Transforming Pickering Town Centre Mall: CentreCourt's Ambitious Vision

CentreCourt, in partnership with Cowie Capital Partners Inc and Salthill Capital, is poised to redefine Pickering with a dynamic 55-acre community known as Pickering City Centre. This transformative endeavor, located at 1355 Kingston Road near the Brock Road interchange on Highway 401 and in proximity to Pickering GO station, will seamlessly integrate residential, retail, and public spaces. As the heart of Pickering evolves, its ties to the Greater Toronto Area will strengthen, solidifying CentreCourt's mission to establish this area as the authentic downtown of Pickering.

Revitalizing Pickering: A Decade-Long Urban Revival

CentreCourt envisions a vibrant urban hub emerging from the current mall site, a decade-long endeavor that will reshape Pickering's landscape. This visionary project introduces extensive residential, retail, and public zones, replacing the existing surface parking. Over ten mixed-use towers, ranging predominantly from 40 to 55 stories, will grace the skyline with over 6,000 residences. As Pickering Town Centre mall undergoes revitalization, a new era dawns for the region.

Block 1: Unveiling the Residential Oasis

In Phase 1, Block 1 will take center stage, featuring four residential towers comprising approximately 2,200 units and an impressive 111,483 m² of mixed residential and commercial space. These towers will also house a ground-level retail area spanning about 1,672m².

Elevated Living: Amenities for Every Lifestyle

Residents of Block 1 will revel in a lavish array of amenities, spanning approximately 4,552m² indoors and 7,246m² outdoors. This enticing offering encompasses a fitness center, rooftop pool, outdoor lounges with grilling stations, co-working and social spaces, a golf simulator lounge, and inviting interior courtyards that seamlessly connect with lush green spaces.

Discover more about this exciting development at pickeringcitycentre.com and witness the transformation firsthand. Your journey to the future of Pickering begins here.

On Wednesday, the Bank of Canada raised its overnight rate by 25 basis points, bringing it to 5.0 percent. This decision is part of a significant tightening of monetary policy, returning interest rates to levels not seen since the 2007-08 financial crisis. For some, this latest rate hike feels like the decisive blow that solidifies a troubling situation, while others hope it truly marks the end of rate increases. Tiff Macklem, the governor of the Bank of Canada, expresses uncertainty and asserts that further rate hikes are not off the table if deemed necessary.

The recent unexpected rate hike appears to have had an immediate impact on the sentiment of the real estate market. It could be seen as another minor warning sign, similar to the initial 25 basis point hike in February 2022, as it has achieved a comparable outcome. There are reports of distress among homeowners circulating within the real estate community, with many professionals publicly expressing empathy towards those facing difficulties.

As a result of the rate hike, commercial bank prime rates have risen to 7.20 percent. Consequently, variable rate mortgages are now hovering around the 6.0 percent range, while HELOCs (Home Equity Lines of Credit) are surpassing 7.50 percent for most borrowers. This represents a significant increase from the rates of approximately 3.0 percent that instilled great confidence in the market during the peak of the pandemic era.

Following the announcement of the rate hike, the Canada 5-Year Government Bond yield experienced a consistent decline throughout the day on July 12. It started at 3.950 percent at the opening and closed at 3.812 percent. The yields have remained relatively stable within this range, which holds crucial importance as it serves as the primary pricing gauge for fixed-rate mortgages.

In Canada, fixed-rate mortgages are closely linked to government bond yields, specifically the yields of Government of Canada bonds with similar maturity periods. As bond yields rise, lenders are compelled to raise mortgage rates to make them more attractive investments compared to those bonds. If not, banks would prefer investing their funds in bonds, which are regarded as one of the safest investment options. Typically, banks add a risk premium to mortgage products, resulting in pricing at "GOC+2" or the bond yield plus 2.0 percent. Based on the current yields, this would translate to mortgage rates in the range of high 5.0 percent to low 6.0 percent.

Conversely, when bond yields decline, fixed mortgage rates tend to follow suit, making them more affordable for borrowers. Therefore, fluctuations in Canadian bond yields play a significant role in influencing the direction of fixed mortgage rates in the country.

