Inflation Cooled Again in August, But Higher Rates Still Coming

Latest News Gabriel Da Silva 21 Sep


Canada’s headline inflation rate cooled again in August, even a bit more than expected. The consumer price index rose 7.0% from a year ago, down from 7.6% in July and a forty-year high of 8.1% in June, mainly on the back of lower gasoline prices.

The CPI fell 0.3% in August, the most significant monthly decline since the early months of the COVID-19 pandemic. On a seasonally adjusted monthly basis, the CPI was up 0.1%, the smallest gain since December 2020. The monthly gas price decline in August compared with July mainly stemmed from higher global production by oil-producing countries. According to data from Natural Resources Canada, refining margins also fell from higher levels in July.
Transportation (+10.3%) and shelter (+6.6%) prices drove the deceleration in consumer prices in August. Moderating the slowing in prices were sustained higher prices for groceries, as prices for food purchased from stores (+10.8%) rose at the fastest pace since August 1981 (+11.9%).

Price growth for goods and services both slowed on a year-over-year basis in August. As non-durable goods (+10.8%) decelerated due to lower prices at the pump, services associated with travel and shelter services contributed the most to the slowdown in service prices (+5.5%). Prices for durable goods (+6.0%), such as passenger vehicles and appliances, also cooled in August.

In August, the average hourly wages rose 5.4% on a year-over-year basis, meaning that, on average, prices rose faster than wages. Although Canadians experienced a decline in purchasing power, the gap was smaller than in July.

Core inflation–which excludes food and energy prices–also decelerated but remains far too high for the Bank of Canada’s comfort. The central bank analyzes three measures of core inflation (see the chart below). The average of the central bank’s three key measures dropped to 5.23% from a revised 5.43% in July, a record high. The Bank aims to return these measures to their 2% target…


Bottom Line

Price pressures might have peaked, but today’s data release will not derail the central bank’s intention to raise rates further. Markets expect another rate hike in late October when the Governing Council of the Bank of Canada meets again. But further moves are likely to be smaller than the 75 bps-hikes of the past summer.

There is still more than a month of data before the October 25th decision date. The September employment report (released on October 7) and the September CPI (October 19) will be critical to the Bank’s decision. Right now, we expect a 50-bps hike next month.


Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres



First Time Home Buyers Guide

Mortgage Tips Gabriel Da Silva 20 Sep


Let Us Be Your Guide Through The Mortgage Process.
When you work with us, we’ll pair you with an experienced agent to take you step-by-step through the mortgage process. You’ll receive personalized, one-on-one service designed to get you across the finish line.


Notable Terms.
Mortgage Term: The length of time that you’re locked into your rate and conditions.

Down Payment: Any down payment less than 20% requires mortgage default insurance. Over 20% is considered a conventional mortgage, which doesn’t require insurance.

Mortgage Type: An open mortgage allows the borrower the option to pay off all or any of the balance owing on the mortgage at any time, without a penalty but tends to come with a higher interest rate.

Mortgage Rate: You’ll choose either a fixed or variable rate mortgage. Variable rates are often lower but involve more risk, as your payments may fluctuate with the rate set by the Bank of Canada. Fixed rates mean you are locked in for a term and your monthly mortgage payment is set in advance.

Amortization: The number of years it takes to repay your entire mortgage loan amount, based on a fixed payment schedule. Most lenders offer 25-year amortizations.

Closing Costs: Don’t forget about closing costs. Lenders typically like to see that you have at least 1.5% of the purchase price to cover these costs.

Mortgage Stress-Test: Federal regulations have made qualifying for a mortgage a little tougher. Regardless of the low rates offered, you’ll need to qualify to ensure that if mortgage interest rates go up, you’ll still be able to afford your payments.


Looking for your First Mortgage? There are Programs and Rebates to Help.

If you’re a first-time homebuyer, the HBP allows you to withdraw up to $35,000 from your RRSPs tax-free to put toward buying your first home. The HBP allows you to pay back the withdrawn funds within a 15-year period.

The First-Time Home Buyer Incentive helps people across Canada purchase their first home. The program offers 5% or 10% of the home’s purchase price to put toward a down payment. You pay back the same percentage of the value of your home when you sell it or within a 25-year window.


The Mortgage Financing Process.
The number one question for someone new to the mortgage process is “what does this process entail?”. The following is a simple outline to give you an idea of the process and help you understand what to expect as you embark on your home buying journey!

Having the following information on hand before meeting with your mortgage professional will help them determine what you qualify for and help them determine the best mortgage product for you:

Contact information for your employer and your employment history
Proof of address and your address history
Government-issued photo ID with your current address
Proof of income for your mortgage application
Down payment proof (amount and source)
Savings and investments proof
Details of current debts and other financial obligations

One of the best things any potential homeowner can do when starting the home buying process is to get pre-approved. Mortgage pre-approval requires submission and verification of your financial history and can help you determine your price range, understand the monthly mortgage payment associated with that price range and provide the mortgage rate for your first term.

It is important to note that pre-approval does not mean that a lender has fully reviewed your documentation and you may still need the approval of a mortgage insurer. However, it does have a lot of benefits that can give you a “leg-up” in your search!

