Trump Wins, Yields Rise - What Does It Mean for Your Investments?

I’m glad to have the opportunity to speak with you today. Back in 2019, I spoke to the Economic Club of Canada about mortgages in my previous role as a bank regulator. Five years later I’m back, talking about mortgages again, this time from the point of view of a central banker. A lot has happened over the past five years, to put it mildly: we’ve seen a global pandemic, the sharpest economic downturn in a century followed by the fastest recovery on record, and a big spike in inflation. Lately, it’s been good to see inflation return to our 2% target. Monetary policy worked: not painlessly, but it did get inflation under control without creating the sharp economic downturn that many feared. Interest rates have started to come down, and we have the prospect of further normalization ahead. And yet, for many Canadians, things don’t feel like they are back to normal. While inflation has returned to target, the cost of many necessities is higher than it was before the pandemic. Wages have also increased, but for many, incomes haven’t kept pace with prices. Housing also continues to be a big affordability challenge. This is true for people looking to buy a home, and it’s also true for renters. For those who have a mortgage, the big worry is the interest rate they’ll have to pay when they renew. There has been a lot of focus on what’s been described as the mortgage renewal wall. More than 4 million mortgages—or about 60% of all outstanding mortgages—will renew over the next two years. A big portion of these have not renewed since interest rates started rising in 2022. Even with recent declines in interest rates, most of those borrowers will likely face a significant increase in their payment. At the BanFinding balance in the mortgage market Although inflation is back to target, the cost of many goods and services remains higher than before the pandemic. Whether you rent or own, housing costs are a big part of this. For those who carry a mortgage, the elevated interest rates that were needed to cool inflation will mean increased payments when at renewal time. So, over the next two years, many Canadian households will renew their mortgage rates that are higher than their rate. The Bank of Canada is looking closely at this from two perspectives: From a monetary policy perspective, people who are spending more on shelter costs may cut back on other spending, which will slow the economy. From a financial stability perspective, higher mortgage payments could stress households and lead to greater losses for financial institutions and mortgage insurers. While we don’t expect these risks to materialize, we need to keep an eye on them. post: BOC'S SENIOR DEP. GOV. ROGERS: INTEREST RATES HAVE STARTED TO COME DOWN AND THE PROSPECT OF FURTHER NORMALIZATION IS AHEAD.