Canadian Inflation Falls to 1.8% y/y in December.

Positive News On The Inflation Front

The Consumer Price Index (CPI) increased by 1.8% year-over-year in December, a slight decrease from the 1.9% rise in November. The main contributors to this slowdown were food purchased from restaurants and alcoholic beverages bought from stores. Excluding food, the CPI rose by 2.1% in December.

On December 14, 2024, a temporary GST/HST exemption on certain goods was introduced. The major categories affected by this tax break included food; alcoholic beverages, tobacco products, and recreational cannabis; recreation, education, and reading materials; as well as clothing and footwear.

On a monthly basis, the CPI dropped by 0.4% in December after remaining flat in November. However, on a seasonally adjusted basis, the CPI increased by 0.2%.

Prices decline for items impacted by the GST/HST break

Approximately 10% of the all-items Consumer Price Index (CPI) basket is affected by the tax exemption.

In December, Canadians paid less for food purchased from restaurants, experiencing a year-over-year decline of 1.6%. This marked the index’s first annual decrease and the largest monthly decline of 4.5%, attributed to the GST/HST break.

On a year-over-year basis, prices for alcoholic beverages purchased from stores fell by 1.3% in December, compared to a 1.9% increase in November. Monthly prices also dropped by 4.1%, nearly tripling the previous largest monthly decline for this series, which was recorded in December 2005 at 1.4%.

The prices for toys, games (excluding video games), and hobby supplies decreased by 7.2% year-over-year in December 2024, a significant drop from the 0.6% decline in November. Additionally, the index for children’s clothing fell by 10.6% in December compared with the same month in 2023.

The shelter component of the CPI grew at a slightly slower pace in December, rising by 4.5% year-over-year, following a 4.6% increase in November. Rent prices decelerated on a year-over-year basis in December, rising by 7.1% compared to a 7.7% increase in November. Since December 2021, rent prices have increased by 22.1%.

The mortgage interest cost index continued to slow for the 16th consecutive month, reaching an 11.7% increase year-over-year in December 2024, the smallest rise since October 2022, which was at 11.4%, as interest rates continued to climb. Additionally, gasoline prices rose due to base-year effects, and consumers paid more for travel services.

The central bank’s two preferred core inflation measures stabilized, averaging 2.65% year over year in October and November. Both core inflation measures rose a solid 0.3% m/m in seasonally adjusted terms and have been up at a 3+% pace over the past three months. Excluding food and energy, the ‘old’ core measure dipped to 1.9% year over year, its first move below 2% in more than three years.

The central bank’s two preferred core inflation measures declined, averaging 2.55% y/y in December. Both core inflation measures dipped m/m in seasonally adjusted terms and are up at a 3+% pace over the past three months.

Bottom Line

The inflation report for December 2024 showed a downward distortion due to the sales tax holiday, which will also affect the data for January. However, this effect will reverse in the following months. Core inflation measures are concerning, as the three-month moving average of trimmed-mean and median inflation has risen above 3.0%.

This inflation report is sufficient for the Bank of Canada to cut the overnight rate by 25 basis points to 3.0% on January 29, the date of its next decision.

A significant question remains regarding the potential Trump tariffs, which have been postponed to allow federal agencies time to analyze the trade, border, and currency policies of China, Canada, and Mexico. Trump mentioned yesterday that a 25% tariff would be implemented by February 1. However, government agencies typically do not move that quickly. Moreover, Trump aims to maintain pressure on these countries to ensure a robust response on border control and to reduce China’s influence on manufacturing in Mexico and Canada. The new administration also wishes to prevent Mexico and Canada from selling strategically important products to China.

I believe Trump wants to renegotiate the free trade deal between the US, Canada, and Mexico. Canada has already pledged to tighten its borders and has rejected Trump’s claim that it is exporting fentanyl to the US. I do not expect 25% tariffs on Canada; even if they are imposed, there would likely be Canadian retaliation, making the tariffs short-lived. This is a significant threat. Some have suggested that tariffs would compel the Bank of Canada to increase interest rates in order to combat inflation. While inflation might initially rise due to tariffs, the long-term effects would likely include layoffs and a marked slowdown in business and consumer spending, leading to increased unemployment. The Bank of Canada’s primary concern would be recession, not inflation.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres

Strongest Canadian Employment Report In Nearly Two Years.

