Spousal Buy-Out Program was designed to help YOU and mitigates these costs by allowing individuals to bring on a cosigner, such an existing family member or even a new partner, to assist.

If you are separating from your spouse or partner and would really like to hold onto your shared home, there are a few things you will need including:

1. AN APPRAISAL

An appraisal report will likely have been obtained to determine Equalization of Assets. However, in some cases the appraisal may not be acceptable to a lender unless it was originally ordered by a third party. The appraisal must also have been produced within 90 days (less with some lenders) to ensure accuracy. If the original report was previous to 90 days, a new one must be obtained.

2. A SIGNED SEPARATION AGREEMENT

To qualify the lender must be provided a signed copy of the separation agreement. The details of asset allocation must be clearly outlined.

3. AN AGREEMENT OF PURCHASE AND SALE

A standard agreement of sale indicating the new ownership.

4. AN EMPLOYMENT LETTER OR RECENT PAY STUB

This is required so the lender can verify your ability to manage your mortgage payments.

5. DEBT PAYOUT LIST

This is an optional one-time option for paying off additional debts outside of the separation agreement. The proceeds can only be used to buy out the other owner’s share of equity and/or to pay off joint debt as explicitly noted in the signed separation agreement.

Moving on in life can often be difficult, but this program allows you to maintain some of your routine and security by ensuring you – and your children – can remain in the home you love.

 

Article From: https://dominionlending.ca/mortgage-tips/whats-next-for-your-home-after-a-separation

 

 

 

Bought Your First Home? Here are Some Tips for You

General Mitchell Goode 26 Oct

Bought Your First Home? Here are Some Tips for You.

Buying a home is an exciting time in your life.  It’s a monumental occasion, and you should celebrate and enjoy every moment of the experience. But at the same time, there are a lot of new stresses you’ll discover. From trying to find the right space, to bidding and financing, the whole experience is a roller-coaster ride. Once you gain possession of the property, you’re about to start on a whole new adventure as a homeowner.

Homeownership is accompanied by a new world of stresses and anxieties. As soon as you move in, you’ll no doubt discover things that aren’t working right or aren’t as you anticipated.  It’s a learning experience as you try to tackle the issues, sometimes an expensive experience at that.

Let’s take a look at some of the issues you might encounter and what you can do about them.

BUT FIRST, THE VALUE OF A PROPERTY INSPECTION

Before we dive into details, it’s worth noting the importance and value of a property inspection. In this competitive real estate market, it’s not always possible to get a property inspection performed before you buy a home. If you’re unable to, it’s still worth doing after the fact as a good inspection can draw attention to issues that need immediate attention, issues that you might not have noticed before.

The cost of an inspection will depend on the size of your property. While this may seem like an unnecessary expense at the time, it can help save you money in the long run.

TEN COMMON ISSUES

According to the International Association of Certified Home Inspectors, here are the ten most common issues reported by inspectors:

  1. Poor drainage/surface grading can lead to water infiltrating basements and crawlspaces.
  2. Incorrect electrical work that can include insufficient protection against overload, dangerous wiring, and not enough service to the house.
  3. Damage to the roof, such as damaged and old shingles that can lead to leaky roofs.
  4. Heating system issues like blocked chimneys, damaged equipment, and broken controls.
  5. Poor home maintenance, which is a broad area, but includes amateur wiring, poor plumbing, damage to the masonry, etc.
  6. Structural problems like windows and doors, the foundation, and joists that can all suffer significant damage.
  7. Plumbing fixtures not working properly, poor waste lines, and old and broken piping that can all lead to major problems.
  8. Exterior issues like poor weather-stripping and caulking, or old windows and doors, that can all affect the integrity of a home.
  9. Bad ventilation that may result in issues such as excessive moisture, which can rot or damage materials throughout the home.
  10. Miscellaneous things, usually cosmetic, that are identified by home inspectors.

The site also highlights how, in four of the top ten issues reported, water infiltration was a factor.  For this reason, it’s important to pay particular attention to signs of water damage and leaks throughout your house. Homes are a lot of work, and it’s easy to cut corners on things like clearing pipes and maintaining the seals around windows.