This is the primary challenge faced by the Bank of Canada. Currently, a majority of homebuyers opt for fixed-rate mortgages due to their more favorable pricing compared to variable-rate mortgages. Consequently, when the central bank raises the interest rate, it does not significantly affect the demand side of the equation. Instead, it exerts pressure on the supply side, leading to financial strain and creating an incentive for property owners to sell. From the sounds of it, this is precisely the outcome they have achieved, as an increasing number of sellers are conceding to the Bank of Canada's influence. As a result, new property listings are generally surpassing sales, a trend that hasn't been observed for some time.

The Bank of Canada's focus on the housing market became evident through its Quarterly Monetary Policy report. Additionally, during the subsequent press release, Governor Macklem indicated a shift in reliance from unemployment as a key performance indicator (KPI) to placing increasing importance on the housing market and immigration in establishing potential outcomes for the Canadian economy.

In the release, Macklem acknowledged the significant impact of the interest rate hikes on the housing market, leading to a notable slowdown. However, he also noted that the slowdown was not as substantial as initially anticipated, and housing activity has since rebounded.

Macklem referred to the previous year's significant decline in house prices, which began following the initial rate hike in February. This decline resulted in a nearly 20 percent year-over-year drop in house prices, surpassing the previous record "crash" in house prices experienced by Canada in 1989.

Now we come to the significant questions: Is the ordeal reaching its conclusion? When will things start improving?

Initially, Macklem hinted that 5.0 percent might be the limit or the point at which he would cease increasing the overnight rate. We must remember that the Bank of Canada (BoC) has a mandated target rate of 2% to achieve. Finally, the overnight rate has significantly exceeded the inflation rate. This indicates that, when adjusted for inflation, the real interest rate has become positive.

The real interest rate is calculated as the nominal interest rate minus the inflation rate.

Traditionally, the nominal interest rate needs to align with the inflation rate before a reversion begins. On average, interest rates tend to remain at their peak for around nine months before rate cuts are implemented.

In June 2023, home sales and the average selling price in the Greater Toronto Area (GTA) remained higher compared to the previous year. However, when considering seasonal adjustments, sales showed a decline compared to the previous month. On the other hand, the seasonally adjusted average selling price and the MLS® Home Price Index (HPI) Composite benchmark increased compared to the previous month.

 According to Paul Baron, President of the Toronto Regional Real Estate Board (TRREB), the demand for owning a home is stronger than last year, despite the increased costs of borrowing. However, uncertainty surrounding the Bank of Canada's stance on inflation and interest rates affected home sales last month. Additionally, the persistent lack of available properties likely deterred some potential buyers who couldn't find a home that suited their needs. Essentially, if a home isn't available, it cannot be purchased.

In June 2023, GTA REALTORS® recorded a total of 7,481 sales through the MLS® System of TRREB, marking a 16.5 percent increase compared to June 2022. However, the number of listings decreased by three percent during the same period.

 The rise in sales compared to the previous year, along with the decline in new listings, indicates that market conditions in June were more competitive than during the same period last year. The average selling price experienced a 3.2 percent increase, reaching $1,182,120. However, the MLS® HPI Composite benchmark still showed a 1.9 percent decrease compared to the previous year, marking the slowest annual rate of decline in 2023. On a month-over-month basis, both the seasonally adjusted average price and the MLS® HPI Composite benchmark demonstrated an increase.

“A resilient economy, tight labour market and record population growth kept home sales well above last year’s lows. Looking forward, the Bank of Canada’s interest rate decision this month and its guidance on inflation and borrowing costs for the remainder of 2023 will help us understand how much sales and price will recover beyond current levels,” said TRREB Chief Market Analyst Jason Mercer.

 “GTA municipalities continue to lag in bringing new housing online at a pace sufficient to make up for the current deficit and keep up with record population growth. Leaders at all levels of government, including the new mayor-elect of Toronto, have committed to rectifying the housing supply crisis. We need to see these commitments coming to fruition immediately, or we will continue to fall further behind each month,” stressed TRREB CEO John DiMichele. “In addition to the impact of the listing shortage, housing affordability is also hampered on an ongoing basis by taxation and fees associated with home sales and construction as well as the general level of taxation impacting households today. Going forward, we need to look at all of the factors influencing the household balance sheet and people’s ability to house themselves,” continued DiMichele.