Stronger-Than-Expected Jobs Report in December

Today’s Labour Force Survey for December was much stronger than expected, as many thought the Canada Post strike would have a larger impact. Employment rose by 90,900 net new jobs last month, and the employment rate—the proportion of the population aged 15 and older who are employed— increased by 0.2 percentage points to 60.8%. The jobless rate declined a tick to 6.7%.

Employment gains in December were led by educational services (+17,000; +1.1%), transportation and warehousing (+17,000; +1.6%), finance, insurance, real estate, rental and leasing (+16,000; +1.1%), and health care and social assistance (+16,000; +0.5%).

In December, employment increased in Alberta (+35,000; +1.4%), Ontario (+23,000; +0.3%), British Columbia (+14,000; +0.5%), Nova Scotia (+7,400; +1.4%), and Saskatchewan (+4,000; +0.7%), while there was a decline in Manitoba (-7,200; -1.0%). Employment changed little in the other provinces.

Total hours worked rose 0.5% in December and were up 2.1% compared with 12 months earlier.

Average hourly wages among employees were up 3.8% (+$1.32 to $35.77) on a year-over-year basis in December, following growth of 4.1% in November (not seasonally adjusted).

Employment rose by 91,000 (+0.4%) in December, mostly in full-time work (+56,000; +0.3%). This follows an increase in November (+51,000) and marks the third employment gain in the past four months.

The year 2024 ended with 413,000 (+2.0%) more people working in December compared with 12 months earlier. This year-over-year growth rate was comparable to the one observed in December 2023 (+2.1%) and to the average growth rate for December over the pre-COVID-19 pandemic period of 2017 to 2019 (+1.9%).

Public sector employment rose by 40,000 (+0.9%) in December, the second consecutive monthly increase. In the 12 months to December, public sector employment rose by 156,000 (+3.7%), driven by gains in the public-sector components of educational services as well as health care and social assistance. Private sector employment was little changed in December (+27,000; +0.2%) and was up 191,000 (+1.4%) on a year-over-year basis. The number of self-employed people rose by 24,000 (+0.9%) in December, the first increase since February. This brought total gains in self-employment for the year to 64,000 (+2.4%).

Wage inflation slowed markedly in November and December, providing welcome news for the Bank of Canada. While the strength of this report has led some to speculate the central bank will ease less aggressively, we agree that jumbo rate cuts are a thing of the past. However, monetary policy is still overly restrictive, especially if the Trump tariff threats come to fruition.

We expect the BoC to take the overnight rate down from 3.25% today to 2.5% by mid-year in quarter-point increments.

Bottom Line

The Canadian Labour Force Survey is notoriously volatile. One robust report does not change the Bank of Canada’s easing plans to return interest rates to neutrality–the level at which monetary policy is neither contractionary nor expansionary. Today’s US employment report was also quite strong, reducing the unemployment rate to 4.1%. While the Fed is unlikely to cut rates when the FOMC meets again on January 29, the Bank of Canada has room to ease further. Canada’s economy is far more interest-sensitive than the US, and interest rates in Canada -though historically low compared to the US- are still overly restrictive.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres

Budgeting for the Year Ahead!

With the recent inflation and rising prices occurring across the country, it is time to take control of your finances. One of the quickest ways to understand where your money is going and where you can make changes, is to create a monthly budget. This will help you get a snapshot of your income compared to your spending, and provides an avenue to review all of your outgoing costs and helps you make changes to increase your monthly cashflow – or just feel less stressed!

Step 1: Calculate Your Income

The very first step to creating any budget is determining your income – knowing exactly how much money you bring in is important to understanding what you have available to spend. Remember to focus on NET INCOME versus gross salary, as budgeting for more than you can afford will lead to overspending.

Step 2: Track Your Spending

Once you have determined your income, you will want to take a look at your spending. Reviewing and categorizing all your monthly bills can help you breakdown exactly where your money goes and make some priorities to mark where changes can be made. To start, first list out your fixed expenses – these are things like car payments, loans, rent or mortgage costs that do not change on a monthly basis. Next, you will want to take a look at your variable expenses – things like groceries, gas, entertainment, etc. and determine your average spend. This is typically the area where people are able to cut back.