Getting pre-approved not only makes the search easier by helping to determine your price range and budget, but pre-approval also guarantees the interest rate for 90-120 days while you search for that perfect home. Plus, the rate will automatically be adjusted down with any market reductions. Another benefit to pre-approval is that, when it comes time to purchase, pre-approval lets the seller know that securing financing should not be an issue. This is extremely beneficial in competitive markets where lots of offers may be coming in.

Quick Tip: Being entirely candid with your home-buying team throughout the process will be vital! Hidden debt or buying a big-ticket item during your 90-120 day pre-approval can change the amount you are able to borrow. It is best to refrain from any major purchases (such as a new car) or life changes (such as changing jobs) until after closing and you have the keys to your new home!

In today’s competitive real estate market, it can be very difficult to acquire property WITHOUT the help of a realtor. One of the reasons realtors are integral to the home buying process is that they can provide access to properties that never even make it to the MLS website. Realtors also gain access to information about homes that may come onto the market before a listing is even signed.

Most importantly though, a realtor understands the ins-and-outs of the home buying process and can tell you how to be successful in your endeavors to purchase a home by guiding you through the process from the first viewing to having your bid accepted.

Once you have found the property that meets your needs, you’ll put in an offer that’ll be accepted or countered. This may go back and forth until you reach an acceptable price with the vendor.

Once your offer is accepted with the condition of financing, you will need to do a few things to finalize the sale:

Ask for a realtor intro between your mortgage professional and realtor.
An appraisal may be required, which will be determined and arranged by your mortgage professional.
Send in any remaining documents required for financing (income confirmation, down payment confirmation, etc).
Arrange a home inspection.
Receive the lender’s approval on property and final approval letter.
At this point, your financing is in place and you’re ready to proceed with the purchase of the property.

You’ll be asked to provide any money that’s to be used as your down payment, which is not already on deposit with your realtor. Typically, you’ll go in 1-2 days prior to the completion date.




Understanding Mortgage Trigger Points

Mortgage Tips Gabriel Da Silva 6 Sep


As we move into the Fall market, there are some important things you should be aware of.

While inflation has now likely peaked, we will still be dealing with the repercussions from these heightened levels for a while before things balance out. As inflation is corrected, we are also seeing home prices moving back to normal post-pandemic era.

However, we are still anticipating some final rate hikes from the Bank of Canada coming into the fall.

With that in mind, now is an important time to discuss what this means for your mortgage – specifically in regards to trigger points. Another increase in rates on the horizon will put many variable-rate borrowers near their mortgage trigger points – even for fixed payments.

While static payment variable-rate mortgages are not designed to fluctuate with prime, the reality is that a mortgage payment consistent of two components: your principle and your interest. With the existing rates and subsequent increases expected in the fall, the amount paid towards principle has decreased with an increase in the amount of interest on a static mortgage. For instance, if you are paying $2000 a month on your mortgage, only $200 might be going towards the principle with the rest covering interest. An additional increase to the interest rate, means that your interest portion will spike again and may actually exceed your total payment. When this occurs, it is called hitting your trigger rate.

You can calculate your own trigger rate with the following formula: (Payment amount X number of payments per year / balance owing) X 100) to get your trigger rate in percentage.

If you have reached your trigger rate, don’t panic. You are certainly not alone and there are options:

  1. Adjust Your Payment: Firstly, you may choose to adjust your payment amount to ensure that you still have some going towards your principal balance.
  2. Review Your Amortization Schedule: Consider switching your amortization schedule from 20-year to 25-year which would be ideal if you already have equity in your home. However, if you’re already at your maximum amortization for your lender (i.e. 30-year mortgage), you would need to increase your payment.
  3. Switch to a Fixed-Rate Mortgage: Many borrowers are now choosing to opt for a fixed-rate mortgage to avoid the issue of increased interest and trigger rates. Keep in mind, depending on your mortgage product, you may face penalties if you switch your mortgage mid-term. Be sure to discuss any mortgage changes with me before going ahead.
  4. Pay Off Your Mortgage: The final option that is always there is for you to pay off your mortgage entirely. Though don’t fret if this is not possible!

While I understand words like “inflation” and “trigger rates” can be scary, as a dedicated mortgage professional I am here for you. I would be happy to discuss any concerns you have or help explain in more detail how these changes may impact your mortgage and what your options are.


Gabriel Da Silva
Dominion Lending Centres – FC Funding
Commercial & Residential Mortgage Agent
Lic.# 10671
Independently owned and operated


Understanding Insurance

General Gabriel Da Silva 2 Feb

Not all insurance products are created equal.

One of the most common mistakes homeowners and potential homeowners make is that they hear the word “insurance” and just assume they have it! Well, you might have one kind of insurance, but you might be missing coverage elsewhere.

It is important to understand all the different insurance products to ensure you have proper coverage.




To help you get a better understanding of the insurance, below are the four main insurance product options you will encounter and what they mean:

Default Insurance: This insurance is mandatory for homes where the buyer puts less than 20% down. In fact, default insurance is the reason that lenders accept lower down payments, such as 5% minimum, and actually helps these buyers access comparable interest rates typically offered with larger down payments.

Default insurance typically requires a premium, which is based on the loan-to-value ratio (mortgage loan amount divided by the purchase price). This premium can be paid in a single lump sum, or it can be added to your mortgage and included in your monthly payments.