 As professionals in the industry, it is crucial for us to adapt to these changing circumstances and strategize accordingly. We must proactively assess the market conditions, provide accurate and up-to-date information to our clients, and offer suitable guidance to navigate these new challenges effectively.

By staying informed about the latest developments, tracking interest rate trends, and understanding buyer preferences, we can position ourselves to better assist both buyers and sellers in achieving their real estate goals. It is vital to offer thorough market analyses, comprehensive advice, and personalized solutions to address the concerns that our clients may have.

 Source: Market Watch

As always, we are here to guide and educate all our clients, if you have any questions we are just a text, email or phone call away!

In light of increasing household debt and elevated interest rates, the Financial Consumer Agency of Canada (FCAC) is taking measures to ensure that banks offer appropriate assistance to mortgage holders facing potential default.

Recently, the FCAC released a fresh guideline instructing federally regulated financial institutions (FRFIs) to deliver customized support to individuals who have mortgages on their primary residences and are undergoing "significant" financial challenges.

Based on findings from FCAC research, there is a notable increase in the number of homeowners with mortgages who are facing potential financial difficulties, such as relying more on borrowing for daily expenses or depleting their savings.

The FCAC emphasized that all feasible mortgage relief options should be taken into account, which may include measures like waiving prepayment penalties, internal fees, and costs, refraining from charging interest on interest, and extending the amortization periods.

FRFIs are encouraged to take proactive steps by reaching out to mortgage holders at risk and offering them details about available relief measures, enabling them to make well-informed decisions in a timely manner. Furthermore, FRFIs are expected to provide educational tools and resources at no expense to the consumer, aimed at promoting responsible financial decision-making.

Stay informed, Stay up to date - The Olivera Group Real Estate 

Anthony Olivera & Ann Rahinel - info@theoliveragroup.com

Exciting progress is unfolding in Mississauga as Exchange District Condos, developed by Camrost-Felcorp, takes center stage in the city's skyline. This remarkable multi-tower development, masterfully designed by Arcadis, is making significant strides towards becoming the tallest building in Mississauga, poised to surpass the current record held by Absolute World's 176-meter south tower.

Exchange District Condos represents the epitome of urban transformation and promises a dynamic lifestyle at the heart of Mississauga. Immerse yourself in the thriving downtown core, where culture, commerce, and connectivity seamlessly converge. With a prime location and contemporary design, Exchange District Condos offers unparalleled living spaces, workspaces, and retail options.

Two towers within this extraordinary development will exceed the impressive 200-meter milestone, making a bold statement in architectural achievement. As construction progresses, the cityscape is already undergoing a transformation, with the 60 and 72-storey towers taking shape before our eyes.

To learn more about the remarkable Exchange District Condos and delve into the exciting world of preconstruction opportunities, we invite you to reach out to Ann and Anthony from the Olivera Group. Their expertise and in-depth knowledge of real estate investing and preconstruction will guide you towards making informed and educated decisions. 

Contact Us

Anthony Olivera & Ann Rahinel - info@theoliveragroup.com or (647) 951-0850

According to Statistics Canada's report on Tuesday, Canada witnessed a deceleration in its inflation rate to 3.4 percent in the year leading up to May. This slowdown can be attributed to notably lower prices of gasoline. In April, the inflation rate stood at 4.4 percent, making the current decrease quite significant.

The primary factor driving this deceleration is the decrease in gasoline prices. If we exclude the impact of gasoline, the inflation rate would remain at 4.4 percent. The average decline of over 18 percent in gasoline prices compared to their peak levels last year has played a major role in dragging down the overall inflation rate on its own.

However, despite the apparent deceleration in consumer prices, various aspects of the cost of living continue to rise significantly.

The rate at which grocery prices are increasing is nearly nine percent, only slightly lower than the 9.1 percent rate observed in April. Moreover, this rate is nearly three times higher than the overall inflation rate.