Step 3: Set Realistic Goals

Realistic goals are vital for long-lasting financial health. It is important to determine what you cannot live without and where you can cut costs or scale back on spending. Ideally, when it comes to your monthly budget, you want to consider the 50/30/20 rule, which applies the following:

• 50% of your spending is for NEEDS such as rent or mortgage payments, car payments, utilities and groceries
• 30% of your income goes to WANTS such as shopping, vacations, streaming services, etc.
• 20% of your income goes to SAVINGS OR DEBT such as emergency funds, retirement, child’s education and/or credit card payments

Step 4: Make a Plan

Once you have your goals set, you can now make a plan to tackle your financial position and ensure a healthy cashflow each month. For some, setting realistic spending limits for each category works well. For others, taking a look at the importance of their expenses and re-prioritizing can free up funds.

Step 5: Adjust Your Spending

Now that you have determined how much money you bring in per month and what you spend it on, you can take a look at adjusting your spending to ensure you remain on budget. Taking a realistic look at your wants is a great place to cut out frivolous spending beyond a reasonable amount. This is also a great time to review your fixed expenses. Perhaps you can save money by getting a better interest rate on your mortgage or changing the payment schedule for your loan. Be sure to connect with a me before making any changes to your mortgage!

Step 6: Stay on Track

Tracking your budget on a monthly basis is important to catch any changes in your spending habits. As well, it is a good idea to conduct an annual review and take into account any increase in expenses or wages that may require shifts in your overall plan.

The Government of Canada has an online budget planner tool available as well if you need further assistance! You can find it here.

Remember: A healthy budget is key to financial freedom and comfort.

Written by DLC Marketing Team

Jumbo Rate Cut by the Bank of Canada.

Bank of Canada Cuts Policy Rate By 50 BPS

After three consecutive 25 bp rate cuts, the BoC slashed the overnight rate by 50 bps this morning, bringing the policy rate down to 3.75%. The market had priced in 90% odds of a 50 bp move, where consensus coalesced. The combined slower-than-expected GDP growth and back-to-back weak inflation reports solidified the calls for a more significant move. The output gap continues to widen, countering the BoC’s forecast in July, pointing to an even more subdued inflation forecast. A 50 bp cut helps to offset that forecast miss by improving growth prospects faster. Even at 3.75%, monetary policy remains restrictive, as the chart shows below. The overnight rate is 145 bps above the September core inflation measure, and headline inflation moved below the 2% target.

We expect the policy rate to fall to 2.50% by the spring of next year. This morning’s 50 bp cut reinforces speculation of another 50 bp move in December. However, the Bank will likely need to see continued weak economic data and low inflation to prompt another big move. Wage growth remains stubbornly strong, and there might be some lingering concern about reigniting the housing market, especially with mortgage insurance rules poised to change on December 15.

However, the Bank pointed out that lower rates will trigger a rebound in the housing market. According to the Monetary Policy Report (MPR), “Resales and renovations are anticipated to recover as interest rates decline. Renovations should also be supported by a projected rise in house prices. Recent changes to government mortgage insurance rules are expected to bolster housing demand. Although population growth should ease, the level of demand is expected to remain robust and support new construction. Lower interest rates may also facilitate some increase in housing supply by easing financing costs. However, constraints on the amount of land available for new homes, zoning restrictions and a lack of skilled labour are expected to limit the pace of construction, particularly over the near term. As a result, growth in housing demand is expected to outpace increases in supply. Unlike other sectors of the economy that are experiencing excess supply, the housing market is projected to remain tight. House prices are expected to rise, but the pace of increases will likely be restrained because some home buyers will face affordability challenges”.

Effective tomorrow, the prime rate will fall to 5.95%, lowering floating-rate mortgage rates. According to Mortgage Logic News, the lowest nationally advertised 5-year fixed rate is down 10 bps this week to 4.09%.

In its policy statement, the Governing Council reduced its forecast for growth in the second half of this year to 1.75%. Third-quarter GDP growth was revised to 1.5% from 2.8% in the July MPR. Inflation has improved faster than expected, ending the year at 2.1%, with core inflation at 2.3% and falling further in 2025.

