I’ve made peace with the fact we are unlikely to develop a national strategy to ensure a predictable and more affordable price of snacks, but there are other questions of equal if not greater importance stemming from this week’s inflation report: Will the slowing price of goods bolster the already strong likelihood the central bank will again cut its key lending rate next week? Will it lead to a more sizable impact on mortgage rates and new-car financing?
Thankfully, Rob Carrick was wondering the same things. More from him below, along with a look at how new tech-savvy players are influencing mortgage rates – and how Prince Edward County is becoming a buyer’s market.
In the news
- Paladin CEO bullish on clearing national security test on Fission deal
- Edmonton-based Artificial Agency raises US$16-million for generative AI gaming engine
- Shoppers Drug Mart strikes partnership with blood testing startup Truvian Health
Up top
Climate change damage is hitting corporate profits
More than half of Canadian businesses took financial hits last year from extreme weather, yet a large majority of executives say their companies lack the time and resources to prioritize cutting carbon emissions, Jeffrey Jones reports.
A poll of executives from 350 companies, conducted by accounting consultancy KPMG, found 56 per cent of responders suffered lower profit because of wildfires, floods, heat waves and other weather damage in 2023.
The results show how the physical impact of climate change is a growing business risk. In 2023, severe weather and natural disasters in Canada caused more than $3-billion in insured damage for the second year in a row, and wildfires, flooding and extreme heat are again wreaking havoc across the country, Jones writes. You can read his full story here.
In focus
A buyer’s market in bloom?
Amanda’s Vineyards is a family-operated business near Picton, Ont. The 25-acre property includes a white three-bedroom farmhouse that currently serves as a short-term rental. It's on the market for an asking price of $1,497,500.Supplied
We might already be seeing the effects of the Bank of Canada’s first cut in over four years in Prince Edward County, a picturesque area about two hours east of Toronto known for its cozy shops, sandy beaches and overall summery vibes.
Even with the usual boost that comes in the sunnier months, inventory is higher than usual, Carolyn Ireland reports. That’s partly to do with sellers being resigned to the fact the price peaks of the pandemic are unlikely to repeat. But part of the shift might be driven by sellers getting ahead of lower interest rates and more buyers.
“Right after the rate cut, I definitely saw an increase in showings on those listings,” one real estate agent told Ireland about the entry-level price range. You can read her full story on how the county is becoming a buyer’s market here.
A county and a country
What’s happening in PEC can be seen in markets across Canada as many potential buyers are holding out for lower borrowing rates and potentially softer prices.
While the first cut to the country’s key lending rate was notable for signalling a shift in the central bank’s approach, a second cut would have a greater impact, Rob Carrick writes in a column from which I’ve borrowed liberally:
Before we get too far ahead of ourselves, what are the chances the bank actually makes that cut?
Inflation unexpectedly blipped higher in May, raising concerns that the Bank of Canada might not cut rates on July 24. But this week’s report on inflation in June showed the pace of price increases pulling back once again. As of mid-week, financial markets assessed a 91-per-cent likelihood of a rate cut coming up. The economy needs lower rates because growth is lukewarm and consumer spending is weighed down by high borrowing costs.
What happens with mortgage rates?
The line from big real estate is that lower rates will revive a stagnant housing market. The last Bank of Canada rate cut resulted in minimal declines in mortgage rates, and housing markets in some cities did look a little better last month. Variable-rate mortgage costs track the overnight rate, while fixed-rates are more influenced by what’s happening in the bond market. Another rate cut by the Bank of Canada would grease the way for lower rates in bonds, and that in turn would blaze a path for lower mortgage rates.
What happens with new-vehicle financing rates?
Today’s high interest rates coupled with the big price increases in recent years are making new vehicles increasingly unaffordable. Dealers are already starting to offer low-rate financing incentives in limited cases – mostly vehicles that are less in demand right now. A rate cut by the Bank of Canada would provide room for rate cuts on a wider range of vehicles. If you’ve been holding off buying a new vehicle, more customer-friendly market conditions are coming.
What happens with rates for guaranteed investment certificates?
The investment industry’s distaste for GICs is clear – better returns have been available from stocks and, besides, GICs don’t pay much in commissions. But many investors have scooped up GICs to lock in virtually risk-free returns that topped out around 6 per cent last year. Top GIC rates are down to about 5 per cent for one-year terms and less for longer terms. Investors should expect lower returns as a Bank of Canada rate cut trickles through the system. GICs are used by Banks to fund mortgages, which means both would fall together.
You can read Carrick’s full column here.
🎧 If you’re still (understandably) feeling financial worry, let the award-winning Stress Test podcast be your guide.
Meet the new online mortgage players
At this moment, borrowing costs may still be uncomfortably high for most Canadians, Erica Alini writes. But anyone venturing into the mortgage market this summer will find a welcome silver lining: a growing variety of lenders and brokers vying to offer the lowest rates and the slickest user experience.
To help prospective homebuyers and homeowners with upcoming mortgage renewals navigate the sea of choices, The Globe and Mail reviewed five of the websites promoting some of the most competitive mortgage offerings on the current market.
Nesto. Perch. Pine. Wowa.ca. Ratehub.ca. I’m going to kill it at tonight’s open-mic poetry slam.
Alini asked each of these companies to provide the lowest rate available through their site in two scenarios. The first was a first-time home buyer in Calgary – where young people are flocking in search of affordable housing – for a five-year fixed mortgage that requires default insurance, which is mandatory for buyers with a down payment of less than 20 per cent.
In the second scenario, she asked for the lowest rate for a five-year fixed mortgage for a Toronto homeowner renewing a loan that doesn’t qualify for default insurance.
You can read more of her findings here.
The lookout
On our radar and reading list
In our food: A Canadian company is seeing growing demand for X-ray machines for food producers.
In our kennels: A story I’m recommending both for its lead sentence (kudos to CP reporter Sarah Ritchie) and for anyone planning to cross the border with their dog.
The big picture: A heady mix of economic reports including Japan consumer prices, British consumer confidence and June retail sales; Canadian construction investment and U.S. initial jobless claims.
The smaller picture: Netflix reports earnings today.
Morning markets
Global stocks were mixed as investors tried to pull markets out of a tech-led tumble and attention turned to whether the European Central Bank would signal it is likely to cut interest rates in September.
On Wall Street, a rebound in chip stocks lifted Nasdaq and S&P 500 futures as Taiwan’s TSMC reported upbeat forecast and results. TSX futures were flat.
Overseas, the pan-European STOXX 600 was up 0.38 per cent in morning trading. Britain’s FTSE 100 rose 0.58 per cent, Germany’s DAX advanced 0.28 per cent and France’s CAC 40 added 0.59 per cent.
In Asia, Japan’s Nikkei closed 2.36 per cent lower, while Hong Kong’s Hang Seng added 0.22 per cent.
The Canadian dollar traded at 73.10 U.S. cents.