The eight mortgage rate increases this past year by the Bank of Canada were “unheard of” but the institution will be pausing rate hikes for a while, says one economic expert.
On Feb. 8 Angus Watt, Senior Wealth Advisor with National Bank Financial, Wealth Management, and CEO and Partner of the Angus Watt Advisory Group spoke to the St. Albert and District Chamber of Commerce.
The US finished 2022 with interest rates of 3.75 per cent and started the year at 1.25 per cent, with a peak of 4.3 per cent, said Watt.
“Today they're turning around 3.64 per cent,” Watt said. “So, interest rates, it was the worst year in the bond market in your bond portfolios, depending where you're looking at it, they've gone anywhere from 10 to 12 to 14 per cent. And that's if they went well,” he explained.
And when it comes to Canadian mortgage rates, the country saw a whopping eight increases through the year.
“Our mortgage market is much more focused on one-year floating rates, whereas in the United States, they've got 30-year mortgages and a lot of people take the 30-year mortgage rate, so they haven't had the same negative impact of their mortgages, as we have here in Canada.”
The good news, Watt reported, is that the Bank of Canada will be taking a pause at their current rates.
As for inflation, Watt discussed the impact on local businesses, with a focus on costs of commodities and services. Watt noted that while commodity prices go up and down, the cost of services — which include wages — should remain relatively stable.
“Last year, we were able to have wage increases in Canada in the neighbourhood of 3 to 3.5 per cent … the hardest thing [about] inflation is you cannot take back wages. So, if you give someone a raise of four or five per cent, you can’t take it back.”
The keynote also noted the importance of immigration and population size and its subsequent impact on the local economy.
Watt said that large economies such as China are now seeing a lower birth rate than ever before, but with more immigration and a stable birth rate in the province, the future looks bright for Alberta.
The myth of immigrants “taking jobs” is not accurate, Watt said, as the increase in population results in a more robust workforce.
“We're still the highest earnings on a per capita basis in the province of Alberta. So as far as wages go, were at the highest level on a per capita basis. That means for each one of us, so we can't say that immigration is causing us lower wages.”
The net population movement into Alberta hit a record high in the third quarter of 2022.
“That just illustrates how we have these jobs. We need these new Canadians, we need immigration, both internationally and nationally.”
