The Latest on the CDN Economy & Why It's Circling the Drain

On the heels of last week's 👎GDP report, we have even more evidence that the unending rates hikes of 2022 ( and most of 2023) are working.

A quick recap

Inflation is slowing, demand continues to weaken, households have stopped borrowing money (the real estate industry has ground to a stand still in some markets) and as a result, the economy appears to be circling the drain.  GDP fell well below the Bank of Canada's expectations and while economists argue whether we have "officially" entered a recession, real GDP has fallen for five straight quarters - not good.

I don't know many Canadians who haven't felt the sting of the post pandemic monetary measures to reign in inflation.  Debts are rising as people do their best to just get through the worst of it.  Consumer credit in Canada has slowed to its weakest pace in 30 years!!  When that figure is adjusted for inflation, we haven't experienced a decline like this since the great recession of the 1990s.

What's in store for 2024?

I think the most obvious thing is no more rate hikes.  Tiff is on deck for the final BoC meeting of the year this week and while he's made a number of blunders, I'm not sure how you would sell another rate increase when all the data points to a cooling economy.

When are the cuts coming?  We'll just have to be patient.  In terms of rates, it's a fast ride up and a much slower ride down.

Final thoughts

Bonds have fallen off a cliff since their high in October and I would expect them to keep falling as both the Fed and BoC show signs that they are done hiking. The best rate out there today is the 5 year fixed so if you're in the market for a renewal, be mindful and do your homework.  If you take a five year, will the lender adjust your rate if they drop before you close?  If so, how many times can you get an adjustment?  What's your penalty going to be like?  If rates continue to drop, how much will it cost you to get a lower rate if you're one or two years into that five year term? There are no guarantees but if you prioritize flexibility (in addition to rate), you'll be in a good position if breaking makes sense down the road.

Leslie Smith | Mortgage Agent

Lic. M19000973

905-242-5243mortgage@leslieasmith.ca
www.leslieasmith.ca