Mortgage rates continue to operate in a fairly narrow range but we are moving in the same direction within that range so far this month. At the end of last week, rates rose on the back of strong job creation announced on Friday. This week has been comparatively less volatile, but rates remained under pressure to move higher today after the Bank of Canada (BOC) announced a rate hike.
What does BOC have to do with anything? After all, I’m usually the first person to tell you that the central bank doesn’t care about raising rates as long as mortgage rates actually happen. And that’s before we even consider that Canadian economic and monetary developments traditionally don’t matter much to the US rates market.
But in this case, the market was almost 50/50 on whether the BOC would rise, so the market could not have been in a rise or fall position. The hike offered a proof of concept of sorts that a central bank can and will err on the side of higher rates in order to fight inflation. This concept could be applied when the Fed unveils the latest policy announcement next Wednesday on how to structure our own position in the US.
Most lenders raised rates in the middle of the day in response to market volatility due to the BOC announcement. We’ll have to wait until next Wednesday to hear from the Fed and next Tuesday to see the Consumer Price Index (CPI) – the only data that has a real chance of changing the Fed’s rate decision.