Food prices have consistently been on the rise at a faster pace than the officially reported inflation rate for over a year now.

Moreover, the expense associated with maintaining a place to live continues to surge at an alarming rate.

The mortgage interest cost index has soared by 29.9 percent, marking the highest pace ever recorded. This escalation is a result of the Bank of Canada's aggressive increase in lending rates, aimed at dampening demand.

Variable rate mortgage holders have been particularly impacted, as the cost of servicing their loans has been skyrocketing throughout the year. Even those with fixed-rate loans are facing the need to renew and secure new loans at substantially higher rates than their previous ones.

The increased cost of mortgages stands as the primary factor influencing the inflation rate, according to the data agency. If mortgage expenses are excluded from the calculations, Canada's headline inflation rate would have been 2.5 percent, down from 3.7 percent in April.

Leslie Preston, an economist at TD Bank, pointed out that even if we exclude volatile factors such as gasoline and mortgages, the underlying inflation remains at a level that would likely lead the Bank of Canada to consider another rate hike in the future.

"While the decrease in goods inflation is positive, it is likely that the Bank of Canada has already taken that into account as supply chain disruptions ease," she explained. "Although Canadian inflation has continued to moderate in May, it is unlikely that the progress made will be sufficient to deter the Bank of Canada from implementing rate increases in July."

Navigating the ever dreaded LOWBALL OFFER When Selling Your Home

Opinions vary regarding the definition of a "lowball offer." Some individuals consider it as an offer substantially below the listed price, while others perceive it as an offer significantly below the market value. In this blog, we will refer to "lowball offers" as those that are considerably below the asking price or below market value.

Receiving lowball offers can be disheartening but it is possible to handle them effectively. Here, we provide our top recommendations:

Understanding the Buyer’s Motivations

Gaining Insight into the Buyer's Intentions Before Responding to a Lowball Offer

When faced with a lowball offer, it is essential to comprehend the motivations driving the buyer. Typically, lowball offers originate from buyers in the following situations:

1. Bargain hunters: Some opportunistic buyers or investors are actively seeking a favorable deal and aim to purchase a property below its market value. They employ lowball offers as a strategy to identify sellers in desperate circumstances.

2. Budget limitations: Occasionally, buyers develop a strong affinity for a property that surpasses their financial capabilities. Although they may recognize the value of your home, their budget restricts them. As a result, they may submit an offer lower than your asking price, hoping for a fortunate outcome.

3. Renovation plans: Surprisingly common, certain buyers intend to renovate the property and deduct their estimated renovation expenses from the asking price. They may fall in love with a house but perceive the need to replace the kitchen and bathrooms, resulting in an offer lower than the listed price. It is important to note that personal renovation plans do not directly influence a property's market value.

4. Negotiation tactics: Some buyers, and their agents, relish the art of negotiation and utilize lowball offers as a means to shift the dynamics of the negotiation process. While their true intention might be to pay the market value, they engage in protracted negotiations as part of their strategy.

5. Lack of knowledge: Many buyers rely on their real estate agents to assist them in comprehending a property's value. Regrettably, not all agents possess extensive experience in property valuation. There have been instances where ill-informed agents have advised buyers to submit offers significantly below the asking price, leading to disappointment and frustration for both parties involved.

6. Genuine concerns about property value: While you may not necessarily agree with their perspective, some buyers may genuinely believe that your home is worth considerably less than your listed price. They may have reservations regarding its value, which drives them to present a lowball offer.

By understanding the motivations behind the buyer's offer, you can engage in more effective negotiations and potentially increase the chances of a successful sale.

Are You Priced Right?

Do you have substantial comparable sales data, indicating nearby properties with similar characteristics that support your asking price? Have you taken into account the prevailing market conditions?

HOMEBUYERS today are SMART! – they can quickly identify an overpriced residence, just as readily as they can recognize an underpriced one. If you're selling your home and have received numerous lowball offers, it may indicate that your price is set too high.

Don’t Take it Personally

While receiving a lowball offer can feel personal, it's crucial to keep in mind that buyers are primarily focused on securing the best possible deal for themselves. I've witnessed sellers react emotionally to such offers, refusing to engage in negotiations—I've even found myself in that position. However, if you can prevent yourself from becoming defensive, you'll enhance your likelihood of achieving a successful outcome.

