More than ever, I feel like I am very conscious of what comes out of my mouth, and in particular the words I choose.
This is tough for me, because my instinct is to just say what is on my mind (and also, because I like to swear).
But as we know, that can get you in a lot of trouble these days.
You need to pick and choose very carefully where and when you are going to let your guard down.
One place I can’t let my guard down is at home. Somehow my nine-year-old daughter has suddenly become the authority in our household on what is and isn’t acceptable language.
And if I do slip up, she says “Dad, words!” and then demands an apology and tells her mother on me.
The other day, I pushed back and insisted that I should be allowed to say, “son of a gun.”
She wasn’t having it. I ended up having to apologize and explain myself to my wife.
Speaking of “Words”…
Yesterday, the Bank of Canada announced that it would continue “the pause” and make no change to the current interest rate.
The decision to continue with the rate pause, is what most were expecting.
But most were also expecting some guidance around when we can expect the Bank of Canada to start cutting interest rates.
Instead, the BOC provided no such comfort to the market.
In fact, they did the opposite.
They warned of a number of factors that can create potential upside inflation risks.
“Inflation could be higher if global tensions escalate, and this boosts energy prices and further disrupts international shipping,” explained BoC Governor Tiff Macklem.
He further added “House prices in Canada could rise faster than expected. And wage growth could remain high relative to productivity.”
These comments sent bond yields soaring.
The Government of Canada 5-year Bond saw its yield surge as high as 3.73% on the announcement and ended the day at 3.77%.
Why? Because WORDS matter!
Although the market was not expecting rate cuts, they were expecting a discussion about when the cuts will occur.
What does this mean for mortgage rates?
The Government of Canada 5-year Bond rate heavily influences the 5-year fixed rate mortgage rate, which is traditionally the most popular among borrowers.
When the bond yield goes up, the mortgage rate usually follows.
Recently (the last few weeks) mortgage rates have been trending downwards heading into the usually busy Spring real estate market.
But this trend will likely now catch a headwind, as today’s bond rate is back to where it was in February.
Tiff (I hope he’s okay with me calling him by his first name) did go on to say “We don’t want to leave monetary policy this restrictive longer than we need to. But if we lower our policy interest rate too early or cut too fast, we could jeopardize progress we’ve made bringing inflation down.”
So what does this mean for those whose mortgage is coming up for renewal or purchasing a new house?
My advice is a 2 or 3 year fixed term.
Why? Because anything else is a gamble IMO.
I’m a lot more confident that rates will be down a fair amount in 2 years, than I am in 12 months.
And I have absolutely no clue where rates will be in 5 years time.
That’s why 2 or 3 years makes sense, in my simple mind.
That, and I’m tired of having to listen to every word spoken by Tiff. I need at least a 2 year break, lol.
But in all seriousness, everybody’s situation is different, and I encourage you to give some good thought as to the interest rate term you select.
This isn’t the time to “go with your gut.”
Reach out if you need help assessing your options.
Best,
Vince