In Canada, most homeowners know of the Canada Mortgage and Housing Corporation (CMHC), which is run by the federal government, and have used them in the past. But did you know? We also have two private companies, Sagen Financial and Canada Guaranty, who can also provide this insurance.

Home (Property & Fire) Insurance: Next, we have another mandatory insurance option, property and fire coverage (or, home insurance, as most people know it by). This is number two on our list as it MUST be in place before you close the mortgage! It is especially important to note that not all homes or properties are insurable, so you will want to review this sooner rather than later.

In addition to protecting against fire damage, home insurance can also cover the contents of your home (depending on your policy). This is important for anyone looking at purchasing condos or townhouses as the strata insurance typically protects the building itself and common areas, as well as your suit “as is”, but it will not account for your personal belongings or any upgrades you made. Be sure to cross-check your strata insurance policy and take out an individual one on your unit to cover the difference.

One final thing to consider is that you may not be covered in the event of a flood or earthquake. You may need to purchase additional coverage to be protected from a natural disaster, depending on your location.

Title Insurance: Another insurance policy that potential homeowners may encounter is known as “title insurance”. When it comes to lenders, this insurance is mandatory with every single lender in Canada requiring you to purchase title insurance on their behalf.

In addition, you have the option of purchasing this for yourself as a homeowner. The benefit of title insurance is that it can protect you from existing liens on the property’s title, but the most common benefit is protection against title fraud. Title fraud typically involves someone using stolen personal information, or forged documents to transfer your home’s title to him or herself – without your knowledge.

Similar to default insurance, title insurance is charged as a one-time fee or a premium with the cost based on the value of your property.

Mortgage Protection Plan: Lastly, we have our mortgage protection plan coverage. This is optional coverage, but one that any agent can tell you is extremely important. The purpose of the mortgage protection plan is to protect you, and your family, should something happen. It acts as a disability and a life insurance policy in regards to your mortgage.

Typically, when you get approval for a mortgage, it is based on family income. If one of the partners in the mortgage is no longer able to contribute due to disability or death, a mortgage protection plan gives you protection for your mortgage payments. However, most homeowners don’t realize that if they buy one of these policies through their financial advisor, life insurance agent or bank, the policy will not be able to move with them to a new lender.

As your mortgage professional, I have an exclusive opportunity with this product through Manulife. This means that, if you purchase a Manulife Mortgage Protection Plan with me, you are protected for the life of your mortgage. You do not have to stay with the same lender! If you move, your protection ports with you instead of other similar products where the plan is specific to that lender. In those cases, should you want to switch lenders, you would need to re-qualify for your mortgage protection plan – possibly at higher rates!

If you have any questions about mortgage insurance or what are the best options for you, please do not hesitate to reach out to me! I would be happy to take a look at your existing plan and discuss your needs to help you find the perfect coverage to suit you and your family.

Bank of Canada Still Sees Low Rates Until 2023; Financial Markets Disagree

General Gabriel Da Silva 21 Mar


The Bank of Canada delivered welcome news for variable-rate mortgage holders today when it stood by its expectation of no rate hikes until early 2023.

“We remain committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved,” reads the BoC statement released following its rate decision. “In the Bank’s January projection, this does not happen until into 2023.”

In its decision, the Bank left its key overnight rate unchanged at 0.25%, where it’s been for the past year.

Despite the economy proving “more resilient than anticipated” during the second wave of the pandemic, resulting in a stronger near-term outlook, the Bank noted there remains “considerable economic slack and a great deal of uncertainty about the evolution of the virus and the path of economic growth.”

As a result, in addition to keeping interest rates low, the Bank said it will maintain its current bond-buying pace of at least $4 billion each week, which it says will continue until the recovery is “well underway.”

Also known as Quantitative Easing, this program has helped keep fixed mortgage rates lower than they otherwise would be. The Bank’s large-scale asset purchases keep upward pressure on bond prices, resulting in lower yields, which lead fixed mortgage rates.

The program has largely achieved its objective of keeping borrowing costs lower for households and businesses for much of the past year, but a recent surge in yields in late February has led to a sustained increase in fixed mortgage rates. Five-year fixed rates are now about 20 to 30 basis points higher than they were just weeks ago.

The Bank indicated in January that it would begin to reduce the pace of bond purchases if growth was in line with its expectations. A number of analysts have suggested that tapering could begin as early as April.

Financial Markets at Odds with BoC’s 2023 Rate-Hike Call

Despite the BoC sticking to its script that it foresees the overnight rate remaining unchanged for the next two years, financial markets see rate hikes closer on the horizon.

As of today, OIS prices tracked by Bloomberg imply about a 40% chance of a 25-bps rate hike by year-end. That could result in today’s prime rate of 2.45% rising to 2.70% and immediately boosting borrowing costs for variable-rate mortgage holders. However, markets are still largely expecting the first rate hikes to begin by mid-to-late 2022.

Bond traders see two to three BoC rate hikes by 2024, resulting in prime rate rising by 50 to 75 bps.

“That kind of monetary tightening is nothing to panic over,” writes RateSpy’s Robert McLister, noting it would be “historically modest” for a rate-hike cycle following a recession. Historically, rates have risen about 200 basis points from their lows in previous policy-tightening cycles.