Counteroffer with a Realistic Price

When faced with a lowball offer, it is crucial to respond with a counteroffer that reflects a realistic price. Take into account the present market conditions, recent comparable sales in the vicinity, and any improvements or renovations you have made to the property. Your counteroffer should be grounded in objective factors rather than emotions or a desire to retaliate against the buyer. Just because the buyer may be engaging in strategic maneuvers, there is no obligation for you to follow suit.

Be Willing to Walk Away

If the buyer demonstrates an unwillingness to engage in negotiations and presents an unfair price, you might need to consider withdrawing from the transaction. Certain individuals who submit lowball offers are solely seeking an advantageous deal and may never intend to pay the property's market value.

The Office of the Superintendent of Financial Institutions (OSFI) in Canada announced on Tuesday that it would raise the stability buffer for the country's major banks by 50 basis points to 3.5%. The decision, set to take effect on November 1, was made in response to increasing borrowing costs, high levels of debt, and pressures on the financial system.

In its statement, the OSFI expressed concerns about elevated household and corporate debt levels, the escalating cost of borrowing, and heightened global uncertainty surrounding fiscal and monetary policies. With the financial sector demonstrating resilience in recent quarters, the OSFI deemed it an opportune time to take action.

Superintendent of Financial Institutions Peter Routledge stated, "We are implementing measures to strengthen the resilience of Canada's largest banks against vulnerabilities." The regulator's action comes amid growing concerns about the ability of Canadians to manage their debts, with rising worries about potential increases in delinquency rates for mortgage payments.

Anticipating economic challenges and consumers' struggles to make payments, major banks have already allocated additional funds.

According to Desjardins analyst Royce Mendes, the purpose of the higher buffer is to provide extra capital as a safeguard for future uncertainties.

The cautious approach taken by both regulators and the regulated institutions is expected to enhance global investors' confidence in the stability of the Canadian financial system.

The stability buffer, established in 2018 to bolster banks' capital resilience against vulnerabilities, is reviewed semiannually but can be adjusted at other times.

The common equity tier 1 ratio for Canada's top six banks will now rise to 11.5%, up from 11%. This ratio compares a bank's capital with its risk-weighted assets and measures its ability to withstand economic downturns.

As of the end of the first quarter, the ratio for the six largest banks ranged between 11.9% and 15.3%, with most banks targeting a 12% ratio by the end of 2023.

This marks the second consecutive increase in the size of the buffer by the OSFI. In December of the previous year, it raised the buffer by 50 basis points to 3.0%. The buffer had been lowered during the pandemic but has been raised in the past two years.

One of the most common questions homebuyers ask us is “when is a good time to buy a house?” There isn’t one good answer, because there are so many factors that go into your decision to buy a house. You can’t always time the real estate market to line up with your personal life, such as if you’re downsizing, upsizing, getting married, getting divorced, having a child, or going through any other major milestone that is leading you to look into buying a house.

If you’re getting ready to buy a house, here are some reasons why it might be a good time to buy a house.

YOU NEED TO UPSIZE BEFORE YOU COMPLETELY OUTGROW YOUR HOME

Making do in a house that’s too small will only work for so long. If you’re expecting a new family member, either because you’re about to have a baby, adopt a child, or have a family member move in permanently, then it’s a good idea to upsize before the change happens. This will give you time to buy a new home, sell your old home, and settle in before making another major transition.

YOU HAVE TO DOWNSIZE IN A HURRY

Whether your adult kids have moved out, you’re dealing with the death of a close family member, or you just got divorced, you might need to downsize suddenly. Because you’ll tend to save money by buying a smaller home, you don’t necessarily need to worry about timing a downsize with the market. If you have too much house and need to get into a smaller space, you should do so when you’re ready instead of hanging on to the burden of maintaining a large house when you don’t have the time or money to do so.

