Mortgage market update (Aug 7, 2024)

We all continue to hear mortgage rates can only come down from here – right?  So what is happening? Well – a lot has happened in the last 10 days.  Monday Aug 5th we saw the biggest drop in the stock market in 1 day since the great recession…..the stock market lost over 2 trillion in value, but has bounced back a little today….Keep in mind – the stock market is still up this year a lot so it’s all relative. If anything this shows the volatility of any news, good or bad to markets.  Some are calling for an emergency rate cut by the US fed. – but I do not think the US fed cuts rates until the next scheduled meeting in September (and likely only by 0.25%) Wharton’s Jeremey Siegel on Monday called on the Federal Reserve to make an emergency 75 basis-points cut in the federal funds rate after Friday’s disappointing jobs report In addition, there should be “another 75 basis point cut indicated for next month at the September meeting — and that’s minimum,” Siegel, professor emeritus of finance at University of Pennsylvania’s Wharton School, said on “Squawk Box” on Monday. 1. Wharton’s Jeremy Siegel says Fed needs to make an emergency rate cut https://www.cnbc.com/2024/08/05/whartons-jeremy-siegel-says-fed-needs-to-make-an-emergency-rate-cut.html Does this impact fixed rates? – yes…sort of.  Fixed rates are based on the Bond market or Bond yields and the US 10yr treasury – so bonds are at a 12 month low – but the banks have been hesitant to drop fixed rates other than the 5yr fixed product or insured mortgages…..WHY  Well – banks prefer client lock into a 5yr term as it’s better for the bank….especially if rates are likely to drop in the near future.  We are also seeing the banks start to take away the discounting on the variable rate products….not a great sign but this means further rate drops are highly likely. We now see 5yr fixed rates in the mid 4% range….this is good news for borrowers:) – the majority of rate drops only seem to be focused on insured mortgages (likely due to new reserve requirements for the banks as well as other cost of fund requirements and less profit so far in 2024.  I do not recommend a 5yr fixed…BUT if you want a 5yr fixed just make sure its with a NON bank lender….why? – because the penalties will explode on long term fixed products as rates drop in the next 3 -12 months. **Did you know statistically four out of five Canadians move or refinance their mortgage before five years are up and therefore early discharge penalties are a crucial consideration when selecting your mortgage product** We are already seeing the banks lower the posted rates – which is another sign they want to capitalize on the penalties that will follow.

**INSURED OR INSURABLE RATES ONLY **VARIABLE WITH A DISCOUNT OF PRIME – 0.80 OR BETTER IS LOOKING VERY ATTRACTIVE RIGHT NOW FOR THOSE WHO QUALIFY As always, best to speak with a Professional and unbiased Mortgage broker to review what is most important to you in order to curate the right plan for YOU  Some additional articles this week:  1. Treasuries Surge as Traders Bet on Emergency Fed Rate Cut https://www.bnnbloomberg.ca/investing/2024/08/04/bond-traders-bet-big-on-the-fed-launching-into-rescue-mode/ 1. Global market rout may force central banks into early rate cuts https://www.politico.eu/article/global-market-central-bank-early-interest-rate-cuts/ 1. A global stock rout is deepening with investors fleeing to safe havens https://www.cnbc.com/2024/08/05/a-global-stock-rout-is-deepening-with-investors-fleeing-to-safe-havens.html James Harrison, AMP MORTGAGE BROKER

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