The interest rate easing cycle is starting to get real
Robert McLister: With the Fed hinting at a possible rate cut, it's clear to markets that elevated rates have overstayed their welcome
North American interest rates aren’t just falling; they’re skydiving. With the U.S. Federal Reserve hinting at a possible September rate cut, inflation improving and economic data limping in weaker, it’s clear to markets that elevated rates have overstayed their welcome.
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Canada’s fixed-mortgage leading five-year bond yield is on track for eight straight closing lows. Such theatre typically reflects a monumental shift in market sentiment.
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Indeed, the market now believes that central bank policy rates are set for a nosedive. The action could heat up on September 18. That’s when traders expect the U.S. to roll back its key rate for the first time since the pandemic crisis.
The Fed’s outlook is also boosting odds for Canadian variable-rate mortgagors. Market-implied probabilities of both a Bank of Canada and Fed cut in September are now near 100 per cent, according to data from Refinitiv.
Meanwhile, in the fixed mortgage market, the lowest nationally advertised uninsured rates on three- and five-year terms just fell out of bed. They’re down a steep 20 and 25 bps, respectively, versus last week. With short rates sinking in the bond market, expect better deals on one- and two-year terms soon.
With such eye-catching drops in borrowing costs, this rate-easing cycle is starting to get real. It’s becoming incrementally easier to qualify for a mortgage, and that will no doubt ignite more homebuying interest. Now, all eyes are on Friday’s pivotal U.S. jobs report to see if it keeps the rate descent going.
Robert McLister is a mortgage strategist, interest rate analyst and editor of MortgageLogic.news. You can follow him on X at @RobMcLister.
Want to know more about the mortgage market? Read Robert McLister’s new weekly column in the Financial Post for the latest trends and details on financing opportunities you won’t want to miss.
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Mortgage rates
The rates displayed below are updated by the end of each day and are sourced from the Canadian Mortgage Rate Survey produced by MortgageLogic.news. Postmedia and Imaginative. Online Inc., parent of MortgageLogic.news, are compensated by certain mortgage providers when you click on their links in the charts.