Bottom Line

Today’s action is great news for the Canadian economy and housing activity. Market participants are now expecting home resales to pick up sharply in the first quarter of next year. The coming spring housing season should be robust, boosting sales and prices.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres

Smart Ways to Cut Your Energy Costs.

In the last decade, climate change and energy efficiency have become top of mind for many Canadians. From wanting to do our part by recycling to making our home as energy efficient as possible, there are so many benefits to being environmentally and energy conscious.

If you are looking to cut costs or simply want to reduce your eco-footprint, here are some great ways to cut your energy costs:

• Get a Smart Thermostat: A pretty easy installation, a smart thermostat can help you better manage your in-home temperature. Whether you opt to install a basic programmable thermostat or try Google’s Nest, which learns from you and works to predict which temperatures you prefer and when, getting a read on your in-home temperature can help you better manage your energy usage.
• Look for Drafty Spots: When it comes to heating your home, it can quickly become a wasted effort and results in extra costs if you have drafts in your home. In addition to windows and doors, you should also seal any folding attic stairs, add a fireplace plug to seal the damper and install a dryer vent seal to reduce drafts in your laundry room.
• Swap to LEDs: Most of us are already using LED bulbs throughout our home. If you aren’t yet, now is the time to make the switch! LED bulbs use 15% less energy than an equivalent incandescent, which can save you a ton of money each month especially in larger homes.
• Turn Down Your Water Heater: While sometimes nothing beats a good scalding shower, you don’t want to be burned with a high energy bill. Did you know if you knock down that temperature gauge by just 10 degrees, you can save 3% to 5% on your bills each month!?
• Examine Your Appliances: Since 1992, ENERGY STAR® has been backing energy efficient appliances and products, helping consumers make the right choices. Some of the least green appliances in your home are your dishwasher, washing machine, dryer and refrigerator and, if you don’t currently have Energy Star certified versions of these machines, swapping to them is a surefire way to reduce your monthly expenses.
• Can’t afford new appliances? Here are some other tips and tricks to help make them more efficient in the meantime:
  • Dishwasher: Use a citric acid-based cleaner in an empty cycle to rid your dishwasher of excess soap and calcium buildup that may be causing your machine to work harder.Washing Machine: Maximize energy by stuffing your machine to the brim whenever possible as washing machines typically use the same amount of energy regardless of load size.

    Dryer: For starters, ensure you are always cleaning out your lint filter to increase air circulation. In addition, keep an eye on the outside exhaust and clean when needed to reduce drying time and save energy.

  • Refrigerator: While most of us are more concerned with the food inside our fridges than the parts, it is important to check your condenser coils. Over time, dirt, food particles and dust can collect and reduce the efficiency. Another tip is to set your refrigerator to 2-3 degrees Celsius.

• Close The Blinds: When the temperature starts heating up, it is important to close the blinds and drapes to prevent the sun from beating in and warming up your home. The excessive heat makes your air conditioner work overtime causing your energy bills to skyrocket.

In addition to the cost savings and environmental benefits of improving your energy efficiency, CMHC also has a rebate available! The CMHC Eco Plus refund can provide a 25% partial premium refund if you’re CMHC insured and buying or building an energy-efficient home! Click here for more details.

Weaker-Than-Expected August Jobs Report Raises Prospect Of Larger Rate Cuts

Statistics Canada released August employment data today, showing continued growth in excess supply in labour markets nationwide. Employment changed little last month, up 22,100. The employment rate—the proportion of the population aged 15 and older who are employed—decreased a tick to 60.8%, marking the fourth consecutive monthly decline and the 10th decline in the past 11 months. On a year-over-year basis, the employment rate was down 1.2 percentage points in August, as employment growth (+1.6%) was outpaced by growth in the working-age population (+3.5%).

Full-time jobs declined by 44,000 while part-time work increased by 66,000. This was the fourth straight month of very modest employment gains.

The Bank of Canada expressed mounting concern about the rising output gap–the difference between economic growth at full employment and the current underemployment growth of less than 2%.