YOUR FAMILY NEEDS TIME TO TRANSITION

One reason summer is so popular for moving is because it gives families time to settle in to their new neighborhoods before school starts. This is especially important if you’re moving to a new school district. It’s hard enough to pull kids away from their familiar friends, teachers, and routine. If transitioning during the summer instead of pulling them out mid-year works for your family, then that’s what you should do.

No matter what’s motivating you to buy a house, whether it’s your first house or your fifth, you should start with timing it based on your life. There will always be houses on the market, so focusing on when it makes sense for you to move instead of when it’s the best time to move based on the market might be what works best for you and your family.

‍Book a discovery call with us here

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The Bank of Canada (BoC) caused a surprise in financial markets by increasing its policy rate by an additional 0.25% during the previous week. As a result, Canadian homeowners who possess variable-rate mortgages and/or home-equity lines-of-credit will experience a corresponding rise in their interest rates in the near future.

Bond-market investors had anticipated an increase in the Bank of Canada's policy rate at its upcoming meeting scheduled for July. However, the Bank chose not to wait until then and surprised the market.

In its policy statement, the Bank concluded that "monetary policy was not sufficiently restrictive." The following day, BoC Deputy Governor Paul Beaudry justified the decision by explaining that "excess demand in the Canadian economy is more persistent than we thought, and it increases the risk of the decline of inflation could stall."

Although the Bank had always kept the option open for further rate hikes if deemed necessary, the timing of their recent action and the rationale behind it left many market observers bewildered.

In January, the BoC said that it would take “an accumulation of evidence” to move it off the sidelines. In the end, it moved after only two policy-rate meetings.

The Bank is focusing on four key elements: 1) the evolution of excess demand, 2) inflation expectations, 3) wage growth and 4) corporate pricing behaviour.

1) EXCESS DEMAND - The Bank of Canada (BoC) noted that demand was unexpectedly robust and widespread. However, it did not explicitly acknowledge that a substantial portion of this additional demand can be attributed to the rapid depletion of savings accumulated during the pandemic. This temporary surge in demand is projected to diminish later this year, well before the effects of last week's rate hike become significant. It's important to note that rate hikes typically take effect with a delay and have an impact that lasts for approximately two years.

2) INFLATION EXPECTATION- The inflation expectations of both consumers and businesses continue to remain high, and this sentiment was not alleviated by the announcement that our Consumer Price Index (CPI) increased from 4.3% in March to 4.4% in April. It is possible that the Bank possesses information that is not yet available to the public. Although the most recent consumer and business expectation surveys are set to be released in July, Stephen Brown, Deputy Chief Economist at Capital Economics, confirmed that the Bank already has access to those findings (more details on this matter will be provided later in this post).

3) WAGE GROWTH - The overall nominal wage growth continues to maintain a pace of approximately 5% on an annualized basis. However, the Bank of Canada (BoC) has cautioned that unless there is a significant increase in productivity (which has been declining steadily), inflation will persist above the target level. On the other hand, real wage growth, which considers inflation's impact on nominal wage growth, remains below 1% and is still lower than pre-pandemic levels. Consequently, the average worker's purchasing power is barely improving. In other words, wage growth is unable to generate substantial excess demand. Additionally, there are indications that employment momentum is slowing. Job vacancies have been steadily decreasing over the past two quarters, labor force growth is surpassing the rate of hiring, and most recently, it was revealed that an estimated 17,200 jobs were lost in May. These factors collectively suggest an impending deceleration in wage growth.

4) CORPORATE PRICING BEHAVIOUR - Businesses tend to set prices based on market conditions, but it is primarily the limited savings buffer mentioned earlier that has enabled consumers to withstand higher prices without reducing their spending. However, this buffer is diminishing rapidly. As demand declines, profit margins will shrink rapidly, as there is less consumer spending to go around.

If the Bank of Canada (BoC) is expected to anticipate future trends when setting its monetary policy, why is it relying on indicators that reflect past conditions to justify another round of tightening, which will only have a significant impact a year or two from now?

I believe the decision to raise interest rates is driven by two crucial and interrelated objectives: 1) to manage inflation expectations and 2) to slow down the upward momentum of real estate prices.

