Daily Market Update

CIBC expects another rate cut in March despite weak loonie
A forecast from CIBC World Markets predicts that the Bank of Canada will make a further 0.25 per cent cut to interest rates in March despite the current weakness of the Canadian dollar. Chief economist Avery Shenfield says that growth will be lower than two per cent this year and sees the loonie falling to 77 cents US and not recovering too much above 80 cents US. Avery notes that there is a need to shift economic growth from housing and debt to exports in spite of the weak oil prices. He also says that the US is likely to increase its interest rates in the summer, putting additional pressure on the Canadian dollar. There is also a possibility that the BoC will take even more action later in the year. “While that second cut is priced in, markets may then guess about a third," says Avery, but with CIBC expecting a recovering oil price by the end of the year it is also forecasting a “reversal of the Bank of Canada’s rate cuts in 2016.”
Property loan with 0.50 per cent rate cut…for businesses
The Bank of Montreal has announced that it has cut 0.50 per cent off its variable rate loans to small businesses under the Canada Small Business Financing Program. Loans can be used for various business purposes, including the purchase or improvement of real estate and leases. It does not appear that the loans would be agreed for businesses that wish to start or grow a residential property portfolio, however “purchasing or improving land and buildings used for commercial purposes” is allowed, according to the BMO website.
Weak dollar will hit household budgets
Canadian households can expect higher grocery bills due to the weakened dollar. Next week the University of Guelph’s Food Institute will publish an updated edition of its 2015 Food Price Report to reflect the lower value of the loonie. Professor Sylvain Charlebois has told the Calgary Herald that prices are likely to rise sooner rather than later. He expects that items from south of the border, including many fresh fruit and vegetables, could become more expensive within weeks. Although wholesalers and grocery stores try to absorb some price increases, with the higher costs of meat in recent months they may have squeezed their margins as much as they are prepared to. Read the full story.


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  • by e. harold 2015-01-30 10:15:38 AM

    Ever wonder Who is actually causing this ??? Is it magic ? Who actually says the price will be this or that ?? Who actually says the interest goes up or down ? Where is that person ? Is it God ?? Can someone identify that person who starts this movement each time ?? Don't say ' its the market ' ! Somewhere, some human makes a move to make these crazy things happen.

  • by Nate 2015-01-30 1:18:27 PM

    It's Stephen Poloz, Governor of the Bank of Canada, who, along with a team of economists, make the decision to raise or lower the BOC rate at which money is lent to banks. They decide based on a target inflation rate of 2% within a range of 1-3%...it's called monetary policy. Read up on the hazards of deflation or high inflation if you want to know why they do this.

    Banks set their own rates based on business decisions involving a few variables -- borrowing rate from BOC, bond market yields, perceived risk in the market place, business objectives, competition from other banks etc. Banks borrow from BOC, among other places, lend out money in the mortgage market, and make money on the 'spread' between the rate they charge and the rate at which they borrow. Mortgages often are subsequently bundled and resold by lenders on financial markets as 'asset backed securities'.

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