He adds that those who already have a variable rate could still enjoy another full year of a near-record low prime rate, or “maybe 2+ years if you’re lucky.”

Should the BoC be Worried About Runaway Inflation?

The Bank also touched on the strong 9.6% growth in GDP recorded in the fourth quarter, adding that it now expects Q1 GDP growth to be positive rather than the contraction originally forecast.

Indeed, strong economic growth prospects have been largely responsible for the recent run-up in bond yields, which are driving fixed rates higher. The BoC warned that CPI inflation is likely to move to the top of its 1-3% target band over the next few months, but added that the expected rise “reflects base-year effects from deep price declines in some goods and services at the outset of the crisis a year ago.”

“We expect the BoC will look through a largely energy-driven increase in headline inflation in Q2, but note that risks are tilted to the upside as the economy re-opens with the potential for demand to outpace supply in some sectors,” writes Josh Nye of RBC Economics. “Our base case, though, assumes headline inflation will slip back below 2% by the end of this year and that underlying inflation won’t be sustained at the BoC’s 2% target until 2022.”

TD senior economist Sri Thanabalasingam said there are two reasons why inflationary pressures haven’t yet forced the Bank to revisit its level of monetary support through QE.

“One, a more resilient Canadian economy implies less scarring from the pandemic, which suggests growth can be stronger without becoming inflationary. This offers room for the Bank to maintain monetary stimulus at its current level,” Thanabalasingam wrote.

“Two, even while some areas of the economy are outperforming, others are struggling. Over 500,000 workers have been unemployed for 27 weeks or more, and until these Canadians find new opportunities, inflationary pressures are likely to be modest.”


Steve Huebl  

March 10, 2021


Bond Yields Surge, Mortgage Rates Rising in Response

General Gabriel Da Silva 23 Feb


Canadian bond yields hit their highest level since April in recent days, and a number of lenders have responded by starting to raise some of their mortgage rates.

CMLS, MCAP and First National were among the non-bank lenders to increase at least some of their rates, with their broker rates rising 10-30 bps.

The 5-year bond yield, which leads fixed mortgage rates, closed at 0.67% on Monday, a 10-month high. As funding costs rise, lender margins get squeezed to the point they can no longer absorb the increase without passing it on to borrowers.

What’s Driving Yields Higher?

There are a number of domestic factors contributing to the run-up in bond yields, but much of the impact is coming from south of the border, according to Dave Larock of Integrated Mortgage Planners.

“The current surge in bond yields is really a U.S. story, with GoC bond yields taken along for the ride…” he writes. “Simply put, the recent run-up is a response to the growing consensus belief that U.S. inflationary pressures will rise more quickly than previously expected.”

North of the border, sentiment is largely positive on the expectation that COVID-19 vaccines will finally spell the end of the pandemic and its restrictive lockdown measures. Not to mention, the economic impact of the Government of Canada’s own proposed $100 billion of post-pandemic stimulus spending.

Will Mortgage Rates Continue to Rise?

Nothing is certain, of course. Bond yields also jumped back in November 2020 on news of Pfizer’s COVID-19 vaccine proving effective in trials, which caused some at the time to suggest rates would start rising. Instead, they continued to fall, right up until last week.

“For my part, I continue to believe that the current run-up in bond yields will be temporary, and it is worth remembering that nothing goes up or down in a straight line,” Larock wrote. But he also acknowledged rates won’t remain low indefinitely.

“The only thing that has been holding lenders back is stiff competitionno one wants to be the first to move higher,” he said. “Regardless, the dam will break very soon.”

Rob McLister, founder of and mortgage editor at RATESDOTCA, sees this rise in yields as more sustained, saying mortgage rates have “turned the corner.”

“Expect further hikes,” he wrote, noting that bond yields have soared roughly 30 bps since February 1. “There’s still no sign of increases from the big guns (major banks), but if this yield climb persists, it’s just a matter of time [that they will follow].”

How Should Mortgage Shoppers Respond?

For those with a mortgage closing in the next few months and who are considering a fixed mortgage, the experts offer two words of advice: lock in.

“It’s rate-hold time if you’re closing a mortgage between now and the end of June (since most rate guarantees last only 120 days or less),” McLister said.

“Some lenders will milk their current low rates for all they’re worth in order to keep the volume flowing…But don’t bet on that lasting long…unless there’s a further derailment of our economy, which is possible, but less probable the further we get into 2021.”

For those leaning towards a variable rate, those aren’t currently at imminent risk of rising, since they are priced based on prime rate, which rises or falls depending on the Bank of Canada’s overnight target rate movements.

At its last rate decision in January, the Bank of Canada said its overnight target rate of 0.25% will likely remain unchanged until 2023, providing assurances to borrowers that now is still a good time to purchase a home.

Another point to remember is that, despite any small to moderate increases in the 5-year fixed rate, Larock notes that borrowers will still have to qualify based on the government’s 4.79% mortgage stress test.

“So, an increase in real rates won’t have any impact on the amount they can actually borrow,” he wrote. “If you’re in the market for a mortgage today, the usual tips apply. If you will want a fixed rate, which is likely, lock in a pre-approval to guard against rising rate risks.”


