In our latest video we dive deep into the current dynamics of the bond market, interest rates, and their implications on the real estate sector. Jay Lewis sits down with Mortgage Broker Josh Tagg to unravel the complexities of the Bank of Canada’s recent interest rate decision and its ripple effects on the mortgage and real estate markets.

This enlightening conversation sheds light on how these economic factors interplay, offering valuable insights for both homebuyers and sellers. Whether you’re navigating the property market or simply keen on economic trends, this video is tailored for you. Watch, learn, and stay ahead in the ever-evolving world of real estate and mortgage finance!

Jay Lewis: Hello, hello, thanks everybody for joining me back here with our good friend Josh.

So I’ve had a few phone calls, lots of people are asking me saying, “hey, it looks like the bond market’s dropping, interest rate’s dropping.” I don’t actually know what’s going on. Can you fill us in?

Josh Tagg: Well, that has certainly been in the news and in the media lately. So today is December 6th and the Bank of Canada made their scheduled rate announcement today. No change to their rate and as a result of that the bond market which is how fixed rate mortgages are priced got further confirmation that they’re doing the right thing and we’ve been seeing some downward movement in that.

So right here we’ve got the picture of the bonds. If you look at that, back in the spring, we had fixed interest rates like at 4.3% to 4.5%. The bond was nice and low after some banks collapsed in the United States. But then over the summer, as things sort of stabilized, we saw the bond yield increase. That made the fixed mortgage rates also increase. And so they went from that four and a half area up to like 5.7%, 5.8%, 5.9% with some lenders.

So some pretty significant increases over that summer period. But in the last month since it hit a high in October, we’ve been seeing it come down about a percent. But what we haven’t seen yet is the fixed rates drop as much. So I think that’s important. We’ve seen fixed rates drop about a third to a half of a percent but now we’re expecting as long as this trend is stable and continues we should be seeing fixed rates kind of below 5% here soon which is super exciting.

Jay Lewis: Right that’s that’s really awesome to hear and so is it lagging a little bit until maybe they get some information on like inflation or what what happens with that or why is it such a lag and what is inflation doing because it feels like you know what it yeah it definitely seems to be somewhat lagging.

Josh Tagg: These bond rates do take a little bit of time to adjust. But here I’ll show you one more here which is the inflation numbers. With the inflation numbers, we saw that peak kind of June 2022 or so after it’s been steadily climbing.

The Bank of Canada already had started their process of raising interest rates but since that point we’ve seen a steady decrease in the inflation rate and the most recent numbers are October’s at 3.1% which is almost in that band that the Bank of Canada wants to see it between 1 and 3% obviously with the target rate at 2. So that is part of the reason that we’re seeing the bond yields drop and because the expectation of the rate staying higher for longer is starting to to fade.

Jay Lewis: Gotcha. So this should bring some optimism back in our market you know our buyers can maybe cross their fingers we’re going to see some some nice new interest rates coming out and should be good for our sellers as well.

Josh Tagg: I’m definitely thinking that it’s kind of like setting us up for what happened this past spring interest rates came low in the spring. We saw values increase. We saw a lot more real estate activity happening and it’s definitely looking like we’re going to see a repeat of that activity kind of in the first part of 2024.

And if the Bank of Canada drops their rate come March, April as expected, I think we’ll continue to see more fuel on real estate and on people purchasing homes because anybody who’s been sitting off to the side is now gonna be like, okay, rates are lower, prices are going back up again. Let’s get ourselves into the market before the prices go up too much.

Jay Lewis: Yeah, awesome. So we can definitely help anyone who’s watching with either of those things. So, you need a mortgage, reach out to Josh. When you’re done with Josh, reach out to us, we’ll show you around. Thanks for joining me again here today, Josh.