The number of private sector employees rose by 38,000 (+0.3%) in August, mainly offsetting a similar-sized decrease in the previous month (-42,000; -0.3%). The increase in private-sector employment in August was the first since April. Public sector employment and self-employment both changed little in August.

Year-over-year employment growth was concentrated among core-aged (aged 25 to 54) men and women as youth unemployment surged. Young immigrants have been hardest hit.

The unemployment rate rose 0.2 percentage points to 6.6% in August after holding steady in July. It was the highest since May 2017, outside of 2020 and 2021, during the COVID-19 pandemic. The unemployment rate has generally increased since April 2023, rising 1.5 percentage points.

In August 2024, 1.5 million people were unemployed, an increase of 60,000 (+4.3%) from July and 272,000 (+22.9%) from August 2023.

Among those unemployed in July, 16.7% had transitioned to employment in August (not seasonally adjusted). This was lower than the corresponding proportion in August 2023 (23.2%), indicating that unemployed people may face more difficulties finding work.

In August, the unemployment rate rose for men aged 25 to 54 years old (+0.4 percentage points to 5.7%) and for men aged 55 and older (+0.4 percentage points to 5.5%), while it was little changed for other major demographic groups.

Although the unemployment rate was up across all age groups year-over-year in August, the increase was most significant for youth (+3.2 percentage points to 14.5% in August). The rate was up for young men (+3.8 percentage points to 16.3%) and young women (+2.6 percentage points to 12.6%).

For core-aged people, the jobless rate was up 0.9 percentage points to 5.4% on a year-over-year basis in August. Increases for this age group were observed across all levels of educational attainment. On a year-over-year basis, the unemployment rate was up in August for core-aged people with a high school diploma or less (+1.5 percentage points to 8.2%), for those with some post-secondary education below a bachelor’s degree (+0.7 percentage points to 5.5%) as well as for those with a bachelor’s degree or a higher level of education (+0.9 percentage points to 6.2%) (not seasonally adjusted).

In August, employment rose by 27,000 (+1.7%) in educational services, the first increase since January. There were 75,000 (+5.1%) more people employed in this sector than 12 months earlier.

In August, health care and social assistance employment increased by 25,000 (+0.9%). In the 12 months to August, employment gains in health care and social assistance (+157,000; +5.8%) were the largest of any sector and accounted for nearly half (49.6%) of total net employment growth.

Year-over-year employment growth in health care and social assistance was recorded in the private sector (+94,000; +8.6%) and the public sector (+77,000; +6.1%). Self-employment in health care and social assistance changed little over the period (not seasonally adjusted).

Canada’s unemployment rate has risen from 5% at the start of last year.

The youth unemployment rate continued to surge in August, rising to 14.5%, the highest since 2012 outside the pandemic.

Bottom Line

The data point to deteriorating labour demand in an economy that consistently fails to add jobs at the pace of population growth. And while there’s little evidence of widespread layoffs, the continued weakness is likely to add to disinflationary pressures, allowing the Bank of Canada to keep lowering borrowing costs at a gradual pace.

Still, the unexpected jump in the jobless rate will further fuel debate about deeper interest rate cuts. Traders in overnight index swaps boosted bets that the Bank of Canada would cut by 50 basis points at its Oct. 23 meeting. They now put those odds at around 40%, compared with about 30% the day before.

Policymakers led by Governor Tiff Macklem reduced the policy rate by 25 basis points for a third straight time on Wednesday. Officials say they’re increasingly focused on downside worries and guard against the risk that growth slows too much. Speaking to reporters, Macklem said the Governing council had discussed a scenario wherein the economy and inflation were weak enough to require a more significant than a quarter-point reduction in borrowing costs. Policymakers also reiterated they’re concerned about undershooting their 2% inflation target. “We need to increasingly guard against the risk that the economy is too weak and inflation falls too much,” the governor said.

This is the first of two job reports before the October rate decision. A Bloomberg survey found that most economists expect the bank to cut by 25 basis points at the next four meetings, bringing the policy rate to 3% by mid-2025.