HOME RENOS AND PERMITS

Wherever you live, each province and municipality has their own set of rules for what permits you require when performing home renovations.  In Ontario, for example, the government requires you have a building permit when you do one of the following:

  • Construct or place a building on your property that is over 10 square metres in area. This applies to motor homes, garden sheds, and other structures.
  • Add to your residence, renovate, or make repairs.
  • Change what your building is used for.
  • Construct or dig up a foundation.
  • Build a seasonal building.
  • Perform work on the on-site sewage system, including installation, extension, repairs, and alteration.

Looking at this, it all feels a little broad, and that if you are to do any kind of work on your home you’ll need a permit. This isn’t the case. Each municipality has specific guidelines for when you require a permit. Continuing with the example of Ontario, the city of Toronto provides detailed information on their website of when you do and do not require a permit.

To be safe, make sure you contact your municipality before planning renovations.

Pro tip: Building permits take time to be reviewed and issued, so start early if you’re planning on renovations. There are also fees associated with permits, so be sure to account for this in your budget.

FINAL THOUGHTS

Becoming a homeowner is exciting and should be celebrated. But it’s also a big responsibility, and there are a lot of things to juggle when you purchase a space. Even with a home inspection, you will undoubtedly encounter unexpected issues with your home as you start to live in it. Making sure you’re aware of any potential issues and keeping on top of your home maintenance will take you a long way!

 

Article From: https://dominionlending.ca/sponsored/bought-your-first-home-here-are-some-tips-for-you

 

Canadian Inflation Rises Once Again

General Mitchell Goode 20 Oct

Prices are Rising Everywhere–Transitory Can Last A Long Time
Today’s release of the September Consumer Price Index (CPI) for Canada showed year-over-year (y/y) inflation rising from 4.1% in August to 4.4%, its highest level since February 2003. Excluding gasoline, the CPI rose 3.5% y/y last month.

The monthly CPI rose 0.2% in September, at the same pace as in the prior month. Month-over-month CPI growth has been positive for nine consecutive months.

Today’s inflation is a global phenomenon–prices are rising everywhere, primarily due to the interplay between global supply disruptions and extreme weather conditions. Inflation in the US is the highest in the G7 (see chart below). The economy there rebounded earlier than elsewhere in the wake of easier Covid restrictions and more significant markups.

Central banks generally agree that the surge in inflation above the 2% target levels is transitory, but all now recognize that transitory can last a long time. Bank of Canada Governor Tiff Macklem acknowledged that supply chain disruptions are “dragging on” and said last week high inflation readings could “take a little longer to come back down.”
Prices rose y/y in every major category in September, with transportation prices (+9.1%) contributing the most to the all-items increase. Higher shelter (+4.8%) and food prices (+3.9%) also contributed to the growth in the all-items CPI for September.Prices at the gas pump rose 32.8% compared with September last year. The contributors to the year-over-year gain include lower price levels in 2020 and reduced crude output by major oil-producing countries compared with pre-pandemic levels.

Gasoline prices fell 0.1% month over month in September, as uncertainty about global oil demand continued following the spread of the COVID-19 Delta variant (see charts below).
Bottom Line

Today’s CPI release was the last significant economic indicator before the Bank of Canada meeting next Wednesday, October 27. While no one expects the Bank of Canada to hike overnight rates next week, market-driven interest rates are up sharply (see charts below). Fixed mortgage rates are edging higher with the rise in 5-year Government of Canada bond yields. The right-hand chart below shows the yield curve today compared to one year ago. The curve is hinged at the steady 25 basis point overnight rate set by the BoC, but the chart shows that the yield curve has steepened sharply with the rise in market-determined longer-term interest rates.

Moreover, several market pundits on Bay Street call for the Bank of Canada to hike the overnight rate sooner than the Bank’s guidance suggests–the second half of next year. Traders are now betting that the Bank will begin to hike rates early next year. The overnight swaps market is currently pricing in three hikes in Canada by the end of 2022, which would bring the policy rate to 1.0%. Remember, they can be wrong. Given the global nature of the inflation pressures, it’s hard to imagine what tighter monetary policy in Canada could do to reduce these price pressures. The only thing it would accomplish is to slow economic activity in Canada vis-a-vis the rest of the world, particularly if the US Federal Reserve sticks to its plan to wait until 2023 to start hiking rates.

It is expected that the Bank will taper its bond-buying program once again to $1 billion, from the current pace of $2 billion.

The Bank will release its economic forecast next week in the Monetary Policy Report. It will need to raise Q3 inflation to 4.1% from its prior forecast of 3.9%.

