Bank of Canada Will Not Be Happy With This Inflation Report

General Robyn McLean 19 Oct

The latest facts and insight from Dr. Sherry Cooper, Chief Economist at Dominion Lending Centres.

Bank of Canada Will Not Be Happy With This Inflation Report
Canada’s headline inflation rate ticked down slightly last month to 6.9%, but measures of core inflation remain stubbornly high, and food prices hit a 41-year high. Lower gasoline prices were primarily responsible for the decline in inflation in the past three months. Bond markets sold off on the immediate release of the data this morning, taking the 2-year yield on Government of Canada bonds to over 4%. This is the last major data release before the Bank of Canada’s policy rate announcement next Wednesday, October 26, which puts the potential for a 75-bps hike back in play. At the very least, the Bank will take the overnight rate up 50 bps to 3.75%, but I wouldn’t rule out another 75-bps move. Judging from experience, we may see a nod in that direction by Governor Macklem before the Governing Council meets.

Excluding food and energy, prices rose 5.4% year-over-year (y/y) in September, following a gain of 5.3% in August. Prices for durable goods, such as furniture and passenger vehicles, grew faster in September compared with August. In September, the Mortgage Interest Cost Index continued to put upward pressure on the all-items CPI Canadians renewed or initiated mortgages at higher interest rates.

Monthly, the CPI rose 0.1% in September. On a seasonally adjusted monthly basis, the CPI was up 0.4%.
Average hourly wages rose 5.2% on a year-over-year basis in September, meaning that, on average, prices rose faster than wages. The gap in September was larger compared with August.

In September, prices for food purchased from stores (+11.4%) grew faster year-over-year since August 1981 (+11.9%). Prices for food purchased from stores have increased faster than the all-items CPI for ten consecutive months since December 2021.

Contributing to price increases for food and beverages were unfavourable weather, higher prices for essential inputs such as fertilizer and natural gas, and geopolitical instability stemming from Russia’s invasion of Ukraine.

Food price growth remained broad-based in September. On a year-over-year basis, Canadians paid more for meat (+7.6%), dairy products (+9.7%), bakery products (+14.8%), and fresh vegetables (+11.8%), among other food items.
Bottom Line

Price pressures might have peaked, but today’s data release will not be welcome news for the Bank of Canada. There is no evidence that core inflation is moderating despite the housing and consumer spending slowdown. The average of the Bank’s favourite measure of core inflation remains stuck at 5.3%. Combined with the Governor’s recent harsh rhetoric, the high probability that the Fed will hike rates 75 bps at the next Federal Open Market Committee Meeting and the weak Canadian dollar, there is no doubt the Bank will increase their overnight policy target to at least 3.75%, and could well go the full 75 bps to 4.0% next week. I would bet that they will not quit there, with further hikes to come in December and next year by central banks worldwide.

The Government of Canada yield curve is now steeply inverted, reflecting the widely held expectation that the economy is slowing. The prime rate will increase sharply next week, increasing variable mortgage rates again. Fixed mortgage rates will rise as well, but not by as much, continuing a pattern we’ve seen since March when the Bank of Canada began the current tightening cycle. We are unlikely to see a pivot to lower rates in the next year as inflation pressures remain very sticky.
Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres

 

Protecting Yourself from Rental Scams

General Robyn McLean 17 Oct

Some great information from our friends at CMI, Canadian Mortgages Inc. 

Protecting Yourself from Rental Scams

The volume of online fraud incidents in Canada is rising quickly. In 2021, there were 67,970 reported victims who lost over $381 million dollars, according to the Canadian Anti-Fraud Centre. As of July 2022 that amount was already sitting at more than $284 million for this year.

One widely known fraud scenario is in rental scams, where someone looking to rent a home or apartment ends up giving money to a fraudster instead of a landlord, and is out both the cash and a place to live.

Spotting a rental scam

In a typical rental scam, a fraudster entices interest in a property with a highly attractive rental listing and a low price. The fraudster posts ads on popular sites like Kijiji or Facebook and uses photos to make the listing look authentic. They may pose as a landlord and claim to be unable to meet to show the place in person. After a few emails or text messages, they ask for a security deposit, followed by advance payment on future months’ rent in exchange for a discount. They often use high pressure tactics to secure the deal by saying that there is a high level of interest in the property. If the deal seems too good to be true and there is no attempt at tenant screening, alarm bells should go off.

The Canadian Anti-Fraud Centre classifies this type of scam as a merchandise or ‘non-delivery’ scam. In case after case, victims across Canada were looking to rent a home or apartment but fell victim instead. While this scam is not new, the incidence rate has increased significantly since the onset of the COVID-19 pandemic and social distancing, and further fuelled by the housing market surge of 2021. According to a recent report from Vancouver-based rental platform liv.rent, suspicious listings have tripled in the past year, and variations of the scam are emerging, as would-be renters try to protect themselves from previously known fraudulent tactics.

Steps to protecting yourself

An ounce of prevention is worth a pound of cure. Advise clients to take these steps, as recommended by Canada’s Competition Bureau, to ensure a rental listing is legitimate:

  • Go to the address and view the property yourself.
  • Use Google Maps to view the location and compare it with actual images of the rental property.
  • Research the address to ensure it is not a duplicate post.
  • Do a reverse image search to determine if the pictures used in the listing were used elsewhere.
  • Schedule a showing and meet the landlord in person.
  • If the rental is in a new development, contact the builder to confirm ownership.
  • Request and carefully review a copy of the lease.
  • Ask to speak with previous tenants.

 

Where to go for help

With all of this info at hand, your clients will be well equipped to navigate the rental market with confidence. If, despite their careful diligence, your client falls victim to a rental scam, this step-by-step resource will guide them through exactly what to do.

Whether you are conducting a vacation rental search, your university-age child is looking for a place to live away from home, or you are looking to rent while accumulating a down payment for a purchase, taking the time to follow these important steps will help to protect you and ensure a successful outcome.