Don’t expect mortgage fireworks after Bank of Canada interest rate decision

Bank of Canada governor Tiff Macklem. The central bank's next interest rate decision is on March 6. © Provided by Financial Post

The Bank of Canada’s next rate-setting verdict is just six days away. Wake me up if something happens.

Borrowers should prepare for a whole bunch of nothing — at least when it comes to mortgage rates . The Bank of Canada remains in wait-and-see mode. It’ll play it cool, likely signalling the need for at least a few more months of friendly CPI data to support its “ inflation is heading back to two per cent” narrative.

So far this year, the “Ca-merican” economy is showing some pep. Most big-bank economist-types predict it’s just a flash in the pan, though, and not an inflation threat. We’ll see.

For March, mortgage hunters should root for two things:

1. Further disinflation: Central bankers want core inflation to show more progress on both sides of the border, and we’ll find out mid-month if they get what they want.

2. Co-operative bond yields: Canada’s fixed-rate leading five-year government yield must stay under February’s high to avoid a mortgage rate rebound. Should it dip below February’s low, odds will improve for meaningful rate relief this spring/summer.

Financial markets, where billions are bet on monetary policy daily, still see a hat-trick of rate cuts this year. The first is fully priced in for July. That may change, but if inflation behaves in the next few months, it’s a reasonable expectation of hope for overburdened mortgagors.

On Thursday, rate markets were breathing easier after U.S. annual core inflation came in as expected, decelerating slightly, and Canadian GDP growth didn’t set off any fireworks. Yields are down, coinciding with modest decreases in leading fixed mortgage rates.

And hey, what do ya know? The leading nationally advertised uninsured five-year fixed is almost back in the four per cent range. That would be a teeny morale booster for the house-hunting brigade. For default-insured borrowers — who always get lower rates — the national five-year leader is already down to 4.69 per cent.

Robert McLister is a mortgage strategist, interest rate analyst and editor of . You can follow him on X at @RobMcLister.

Source: Financial Post