 

Article From: https://dominionlending.ca/economic-insights/canadian-inflation-rises-once-again

 

Canadian Home Sales Rise in September For The First Time Since March

General Mitchell Goode 15 Oct

Canadian Home Prices Continued to Rise As Insufficient Supply Creates Excess Demand
Today the Canadian Real Estate Association (CREA) released statistics showing national existing-home sales rose 0.9% between August and September 2021, posting the first monthly gain since March (see chart below). On a year-over-year (y-o-y) basis, the number of transactions last month was down 17.5%. Nevertheless, it was still the second-highest sales figure ever for the month of September.

“September provided another month’s worth of evidence from all across Canada that housing market conditions are stabilizing near current levels,” said Cliff Stevenson, Chair of CREA. “In some ways that comes as a relief given the volatility of the last year-and-a-half, but the issue is that demand/supply conditions are stabilizing in a place that very few people are happy about. There is still a lot of demand chasing an increasingly scarce number of listings, so this market remains very challenging.”

Housing supply remains a major constraint, forcing many buyers to either pay up for scarce properties or to remain on the sidelines. This is particularly troublesome for first-time homebuyers as mortgage rates are coming under renewed upward pressure as inflation concerns have forced yield curves to steepen and longer-term bond yields to rise worldwide.
New ListingsExacerbating supply problems, the number of newly listed homes fell by 1.6% in September compared to August, as gains in parts of Quebec were swamped by declines in the Lower Mainland, in and around the GTA and in Calgary.

With sales up and new listings down in September, the sales-to-new listings ratio tightened to 75.1% compared to 73.2% in August. The long-term average for the national sales-to-new listings ratio is 54.8%.

Based on a comparison of sales-to-new listings ratio with long-term averages, a small but growing majority of local markets are moving back into seller’s market territory (see chart below). As of September, it was close to a 60/40 split between seller’s and balanced markets.

There were 2.1 months of inventory on a national basis at the end of September 2021, down slightly from 2.2 months in August and 2.3 months in June and July. This is extremely low and indicative of a strong seller’s market at the national level and in most local markets. The long-term average for this measure is more than 5 months.
Home PricesIn line with tighter market conditions, the Aggregate Composite MLS® Home Price Index (MLS® HPI) accelerated to 1.7% on a month-over-month basis in September 2021.

The non-seasonally adjusted Aggregate Composite MLS® HPI was up 21.5% on a year-over-year basis in September, up a bit from the 21.3% year-over-year gain recorded in August.

Looking across the country, year-over-year price growth is creeping up above 20% in B.C., though it is lower in Vancouver (13.9%), on par with the provincial number in Victoria, and higher in other parts of the province (see table below).

Year-over-year price gains are in the mid-to-high single digits in Alberta and Saskatchewan, while gains are into the low double digits in Manitoba.

Ontario saw year-over-year price growth pushing 25% in September; however–as with B.C.–big, medium and smaller city trends, gains are notably lower in the GTA (19.0%) and Ottawa (16.4%), around the provincial average in Oakville-Milton (26.9%), Hamilton-Burlington (26.5%) and Guelph (26.4%), and considerably higher in many of the smaller markets around the province.

Greater Montreal’s year-over-year price growth remains at a little over 20%, while Quebec City is now at 12.7%. Price growth is running a little above 30% in New Brunswick (higher in Greater Moncton, a little lower in Fredericton and Saint John), while Newfoundland and Labrador is now at 12% year-over-year (a bit lower in St. John’s).
Bottom Line

Canada continues to contend with one of the developed world’s most severe housing shortages. As our borders open to a resurgence of immigration, excess demand for housing will mount. The impediments to a rapid rise in housing supply, both for rent and purchase, are primarily in the planning and approvals process at the municipal level. Liberal Party election promises do not address these issues.

It is noteworthy that while Canada suffers one of the most acute housing shortages, housing affordability is getting worse in many OECD countries (see chart below).
Adding to the affordability problem, interest rates have bottomed as an inflation-induced selloff in bonds mount despite the assertion of most central banks that inflation is temporary. Very recently, Governor Tiff Macklem admitted that inflation is likely to remain a problem until the end of the year.

