Is it just us or do things change so quickly that it’s hard to know what to believe? Trade wars, Brexit, Tump’s plausible re-election, geopolitical instability, climate change and finally a world wide Covid-19 epidemic as the cherry on top.

 Recession talk has been a popular topic for close to 2 years and as we all know, what goes up must come down. Yet, it has not come down. The economic expansion – be it weak – has pursued through almost every possible obstacle it has seen. Economists have scrambled to explain such low inflation for such a long period. New terms and theories such as “trickle up economics” have been used to try and explain the continued expansion of the global economy; yet, if we are now sure about one thing, it’s that nothing is certain.

 The new reality of the current global monetary system is expect the unexpected. Old concepts are slowly disintegrating and being replaced by something that no one – including all major central bankers – seem to be able to grasp coherently for the time being.

 After so many possible outcomes that could have created a recession, it is almost not surprising that what seems to have finally brought the global economy down to its knees originated in Wuhan, China. More specifically in a small outdoor market. And it has now spread across the globe scaring almost every economy and sending markets into a free fall. Let me introduce to you : Covid-19.

 So what does this mean for Canadian mortgage debt? What does it mean for your mortgage?

 The bond market has been sent spiralling downward and reached record low levels once again. This has pushed fixed rates down. Variable rates – which historically perform better than fixed rates – had been rather timid over the last 12 months. However, there is nothing like a global slowdown and low oil prices to jolt the BoC (Bank of Canada) into action. The BoC confirmed a rate cut of 0.50% this morning (March 4^th 2020) and could very possibly reduce again next April. This would have a profound impact on variable rates and once again making them possibly more interesting than a fixed rate.

 ADVISORY: all interest rate and product choices should be made on a case per case basis and not on general market behaviour. Each particular situation is unique and should not be compared to friends, families and colleagues situations at any time.

 For the time being, here is our opinion. If you are in a FIXED RATE : wait and see how the next few months will develop, do not go rush and pay a penalty to break your mortgage thinking you are going to save a fortune. Wait a few months and then contact you mortgage broker to discuss mathematically what is best for you and your financial situation.

 If you are currently in a VARIABLE RATE, congratulations! Your patience has been rewarded. Enjoy the ride on the way down and stay tuned to our market updates!

 IF YOU’RE ABOUT TO CHOOSE YOUR MORTGAGE, wait a few weeks and see how the fixed rates will react. Do not make decisions based on your Facebook feed or your best friends or colleagues opinion. As Daniel Kahneman the father of behavioural economics suggests: “Think slow”. In other words, let’s take the time to see what is happening and not rush to any quick decisions. Put simply, wait to see over the next few weeks how the fixed rates react to the BoC cut and then discuss with your mortgage broker what to do.

 We remain committed to keep you informed and stay tuned for continued updates.

 RLH