Although inflation only rose slightly from 4.3% in March to 4.4% in April, it marked the first month-over-month increase since inflation reached its peak in June 2022. Many people may not delve deeper into the news beyond the headlines announcing the resurgence of inflation.

Implementing another rate hike attracts attention and helps to anchor inflation expectations.

More significantly in the current context, last week's rate hike will also dampen the momentum of our recently revived real estate markets. The Bank likely wanted to take action without further delay.

Real estate was expected to cool down for a period after the Bank of Canada implemented its most substantial series of rate hikes in modern history. However, the Bank's decision to pause in January unexpectedly fueled the market. When buyers learned that interest rates would no longer increase, they reentered the market, leading to excessive demand for limited housing supply.

Subsequently, the US banking crisis triggered a significant drop in bond yields, which in turn caused fixed mortgage rates to decline by 0.50% or more. Bidding wars resurfaced, and prices began to rise once again.

In its policy statement, the Bank of Canada acknowledged that "buyers were returning to the housing market, despite tight supply," and noted the "unexpected" strength in goods spending, particularly the demand for interest-rate-sensitive goods such as furniture and appliances, which are closely linked to home purchases.

The strong rebound in the real estate market significantly influences consumer inflation expectations, according to economist Stephen Brown, who recently highlighted the Bank's research indicating a strong correlation between house prices and consumer inflation expectations.

While the Bank's most recent rate hike did lead to a 0.25% increase in variable mortgage rates, the greatest impact was seen in fixed rates, which is the preferred choice for most borrowers nowadays. In a short span, three-, four-, and five-year fixed rates have surged by 0.50% or more, approaching their previous cycle peaks. Currently, this aligns with the Bank of Canada's intentions.

The favorable conditions resulting from the US banking crisis have now completely dissipated, with any expectations of rate cuts forgotten. Prospective homebuyers are once again concerned about the potential increase in near-term mortgage rates.

From the perspective of the Bank of Canada, their mission is accomplished for now.

So, what should you do if you are in the market for a mortgage today?

When the US banking crisis led to a decline in our bond yields, it created advantages for new borrowers opting for fixed rates, but it came at the expense of existing variable-rate borrowers. Lower fixed rates undermined the Bank's efforts to slow demand and consequently delayed the implementation of variable-rate cuts.

Fixed rates have become increasingly favorable for several reasons.

These rates are based on bond yields that had previously factored in the expectation of policy rate cuts by the Bank of Canada (BoC) and the Federal Reserve in the upcoming fall, despite BoC Governor Macklem publicly dismissing such a notion. Those who secured a fixed rate during a period when the bond market anticipated near-term rate cuts are currently benefiting from their decision.

Present-day fixed mortgage rates now reflect a viewpoint of prolonged higher rates. Currently, the bond market has aligned with the BoC's perspective.

Interestingly, each rate hike by the BoC increases the risk of excessive tightening. This raises the likelihood that, when economic slowdown accumulates and prompts a reversal in policy, the Bank may need to implement rate cuts sooner and more aggressively than it otherwise would have. Although this argument holds theoretical validity, it may be challenging for borrowers to let it significantly impact their decision-making, especially considering that variable rates are even higher now and the bond market believes additional rate hikes are not just possible but likely.

For the time being, I maintain the belief that the safest choice for individuals currently seeking a mortgage and aiming for a balanced approach is a three-year fixed rate.

Those who opt for this choice must accept the risk of potentially paying an above-market rate in the later part of their term. However, most borrowers view this as a trade-off worth making when the alternatives are longer terms (which amplify the risk) or variable rates and shorter-term fixed rates (which appear to be consistently rising).

The main point is that the increase in Government of Canada (GoC) bond yields led to lenders raising their fixed mortgage rates once again.

The recent surge in GoC bond yields suggests an expectation that the Bank of Canada (BoC) will likely increase its policy rates before the end of the year. Consequently, there may be a possibility of a near-term pullback following such a significant movement. This could result in fixed mortgage rates remaining stable at their new elevated levels for the foreseeable future.

Variable-rate discounts remained unchanged last week. However, the unexpected 0.25% hike by the BoC last Wednesday means that borrowers with variable rates will soon experience a corresponding increase in their borrowing costs.