What's Happening with Rates?
  
What's happening with Rates?
Fixed interest rates for purchases under $1M have come down below 5%, with purchases over $1M and refinances still in the mid-5% range. Variables are holding steady approximately 1% less than the comparable fixed rates.
The Bank of Canada is again expected to raise the overnight lending rate by .50%-.75% in September, which will raise variable interest rates by .50% to .75% and again further reduce purchasing power. Unless…
The US Primary Elections and Interest Rates
It seems like a foregone conclusion that the Bank of Canada will continue to raise interest rates in September. This is further supported by the Federal Reserve in the US that stated this week that rates will need to continue to increase.
The US midterm elections have begun and there is tremendous pressure being placed on the Biden administration to get the economy back on track. There haven't been many success stories for this government, and the Republican representatives will continue to hammer this point over the next few weeks.
There will be some political pressure to get the US economy rolling over the next few months. This administration is looking for some wins and getting the economy back on track by lowering, or holding interest rates might be one way to do it.
Whether we are technically in a recession or not, is beside the point. The economy has slowed, and that is not politically advantageous over the next few months. The rate decisions should not be politically motivated, but it is fallacy to believe that the rate policy is not at least somewhat influenced by the current political situation.
From Sherry Cooper, Dominion Lending Centres Chief Economist
In other news, Bloomberg reports that "US employers added more than double the number of jobs forecast, illustrating rock-solid labour demand that tempers recession worries and suggests the Federal Reserve will press on with steep interest-rate hikes to thwart inflation." So much for a Fed pivot. The idea that the bond market rallied on the premature news of a US recession made no sense at this point in the cycle.
Similarly, the Bank of Canada is still likely to hike the policy rate by 75 basis points when they meet again on September 7. That would take the prime rate up to 5.45%. Currently, the 5-year government of Canada bond yield is 2.87%, well below its peak of 3.6% in mid-June. Consequently, we may see variable mortgage rates rise above fixed rates before year-end.
Book of the Month - The PIG to Climate Change
Every month I will be featuring a book I've read. This month's feature is The Polically Incorrect Guide to Climate Change by Marc Morano.
Less freedom. More regulation. Higher costs. Make no mistake: those are the surefire consequences of the modern global warming campaign waged by political and cultural elites, who have long ago abandoned fact-based science for dramatic fearmongering in order to push increased central planning.
The Politically Incorrect Guide to Climate Change gives a voice -- backed by statistics, real-life stories, and incontrovertible evidence -- to the millions of "deplorable" Americans skeptical about the multibillion dollar "climate change" complex, whose claims have time and time again been proven wrong.
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