Steve Huebl

Commercial & Leasing Lending

General Gabriel Da Silva 17 Feb



Commercial Mortgages are designed for businesses and investors who wish to purchase or refinance commercial, income producing properties and offer a flexible way to raise capital.

Some common commercial mortgage products provide funding for:

  • Income properties
  • Multi-residential properties
  • Bridge financing
  • Restaurants
  • Industrial properties
  • Office properties
  • Self storage
  • Retail malls
  • Raw land financing
  • Start ups financing
  • Debt consolidation

Benefits of using a Leasing Professional

A Dominion Lending Centres leasing professional can help you in discovering multiple ways to structure lease financing for new equipment, a sale-lease back to extract capital from existing assets, or solve other equipment acquisition opportunities. Many of our lease professionals are also mortgage brokers who can use commercial and residential mortgage and property credit-line products alone or in combination with lease-financing to help you achieve the best solution for equipment acquisition.

Benefits of using Dominion Lending Centres Leasing

As a franchise organization with local ownership of our street-front locations, you get a committed local-office presence with a team that understands your market, is in your time-zone, and has community-involvement and knowledge. Our national credit office offers the best tools, underwriting centre, and efficiency in the leasing business today.

With leading funding resources, we provide the best opportunity for approvals with the lowest monthly payments.

Why rely on only one or two lease-sources when you can have over 30 specialty lease-funding sources in Canada and the United States.

Creative and flexible, Dominion Lending Centres Leasing can break up large-dollar transactions into multiple leases across a number of funders to ease and simplify the approval process.

Exposure limits are not an issue as we simply move the lessee to additional funding resources when exposure-limits are imposed by each funding source.

Dominion Lending Centres Leasing provides a broad range of auto & equipment leasing programs which dramatically increases our capabilities at solving the most challenging equipment acquisition challenges.


What’s happened in 2021 so far?

General Gabriel Da Silva 27 Jan





It has been a newsworthy few weeks to start off the year and for all us wishfully thinking that we would ease into 2021, I think we can admit that we were mistaken. Fortunately, hockey is back and better than ever with an all Canadian division and re-established rivalries. Virtual lines are being drawn in the sand all across the country.

Rates and Curves

As we approach the conclusion of the second trading week of the year, the 5-year GOC and 10-year GOC currently stand at 0.44% and 0.83% respectively. The 5-year is up 7 bps in 2021 and 10-year is up 18 bps in 2021.

The idea of additional fiscal stimulus with the continuation of monetary policy has given this bond market selloff some serious momentum over the last few weeks. Although the outlook for near-term growth is dismal due to renewed lock downs in Ontario and Quebec, investors seem to be overlooking this fact and focusing in on vaccine distributions, economic growth and future inflation above what was previously expected.

Over to the credit curve, the 5-year CMB’s are currently yielding 0.70% and the 10-year is at 1.19%. Interestingly, spreads on the 5-year are down 3 bps from the start of the year over the risk-free Government of Canada bond while the bond yield is up 3 bps. A similar story with 10-year CMB’s as well – the bond us up 11 bps in 2021 while spreads are down 6 bps. This points to the demand and quality of CMB’s while overall yields on Government of Canada bonds continue to increase.

Canada Housing Trust (CHT) Issuance Levels

In 2020, CHT completed a total of $53.0 billion in CMB issuance, their largest annual borrowing ever. This included a reintroduction of the 3-year offering for the first time since March 2009 in addition to $15.0 Billion in the 10-year issuance bucket. For reference, 10-year issuance in 2019 totaled only $8.75 Billion. Moving forward, we hope to see similar large 10-year issuance sizes in order to continue supporting our clients seeking for 10-year mortgages.

During the heat of the first COVID wave, CMB spreads unsurprisingly widened out 25-30 bps however they ended off the year 5 bps tighter on the 5-year and flat on the 10-year which speaks to the excellent credit quality of the bond and covenant. Furthermore, consistent domestic demand and strong demand from US, Asian and Middle Eastern investors continue to help the strong performance of CHT’s bond issuance offerings.

In case you missed it

  • Unemployment is slowly creeping up and now stands at 8.6% vs. 8.5% last month. Relative to the pre-pandemic peak in February 2020, Canada currently has 574K fewer jobs.
  • Two 975 NHA MBS pools launched this week. The first being issued by Merrill Lynch totaling $642MM at a spread of GOC + 33. The second issuance was by Laurentian Bank totaling $341MM at the same spread of GOC +33. Maturities on both pools were December 2025.
  • The Bank of Canada has a rate decision next week on January 20th. It is widely believed that there will be no major change in rate. Should the BoC cut rates next week, this would most likely lead to an additional steepening of the curve. Be sure to stay one step ahead by reading our First National rate announcement commentary published on the same day.


Neil Silverberg, Analyst, Capital Markets

Jan 15, 2021

Bank of Canada Still Expects No Rate Increases Until 2023

General Gabriel Da Silva 20 Jan

The Bank of Canada, this morning, released its January Monetary Policy Report (MPR), showing they expect to keep overnight interest rates at its “effective lower bound” of 0.25% until 2023 (see chart below). To reinforce this commitment and keep interest rates low across the yield curve, the Bank will continue its Quantitative Easing (QE) program–buying $4 billion of Government of Canada bonds every week until the recovery is well underway. The central bank indicated it could pare purchases once the recovery regains its footing.

