Uppa

Mr. Market is telling us interest rates will be higher a month from today.

The Bank of Canada sets its number on October 28th and after almost a year of holding firm, it looks like Tiff will crack. The odds are close to 70% our guys will up borrowing costs by a quarter point, with more will follow.

Why would Tiff Macklem let this happen when we’re in a big trade war with the Trumpers, when the housing market is slop, unemployment has been snaking higher, Celine Dion was exported to France and we haven’t even yet seen the Maple Leafs start to lose? I mean, sheesh.

Yes, sentiment has shifted. Gone is then gauzy belief our rates can stay benign while they rise in most of the world. Especially the States – where the Fed jumped recently and is about to do it again. Americans are now paying almost 7% for mortgage loans, which has pretty much pooched the national housing market (except in AI-crazy northern California).

For the record, home loans here are still in the 4.5% range for fixed-rate fivers. But five per cent may be a reasonable expectation by the time your pumpkin is nicely frosted. And, no, that won’t do any favours for our real estate market, either (more on that in a moment).

So, why?

Across the developed world, bond yields have been popping. Here, too. The benchmark 10-year US Treasury and our 5-year Government of Canada bonds have been climbing to multi-year highs. The thing called the ‘yield curve’ is getting steep enough for mountain goats, with long-term rates surging about short-term ones as investors demand a rate premium for holding debt well into the future. This puts big pressure on CBs to up the only rates they control – at the short end, where they immediately impact the bank prime, plus your LOC, mortgage and credit card balance.

It’s all tied to inflation, and where markets see that going – which is not down. Oil is expected to be higher for a lot longer than people believed a few months ago. Iran is a mess. Trump is a disaster. The Middle East has been upended. Global trade is seriously disrupted. Tariffs everywhere. Costs are rising. Supply chains broken. Everything costs more, and much of that is become of one single human being.

So the US Fed hiked. So did the European Central Bank. And the Japanese. Canada is coming, since the gap between our rates and those in the US is helping drive the loonie lower, which will increase the cost of imports (and inflation here).

Adding to the pressures is that little devil, AI. The hyperscaling data-centre megacorps like Amazon, Alphabet, Oracle and others are spending $1 trillion on AI infrastructure, issuing their own bonds, inflating capital markets and goosing US economic activity (all inflationary). In fact half the GDP growth in America these days is coming from this one controversial sector. It’s all exciting, until AI kills us.

Not everyone agrees the B0C will hike. CIBC and National Bank economists, for example, see another hold coming. But most are bracing for a new rate-hiking cycle, as the second half of the Trump presidency begins – with an utterly unknown outcome (but probably not pleasant).

Can Canada’s housing market recover if mortgages – that were 1.5% a little over five years ago – settle into the 5% range?

Hmm. That depends on consumer confidence, which is tied to wage gains, employment levels and a resolution to our immediate problems – like Donald Trump and Danielle Smith. We also have big votes in BC and Quebec to get through. If home loans become more expensive, this could all take longer than seemed like in July.

Meanwhile it’s interesting that a global housing analysis says Canadian markets, which were among the strongest in the world four years ago, are now among the weakest. The good news in the UBS report is that places like Toronto and Vancouver are no longer in bubble territory. In fact, by one measure, and comparted to the rest of the world, we’re getting cheaper.

Look at this:

Source: UBS

Says UBS: ““Elevated inventory, slower economic growth, inflation concerns, and the risk of further interest rate hikes continue to weigh on the near-term outlook for prices.”

So there. We’re now in a real estate slump. Screws are tightening. Everyone is depressed, waiting for worse. Prices and confidence are waning. Buyers are sheltering in place. Sellers suicidal.

Don’t you miss FOMO, 2022 and bidding wars?

About the picture: “This is my neighbour’s pet, who I get to babysit because I’m so lucky!!” writes Kim. “He’s the cutest, bravest, non-barky little play-fighter.  I love him as if he was mine.  I normally like big dogs but Macaroni stole every inch of my heart.  Thank you Garth, I’m a faithful follower for over a decade.”

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Source: https://www.greaterfool.ca/2026/09/28/uppa-3/