The Canadian data were released simultaneously with the highly anticipated nonfarm payrolls in the US, which rose by 142,000 following downward revisions to the prior two months. Economists surveyed by Bloomberg were expecting an increase of 165,000. Treasury yields fell as markets weighed whether the weaker job gains would prompt a larger than quarter percentage point cut from the Federal Reserve when they meet again on September 18.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres

2024 Fall Market Outlook.

The initial Bank of Canada rate cuts this past summer did not spur housing activity as anticipated, but with an additional cut early September and potentially more on the way, they will continue to affect the housing market outlook.

New listing levels are expected to rise as sellers who may have held back enter the market with the hope that lower mortgage rates will attract additional buyers.

While the current Bank of Canada rate of 4.25% may still not be enough to make a dent in home affordability, it does provide a glimmer of hope for potential buyers as interest rates continue to fall.

In addition, while home prices have cooled a bit, home prices in Canada remain among the highest in the world’s most advanced economies (Japan, France, Germany, Italy, and the UK). These still -high prices have resulted in many potential first-time home buyers to withdraw for now. Higher property taxes, higher qualifying stress-test rates, and the current wave of mortgage renewals will also factor into how successful the Fall market will be.

In 2023 alone, the country saw an influx of 46% of new Canadians, which also contributes to housing demands and pricing. As rates continue to drop, the hope is that prices will stabilize owing to increased supply as demand rises.

If you are looking to get into the housing market as a buyer or seller, or simply have questions so you can best prepare yourself for a future move, don’t hesitate to reach out to me today!

Mortgage Renewal Benefits.

Is your mortgage coming up for renewal? Do you know about all the incredible options renewing your mortgage can afford you? If not, we have all the details here on how to make your mortgage renewal work for you.

Get a Better Rate

Are you aware that when you receive notice that your mortgage is coming up for renewal, this is the best time to shop around for a more favourable interest rate? At renewal time, it is easy to shop around or switch lenders for a preferable interest rate as it doesn’t break your mortgage. With interest rates expected to come down as we move into the New Year, taking some time to reach out to me and shopping the market could help save you money!

Consolidate Debt

Renewal time is also a great time to take a look at your existing debt and determine whether or not you want to consolidate it onto your mortgage. For some, this means consolidating your holiday credit card debt into your mortgage, for others it could be car loans, education, etc. Regardless of the type of debt, consolidating into your mortgage allows for one easy payment instead of juggling multiple loans. Plus, in most cases, the interest rate on your mortgage is less than you would be charged with credit card companies.

Start on that Reno

Do you have projects around the house you’ve been dying to get started on? Renewal time is a great opportunity for you to look at utilizing some of your home equity to help with home renovations so you can finally have that dream kitchen, updated bathroom, OR you can even utilize it to purchase a vacation property!

Change Your Mortgage Product

Are you not happy with your existing mortgage product? Perhaps you’re finding that your variable-rate or adjustable-rate mortgages are fluctuating too much and you want to lock in! Alternatively, maybe you want to switch to variable as interest rates start to level out. You can also utilize your renewal time to take advantage of a different payment or amortization schedule to help pay off your mortgage faster!

Change Your Lender

Not happy with your current lender? Perhaps a different bank has a lower rate or a mortgage product with terms that better suit your needs. A mortgage renewal is a great time to switch to a different bank or credit union to ensure that you are getting the value you want out of your mortgage if you are finding that your needs are not currently being met.

Regardless of how you feel about your current mortgage and what changes you may want to make, if your mortgage is coming up for renewal or is ready for renewal, please don’t hesitate to reach out to a DLC Mortgage Expert today! We’d be happy to discuss your situation and review any changes that would be beneficial for you to reach your goals; from shopping for new rates or utilizing that equity! Plus, we can help you find the best option for where you are at in your life now and help you to ensure future financial success.

Closing Costs – The Real Numbers You Need to Budget For.

Buying a home is one of the most exciting ventures in life! To ensure it goes smoothly, you need to have a proper budget in place to protect your financial security and help you make the best decision for your future location. However, the cost of the home is not the only cost that you need to budget for! The temptation will always be to start looking at the very top of your budget but fees, such as mandatory closing costs, can easily put you over the top. Knowing the real numbers will make it that much easier to stay within your budget and maintain your financial comfort.

Closing costs are a one-time fee associated with the sale of a home and are separate from the mortgage insurance and down payment. Typically, these costs range from 1.5-4% of the purchase price, depending on your location. This means, for an $800,000 home, you would be looking to budget around $22,000 on average.