According to the Bank’s press release, “The Governing Council will hold the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved. In our projection, this does not happen until into 2023.” Officials are apparently optimistic about the economy’s prospects once the vaccine is sufficiently distributed and injected. There is no indication that they are planning additional measures to ease monetary policy.

This is particularly noteworthy for two reasons: 1) some economists had been speculating that the Bank would lower the overnight rate by 10-to-15 basis points to help mitigate the impact of continued and broadening lockdowns; and, 2) others thought the early development of the vaccine would trigger sufficient growth to warrant a rate hike in 2022. In the Bank’s current view, neither is likely to be the case. Why mess with a minute cut in already record-low interest rates when mortgage lending is still strong? The slow rollout of the vaccine and the mounting second wave of cases assure weak economic activity in Canada at least until the second half of this year.

As well, inflation remains surprisingly muted. In a separate release today, Stats Canada revealed that price pressures in Canada unexpectedly slowed in December as the country endured a new wave of lockdowns. After climbing to the highest since the pandemic in November, the latest reading shows price pressures are still well below the Bank of Canada’s 2% target. That’s consistent with the view from policymakers that inflation will remain subdued for some time.

The pandemic’s second wave has hit Canada very hard, and the vaccine rollout has been disappointing (see chart below). Today’s MPR predicts that the economy will contract in the first quarter of this year. Economic weakness could be exacerbated by the Canadian dollar’s strength, which moved to above 79 cents US following today’s BoC announcement. Ten-year yields edged up modestly as well.
Bottom Line

For the year as a whole, economic growth is expected to be around 4% in 2021, compared to a contraction of -5.5% last year. As the inoculated population grows, the Bank forecasts an acceleration in growth to just under 5% in 2022 and a more-normal 2.5% in 2023. According to the January MPR, “The medium-term outlook is stronger than in the October Report because of vaccines’ positive effects, greater fiscal stimulus, stronger foreign demand and higher commodity prices. Meanwhile, potential output has also been revised up, reflecting an improved projection for business investment and less scarring effects on businesses and workers. There is considerable uncertainty around the medium-term outlook for GDP and the path for potential output. Thus, while the output gap is expected to close in 2023, the timing is particularly uncertain.”

Concerning housing activity, the report said, “Demand for housing has continued to show resilience, despite increasing case numbers and tightening restrictions. Housing activity should remain elevated into the start of 2021, supported by low borrowing rates and resilient disposable incomes. Changes in homebuyers’ preferences have also played a role. For example, price growth has been strongest for single-family homes and in areas outside city centres,” shown in the chart below.


Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres



General Gabriel Da Silva 13 Jan

Bank of Montreal

Q4 net income: $1.58 million (+33% Y/Y)
Earnings per share: $2.41

  • BMO’s residential mortgage portfolio rose to $108.1 billion, up from $102 billion a year earlier.
  • The HELOC portfolio—63% of which is amortizing—rose to $35.9 billion from $33.8 billion a year ago.
  • Mortgage growth through proprietary channels, including amortizing HELOCs, was up 8% year-over-year.
  • 48% of BMO’s residential mortgage portfolio is insured, up from 42% a year ago.
  • The loan-to-value on the uninsured portfolio is 54%, down from 55% a year ago.
  • 80% of the portfolio has an effective remaining amortization of 25 years or less, up from 72% a year ago.
  • Net interest margin (NIM) in the quarter was 2.60%, down from 2.69% in Q4 2019.

Deferrals & Delinquencies

  • The 90-day delinquency rate “remains good” at 19 bps, with the loss rate for the trailing four-quarter period at 1 bp.
  • Gross impaired loans in the residential mortgage sector stood at 0.29% of the portfolio, down from 0.36% in Q3 but up from 0.28% a year ago.
  • The average credit score for clients with deferred balances is 721, and the average loan-to-value is 55%.

Source: BMO Q4 Investor Presentation

Conference Call

  • “The vast majority of what’s left on deferral is mortgages, so I don’t expect those delinquency numbers to actually change a whole lot,” said Pat Cronin, Chief Risk Officer. “I mean, we’ll watch it carefully as we go, but so far we’re seeing pretty good signs.”

Source: BMO Conference Call


Q4 net income: $1.02 billion (-15% Y/Y)
Earnings per share: $2.20

  • CIBC’s residential mortgage portfolio rose to $212 billion in Q4, up from $202 billion in Q4 2019.
  • Of the portfolio, $27 billion is from the Greater Vancouver Area (unchanged a year earlier), and $67 billion is from the Greater Toronto Area (up from $63 billion a year ago).
  • Of the uninsured portfolio, the LTV was 52%, down from 64% a year ago.
  • The bank reported $14 billion in originations in the quarter, up from $10 billion a year ago.
  • The bank’s HELOC portfolio ended the quarter at $19.5 billion, unchanged from the previous quarter and down from $21.2 billion a year ago.
  • Net interest margin in Q4 was 248 bps, down from 256 bps in Q4 2019.

