“Nobody likes high interest rates” – Chanda Kochhar

Bank of Canada Raises Five-Year Fixed Mortgage Rate

The Bank of Canada raised its conventional five-year fixed mortgage rate on Wednesday, from 5.14% up to 5.34%. As we all now know, the BoC’s five-year fixed rate is a crucial piece of information for prospective home buyers in Canada. Exactly how this

Less Than 20 Per Cent Down Payment

These prospective buyers must qualify for their mortgage at the BoC’s five-year fixed rate of 5.34 per cent, rather than the rate offered by their lender. For reference, the current five-year fixed rate at one of the “Big Five” Canadian banks is currently 3.74 per cent.

20 Per Cent Down Payment or More

For home buyers with 20 per cent down or more, they must qualify at the greater of the BoC five-year fixed rate, or the agreed upon rate with their bank plus 200 basis-points (two per cent).

So, using the above current five-year fixed rate, purchasers with at least 20 per cent down will have to qualify at the rate of 3.74 + 2.00 = 5.74 per cent, because the “bank rate plus 200 basis-points” exceeds the BoC’s current 5.34 per cent.

Stephen Poloz: Canadian Economy “Finally Positive”; Future Rate Hikes Possible

Stephen Poloz, Governor of the Bank of Canada recently stated that the economy was “finally positive”, adding that he was more encouraged about the economy than he was six months ago.

Poloz did caution that there are still areas of softness within the Canadian economy, as well as high levels of consumer debt. As such, the BoC will need to exercise caution with future rate hikes, to avoid future instability.

While the BoC opted not to raise its key rate steady at 1.25 per cent, analysts pegged a 70 per cent chance of a BoC rate hike in July.

Canadians should look at the potential of further rate increases as a reminder to diligently pay down debt where possible. As always, if dealing with multiple types of debts (credit card balances, student loans, mortgages, lines of credit, etc), attack those debts with the highest interest rates. This almost always means paying down credit cards first. Credit card debt is portfolio poison.

WEEKLY MARKET WRAP-UP

North America

• The TSX closed at 15983, up 254 points or 1.61% over the past week. YTD the TSX is down -1.39%.
• The DOW closed at 24831, up 568 points or 2.34% over the past week. YTD the DOW is up 0.45%.
• The S&P closed at 2728, up 65 points or 2.44% over the past week. YTD the S&P is up 2.02%.
• The NASDAQ closed at 7403, up 193 points or 2.68% over the past week. YTD the Nasdaq is up 7.24%.
• Gold closed at 1318, up -9.00 points or 0.15% over the past week. YTD gold is up 0.61%.
• Oil closed at 70.52, up 0.77 points or 1.10% over the past week. YTD oil is up 16.72%.
• The USD/CAD closed at 0.7817, up 0.0017 points or 0.22% over the past week. YTD the USD/CAD is down -1.71%.

 Europe/Asia

• The MSCI closed at 2124, up 53 points or 2.56% over the past week. YTD the MSCI is up 1.00%.
• The Euro Stoxx 50 closed at 3566, up 15 points or 0.42% over the past week. YTD the Euro Stoxx 50 is up 1.77%.
• The FTSE closed at 7725, up 158 points or 2.09% over the past week. YTD the FTSE is up 0.48%.
• The CAC closed at 5542, up 26 points or 0.47% over the past week. YTD the CAC is up 4.31%.
• DAX closed at 13001, up 181.00 points or 1.41% over the past week. YTD DAX is up 0.64%.
• Nikkei closed at 22759, up 286.00 points or 1.27% over the past week. YTD Nikkei is down -0.03%.
• The Shanghai closed at 3163, up 72.0000 points or 2.33% over the past week. YTD the Shanghai is down -4.35%.

 Fixed Income

• The 10-Yr Bond Yield closed at 2.97, up 0.0300 points or 1.02% over the past week. YTD the 10-Yr Bond Yield is up 23.75%.

Sources: Dynamic, Advisor.ca