Here are a few closing costs to keep an eye out for:

• Land Transfer Tax: This is calculated as a percentage of the purchase price of your home, with the amount varying in each province. Some cities, such as Toronto, also have a municipal LTT.
• Legal Fees and Disbursements: You can expect to incur a minimum of $500 (plus GST/HST) on legal fees for the preparation and recording of official documents around your purchase.
• Title Insurance: Most lenders require title insurance to protect against losses in the event of a property ownership dispute. This is purchased through your lawyer/notary and is typically $300 or more.
• PST on CMHC Insurance: Though CMHC insurance itself is financed through the mortgage, PST on the insurance is typically paid at the lawyers and sometimes deducted from your advance.
• Home Inspection Fee: A home inspection is highly recommended as a condition of your Offer to Purchase to prevent any future surprises. This can cost around $500.
• Appraisal Fee: An appraisal is performed to certify the lender of the resale value of the home in the case you default on the mortgage. The cost is usually $400 – $600 but is typically covered by the lender.
• Property Insurance: Property insurance covers the cost of replacing your home and its contents, and must be in place on closing day. This is paid in monthly or annual premiums.
• Prepaid Utility Bills: You may need to reimburse the previous owner of your property for prepaid costs such as property taxes, utilities, and so forth.
• Property Taxes: Property taxes are due on an annual basis and are calculated as a percentage of the home value and vary by municipality. You also may need to reimburse the previous property owner if he/she has already paid property taxes for the full year.

Knowledge is power and understanding the hidden costs associated with purchasing a home can help you create a realistic budget and ensure you remain within your financial means. Contact a DLC Mortgage Expert if you have any questions about your current purchase process or if you are looking to buy a new home now or in the future!

Inflation in Canada decelerated once again in July to its slowest pace in three years, assuring the central bank will cut rates for the third consecutive meeting on September 4. The US is also widely expected to begin easing monetary policy at its September confab.

The annual inflation rate in Canada fell to 2.5% in July from 2.7% in June, matching market expectations. The deceleration in headline inflation was broad-based, stemming from lower prices for travel tours, passenger vehicles and electricity. This confirmed the Bank of Canada’s expectation that inflation would fall to 2.5% in the second half of this year.

The CPI rose 0.4% in July after falling 0.1% in June. Gasoline prices increased month over month in July (+2.4%), putting upward pressure on the monthly CPI figure. The CPI rose 0.3% in July on a seasonally adjusted monthly basis.

The Bank of Canada’s preferred measures of core inflation, the trim and median core rates, exclude the more volatile price movements to assess the level of underlying inflation. The CPI trimmed edged down to 2.7% last month from 2.9% in June. The CPI median fell two ticks to 2.4%.

The central bank’s two core inflation measures decreased, averaging a 2.55% yearly pace, from a downwardly revised 2.7% a month earlier. The third chart below shows the 3- and 6-month moving averages for the average of median and trim CPI measured as an annualized percentage change. The 3- and 6-month moving averages fell in July, with the 6-month figure just above the central bank’s target of 2%.

Bottom Line

Today’s inflation reading is good news for the Bank of Canada, giving them leeway to cut interest rates next week. July marks the seventh consecutive month that the headline yearly inflation rate has been within the BoC’s target range, bringing the annual pace of price pressures back to its weakest levels since 2021.

Today’s inflation data will give the central bank confidence that the May rise in inflation was temporary. Annual inflation will reach the Bank’s 2% target by some time next year. This opens the way for the Bank to cut the overnight rate on September 4 by 25 bps to 4.25%.

In July, mortgage interest costs and rent remained the most significant contributors to the annual inflation rate change. Mortgage interest costs were up 21% in July compared with 22.3% in June, while rents rose 8.5% compared with 8.8%. Excluding shelter costs, the consumer price index rose 1.2% from a year ago versus 1.3% in June.

Labour markets have eased since the Bank’s last decision date. Canada shed 2,800 jobs in July, and the unemployment rate was steady at 6.4%, its highest level in over two years. Bank officials have expressed their concern that a further decline in the job market may delay a recovery in household spending, putting downward pressure on growth.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres