April 24, 2023

The other day I sent out an email that asked: 

What's your number 1 question about real estate or mortgages right now?

One of the common questions that came back was "When will rates drop?"

And I can totally understand why this is the question on everyone's mind.

Put simply, rates will drop when the Bank of Canada can see a clear path to the Target Inflation rate of 2%.

"OK great, Dion, but when will we get there?" 

Read on...

At its peak last year, inflation was at just over 8% 

With a target rate of 2%, you would not be wrong to ask the questions - Why the heck did we wait until we got all the way to 8% before we started to worry? Shouldn't the powers that be have taken action when we were at 3%, 4% ,5% ,6% & 7%????

It's clear someone fell asleep at the wheel...

And when you react later than you should, you have to overcorrect to get back on track. So we are now all holding on to the proverbial steering wheel white knuckling and fishtailing. It's ugly to watch.

Here's a slide from my most recent webinar that explains what the BoC is trying to do with this "Quantitative Tightening"

It's crazy to think that a Central Bank actually WANTS these things to happen. But that's been the recent goal.

There is some good news

The BoC has now Paused rate hikes both in March AND April which means, at least for now, they feel things are going in the right direction.

And last week, inflation for March 2023 was reported at just 4.3%. Down from 5.25% in Feb and 6.65% in Dec (Chart Below)

But we are still not at a point where the BoC can say rates will be coming down.

The economic pundits are predicting that for the next few BoC meetings, rates will likely remain paused and that rate drops may appear later this year or early next year.

Watching the business news is usually the kind of thing that sends most people to sleep. But if you are really interested in when rates are going to come down, continue to tune in to the economic reports. 

Or just continue to read these articles :) 

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