Employment numbers increased dramatically with March cranking out 82,300 jobs, surpassing economists’ expectations 8 fold. This surge of new jobs pushed down the unemployment rate to 7.2%, its lowest rate since the recession began over 3 years ago. This is obviously good news for the economy and is another clear signpost to naysayers that Canada is not only out of its recession, but bouncing back better than expected.
Any significant economic changes like this will have knock-on effects, like higher mortgage rates. This can be good or bad, depending on your perspective. A more robust economy will bring even more upward pressure on prices and will test the limits of our Central Bank’s 2% inflation target. Remember the economist’s old adage, what’s good for Main Street isn’t good for Bay Street. More jobs and prosperity will force the central bank to raise interest rates to moderate inflation and control the growth. Higher borrowing costs not only deliver a hit to highly leveraged corporations but to highly leveraged Canadians via higher variable mortgage rates.
Whether the employment gains are a blip or the beginning of a new trend remain to be seen, but break out your Boy Scout badges and get prepared. With ridiculously low 5 year fixed mortgage rates it’s a good time to lock in to a fixed mortgage rate. If you’re enjoying the benefits of a 2% variable mortgage rate, then you’re in good shape to ride things out, but if your variable mortgage rate is closer to 3% then you can guarantee your rate for the next 5 years for a slight premium. Either way, now is the time to weigh your options. Have a conversation with an accredited mortgage professional (AMP) to discover your options so you can make the best decision to meet your needs.