Deferrals & Delinquencies

  • CIBC reported $2.7 billion worth of mortgage balances in deferral in Q4, down from $33.3 billion reported in Q3.
  • “The late-stage delinquencies of residential mortgages are down as we work with our clients who were not part of the deferral programs to bring their accounts current,” said President and CEO Victor Dodig.
  • Of the bank’s uninsured residential mortgage portfolio, 0.28% are in arrears by 90+ days, unchanged from 0.28% in Q3 and down from 0.29% in Q4 2019.
  • “Provisions were lower this quarter. However, we do expect to see impaired provisions trend higher and peak in the middle of 2021,” Dodig added.

Source: CIBC Q4 Investor Presentation

Conference Call

  • “We also continue to see positive momentum in our mortgage business in the fourth quarter with year-over-year spot balance growth of 5% and sequential growth of 2%,” said Dodig.
  • Asked about the bank’s prospects for growing its mortgage market share, Dodig said this: “You’ll recall that we said a year ago that our goal is to get our mortgage growth…performing consistently, and at the very least in line with market. If you look at our numbers quarter-over-quarter (and) sequentially over the course of the year, we are achieving that target. We expect to keep pace with the housing market as the housing market evolves and we certainly expect to keep pace with our competitors in terms of our investments and our mobile mortgage advisors and our product offering.”
  • Laura Dottori-Attanasio, Senior EVP and Chief Risk Officer, added: “…we’re very focused on the quality of our growth and the anchoring of our new clients. And so that will certainly help us on a go-forward basis…And while I tell you that we haven’t been as successful as I would have liked in terms of retaining some of our past vintage clients when they came up for renewal, I believe we’ve laid the groundwork to ensure that we get not just better retention on a go-forward basis, but better acquisition.”
  • Dottori-Attanasio acknowledged that the bank lost some market share this quarter compared to last, and is currently in sixth place in terms of market share. “What I would expect, and again, there’s movement from quarter-to-quarter, but that you will see a gradual improvement over the course of 2021,” she noted.

Source: CIBC Conference Call

National Bank of Canada

Q4 net income: $492 million (-18% Y/Y)
Earnings per share: $1.36 a share

  • The bank’s residential mortgage and HELOC portfolio rose to $76.3 billion in Q4, up from $70.4 billion a year ago.
  • The bank’s residential mortgage portfolio is 38% insured (71% in Alberta), down from 39% a year ago.
  • The average LTV on the uninsured mortgage portfolio was 58%, while the average LTV on the HELOC portfolio was 55%.
  • Quebec represented 55% of the mortgage book (unchanged from 55% from a year ago), while Ontario made up 27% (up from 26%) and Alberta 7% (down from 8%).
  • Net interest margin was 2.19% in Q4, down from 2.23% a year earlier.

Deferrals & Delinquencies

  • NBC reported $695 million in real estate secured loans (0.9% of loan balances) remaining under deferral as of Oct. 31, down from $3.7 billion in loans (5% of portfolio) as of July 31.
  • Insured mortgages represent 43% of remaining mortgages under deferral.
  • 98% of expired residential mortgage deferrals have restarted regular payments.

Source: National Bank Q4 Investor Presentation

Conference Call

  • “On the outlook, I would say that we’ve been successful at growing our balance sheet, while being disciplined on pricing and we will maintain that,” said Lucie Blanchet, EVP, Personal Banking and Marketing. “We will also continue to evolve our pricing methodology. Like for example, we introduced AI based modelling in the pricing of the mortgages. So we will continue to refine that and evolve that to other products.”
  • “…we had an excellent execution on mortgages in 2020. So, we had originations hit historical levels coming from the performance of our distribution channel and we’ve been able to improve the margins,” Blanchet added. “And at the same time, we absorbed more volume while decreasing our operational costs. So we really start 2021 with that strong momentum.”
  • Looking ahead, Blanchet said this: “We expect we will grow slightly lower than what we’ve achieved in 2020. And I think demand will still continue to be stimulated. However, we expect some slowdown in the resale market due to the slowdown in immigration, but also the concern around the supply potentially across the country.“

Source: NBC Conference Call

Royal Bank of Canada

Q4 net income: $3.24 billion (+1% Y/Y)
Earnings per share: $2.23

  • RBC’s residential mortgage portfolio rose this quarter to $293 billion, up 10.6% from $265 billion a year ago.
  • Mortgage volume was up 11% year-over-year.
  • The bank’s HELOC portfolio fell 5.4% to $78 billion from $81 billion a year ago.
  • 67% of its mortgages are uninsured, up from 65% a year ago. The average LTV on the uninsured portion is 51%, unchanged from 51% a year ago.
  • 90+ day delinquencies in the overall residential mortgage portfolio fell to 0.16% from 0.19% a year ago.
  • The bank’s uninsured mortgage portfolio has an average FICO score of greater than 804, up from 797 in Q4 2019.
  • Net interest margin was 2.56%, down from 2.76% in Q4 2019 “due largely to lower interest rates.”

Mortgage Deferrals & Delinquencies

  • As of Q4, $6.3 billion worth of loans were still being deferred, down from 84% from $39 billion in Q3.
  • RBC said it expected about 76% of its active deferral balances to roll off their payment arrangement by Dec. 31, 2020, “with a majority of the remainder to roll off by March 2021.”
  • “Of (RBC’s) active deferrals, less than 2% of the balances are uninsured with a current LTV greater than 80%. And the majority of those balances are in Alberta, which has seen a decline in home prices over the last few years,” said President and CEO Dave McKay. “While we do anticipate retail delinquencies to rise over the coming quarters as all deferrals roll off, at present delinquencies remain lower than our normal rate.“
  • RBC noted that approximately 2% of its deferrals have become delinquent, although a third were already delinquent prior to the deferral program. “This has resulted in a slight uptick in early stage delinquencies from the Q3 lows, said Graeme Hepworth, RBC’s chief risk officer.

Source: RBC Q4 Investor Presentation

Conference Call

  • “We continue to gain market share through our 750 strong mortgage specialists driving more new originations and an overall focus on client loyalty where we are seeing retention rates at nearly 92%,” said McKay. “While low interest rates will continue to support buyers, we expect mortgage growth to slow going forward as pent-up housing demand begins to cool.“
  • “In terms of specifically the mortgage business…we are pleased with our performance in 2020 despite kind of the extreme slowdown as the pandemic hit, we did really slingshot out of that and compete well, said Neil McLaughlin, Group Head, Personal and Commercial Banking.
  • Asked about the bank’s aggressive growth in recent years and prospects for continued market share growth going forward, McLaughlin said RBC is well-positioned to continue its momentum thanks to two key factors: “One, we have consistently grown our distribution capability. So we are looking for quality mortgage specialists. We set a really high bar. We don’t sort of staff up and then staff down. We are sort of always kind of growing that sales force. And we have over 1,700 mortgage specialists that are out connecting with clients.”
  • He continued: “The second piece in terms of really driving the growth and the market share is…We have really gone through and often felt we have optimized each part of that business. So from lead generation, lead conversion, how we get through adjudication, right through the fulfillment, we feel we started the year really firing on all cylinders and I think we are really well-positioned to come out of the pandemic and compete well. So that, and then I think good representation with our sales capability in the markets that are really growing in Ontario, B.C. and Quebec, where you are seeing the largest growth. So that’s what I really think is the sort of the fundamentals of our success.”

Source: RBC Conference Call


Q4 net income: $1.9 billion (+18% Y/Y)
Earnings per share: $1.45

  • The total portfolio of residential retail mortgages rose to $245 billion in Q4, up from $227 billion in Q4 2019.
  • Mortgage volume was up 6% year-over-year.
  • Net interest margin fell to 2.26%, down 15 bps from Q4 2019.
  • Scotia noted it added 300 sales professionals to Canadian Banking in advisory, mortgage and commercial to “increase customer service and cross-sell.”

Deferrals & Delinquencies

  • Mortgage loans that were 90+ days past due fell to 0.15% from 0.20% a year ago.
  • Scotia reported that just $3 billion in retail loans remains on its deferral balance as of Q1 2021, a decline of 96% from a peak of $74.3 billion in Q2.
  • “Our deferral exposure is skewed towards secured mortgage lending with low LTV,” said Chief Risk Officer Daniel Moore.
  • “We see strong deferral payment trends. We’re adequately provided to absorb net write-offs for the second half of 2021,” Moore added. “And we’re seeing our customers return to current status in line with or better than our expectations.”

Source: Scotiabank Q4 Investor Presentation

Conference Call

  • “The high levels of payment activity we saw in Q3 continued into Q4 as more customer assistance programs expired. 97% of our retail customers remain current in Canada,” said Moore.

Source: Scotiabank Conference Call

TD Bank

Q4 net income: $5.1 billion (+76% Y/Y)
Earnings per share: $1.60

  • TD’s residential mortgage portfolio was $211.7 billion in Q4, up from $200 billion in Q4 2019.
  • The bank’s HELOC portfolio rose to $94.5 billion from $91 billion a year ago.
  • TD’s residential real estate secured lending portfolio is 73% uninsured (up from 69% a year ago) with a 53% LTV for the uninsured portion (down from 54% in Q4 2019).
  • Net interest margin in the bank’s retail portfolio fell to 2.71% in Q4, down 25 bps from a year ago.
  • 52% of the bank’s residential mortgage portfolio is in Ontario (down from 51% a year ago), followed by B.C. at 19%, the Prairies at 17%, Quebec at 9% and just 3% in Atlantic Canada.

Deferrals & Delinquencies

  • Provisions for credit losses in Q4 were $251 million, down from $951 million in Q3 and $1.15 billion in Q2.
  • Gross impaired loans in the residential mortgage portfolio rose to 0.18%, up from 0.14% a year ago.
  • Mortgages under deferral fell by $41 billion from the previous quarter, and TD said “deferral terms have now largely expired.”

Source: TD Bank Q4 Investor Presentation

Conference Call

  • “In terms of deferral related credit impact, the significant majority of clients that have graduated from deferral programs are current with their payments,” said Chief Risk Officer Ajai Bambawale. “And graduated deferral delinquency rates are elevated relative to our broader portfolios, but remain within expectations.”

Source: TD Conference Call

Note: Transcripts are provided by a third party (Seeking Alpha) and their accuracy cannot be 100% assured.


Steve Huebl