Some of the inflation is coming from disruptions on the supply side emanating from COVID-related disruptions, which may work themselves out in time. However, they’re still getting worse, and many suggest the timeline could be much longer than just this year. In addition, extreme weather events and climate change initiatives–both of which are more or less permanent–have also boosted inflation pressure. Consumer demand for goods and housing and business capital expenditures have surged in the face of labour shortages. Wage rates are beginning to rise. All of this has raised prices spilling into next year. Higher interest rates are likely sustainable even though the Bank of Canada and the Federal Reserve will likely hold overnight rates steady for the next year (see charts below).
 

Article From: https://dominionlending.ca/economic-insights/canadian-home-sales-rise-in-september-for-the-first-time-since-march

 

Great News On The Canadian Job Front

General Mitchell Goode 13 Oct

Blockbuster September Jobs Report–Further Fuel For Rising Interest Rates
Statistics Canada released the September Labour Force Survey this morning, providing some unmitigated good news on the jobs front. Employment rose by 157,000 (+0.8%) in September, the fourth consecutive monthly increase. The unemployment rate fell by 0.2 percentage points to 6.9%.Employment gains in September were concentrated in full-time work and among people in the core working-age group of 25 to 54. Increases were spread across multiple industries and provinces.

Employment gains in the month were split between the public-sector (+78,000; +1.9%) and the private-sector (+98,000; +0.8%).

Employment increased in six provinces in September: Ontario, Quebec, Alberta, Manitoba, New Brunswick and Saskatchewan.

Service-sector increases (+142,000) were led by public administration (+37,000), information, culture and recreation (+33,000) and professional, scientific and technical services (+30,000).

Employment in accommodation and food services fell for the first time in five months (-27,000).

While employment in manufacturing (+22,000) and natural resources (+6,600) increased, there was little overall change in the goods-producing sector.

The gains in September brought employment back to the same level as in February 2020, just before the onset of the pandemic. However, the employment rate—that is, the proportion of the population aged 15 and older employed—was 60.9% in September, 0.9 percentage points lower than in February 2020, due to population growth of 1.4% over the past 19 months.

The number of employed people working less than half their usual hours was little changed in September and remained 218,000 higher (+26.8%) than in February 2020. Total hours worked were up 1.1% in September but were 1.5% below their pre-pandemic level.

Among 15-to-69-year-olds who worked at least half their usual hours, the proportion working from home was little changed in September at 23.8%. The ratio who worked from home was lowest in Saskatchewan (12.3%) and Newfoundland and Labrador (12.8%), and highest in Ontario (28.7%). Overall, at the national level, the proportion of workers who worked from home was higher in urban areas (25.2%) than in rural areas (15.9%).

In September 2021, 4.1 million Canadians who worked at least half their usual hours worked from home, similar to the level recorded in September 2020.
The unemployment rate declined for the fourth consecutive month in September, falling 0.2 percentage points to 6.9%, the lowest rate since the onset of the pandemic. The unemployment rate peaked at 13.7% in May 2020 and has trended downward since, with some short-term increases during the late fall of 2020 and spring of 2021, coinciding with the tightening of public health restrictions. In the months leading up to the pandemic, the unemployment rate had hovered around historic lows and was 5.7% in February 2020.The adjusted unemployment rate—which includes those who wanted a job but did not look for one—was 8.9% in September, down 0.2 percentage points from one month earlier.

Long-term unemployment—the number of people continuously unemployed for 27 weeks or more—was little changed in September. There were 389,000 long-term unemployed, more than double the number in February 2020.

The ability of the long-term unemployed to transition to employment may be influenced by several factors, including their level of education and current labour market conditions. For example, those with no post-secondary education face a labour market where employment in occupations not requiring post-secondary education was 287,000 lower in September 2021 than in September 2019 (not seasonally adjusted).
Bottom Line The Bank of Canada has repeatedly suggested that it would not begin to tighten monetary policy until the economy returned to full capacity utilization, which they estimate will not be until at least the second half of next year. Employment will need to surpass pre-pandemic levels before complete recovery is declared because the population had grown since the start of the crisis 19 months ago.

Substantial job losses remain in the hardest-hit sectors. The chart below shows the employment change in percentage terms by sector compared with February 2020.

Sectors where remote work has been widespread–such as professional, scientific and technical services, public administration, finance, insurance and real estate–have seen a net gain in employment. However, in high-touch sectors that were deemed nonessential, the jobs recovery has been far more constrained. This is especially true in agriculture, accommodation and food services, and recreation. Ironically, these sectors have high job vacancy rates as many formerly employed here are reluctant to return. Enhanced benefits and compensation in these sectors will help.

Just this week, the BoC Governor Tiff Macklem reiterated that widespread inflation pressures are likely to remain at least until the end of this year. Most are reflective of global supply chain disruptions as well as extreme weather events. Just how long these will last is uncertain, but tighter monetary policy would have little impact on this type of inflation.

Nevertheless, bond markets have sold off worldwide in response to inflation fears and the annual US debt-ceiling antics. The final chart below shows the steepening of the Canadian yield curve since one year ago. The 5-year bond yield has risen sharply over that period, from 0.378% to a current level today of 1.205%. It is no surprise that 5-year fixed mortgage rates are rising. 

 

Article From: https://dominionlending.ca/economic-insights/great-news-on-the-canadian-job-front

 

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Finding Your Financial Freedom

General Mitchell Goode 13 Oct

Many Canadians will spend their entire lives without proper financial education. With the help of Enriched Academy, an online financial education platform, Our House Magazine has collected some insight and tips from experts on financial literacy to help Canadians achieve their dreams, from homeownership to a comfy retirement.

Money. It’s virtually impossible to get by in life without it, and everyone wants more of it. But many people struggle to manage their money and make it work for them. And all the stats are going in the wrong direction. More and more Canadians are struggling with debt and get by living paycheque-to-paycheque with no idea or strategy on how to turn it around.

Luckily there are many resources out there to help guide you in the right direction. How you use the information to form a strategy will determine your financial future. Jay Seabrook is the co-founder of Enriched Academy, an educational program dedicated to providing financial literacy and awareness to teens and adults.

He explained that most people don’t even get started on a healthy financial journey because of some basic money myths like, you need money to make money or it’s too complicated to understand.

Seabrook suggested there are two key metrics people need to be aware of: their net worth and how much is needed to save every month to reach financial freedom.

Net worth is a valuation of your assets minus your liabilities or what you own and subtracting what you owe. While a general rule of thumb is putting away 10 per cent of your pre-tax income a month, Seabrook suggested the number may not be enough to meet your financial goal. You’ll need to create a proper budget to determine that number you really need to put away to reach your goals.

He added by getting a handle on those two aspects and tracking them on a regular basis, chances of getting to financial freedom are dramatically higher.

Financial literacy is something deeply personal to the 42-year-old entrepreneur.

Like most people, Seabrook grew up with very little financial education. That reality hit home after college when he moved to Whistler, B.C. for work. While he was surrounded by some of the wealthiest people in the world, he couldn’t scrounge enough money for a ski pass – the purpose of moving to the resort community in the first place.

Seabrook didn’t turn his fortunes around until he met a mentor who showed him a path forward.

“Life is a buffet table of the things you can do, but I was on the bread and water part of the buffet table, and I have no idea how to get access to rest of it. It drove me crazy,” he told Our House Magazine. “I wanted this better life, but I didn’t know how to get it.”

By the mid-2000s, Seabrook got into the ground floor of an upstart mortgage company in Dominion Lending Centres. He eventually invested in the company and worked his way up to VP of operations. Along the way, he met his business partner and Enriched Co-founder Kevin Cochran, who was also finding success at DLC. The two entrepreneurs used their own personal experience and what they had learned over the years to create the educational platform. Enriched launched in 2011, and short time later Seabrook and Cochran got a break with a winning pitch to the Dragons’ Den that eventually grew to its current online education platform.

Now the two entrepreneurs are busy teaching the techniques and tools they’ve learned to a mass audience. Seabrook was quick to point out financial freedom won’t happen overnight, but it doesn’t take a lifetime to get there either.

“It’s actually a lot easier than people think,” he said, adding the “biggest hurdle for most people is suppressing the instant gratification of spending in the moment”.

“People spend their entire lives trying to make money, why? They want a nice lifestyle and get to a point where they can enjoy the best things in life, but if you don’t have a plan, you probably won’t get there. If you’re really serious about getting to a place where you make more money from passive income than all the hours you put in, you have to start learning it. If you get clear on some of your goals, you’ll get there.”

 

Article From: https://dominionlending.ca/life-style/finding-your-financial-freedom