Market watchers (and mortgage borrowers) are looking for signs that reinforce the view that the BoC will continue to raise rates - and suddenly every positive economic data point is being interpreted as further proof that more near-term rate hikes are inevitable. In today’s post I am going to put on my contrarian hat (it’s never too far from reach) and make the case that the consensus is now overestimating future path for Canadian mortgage rates.

The Bank of Canada (BoC) raised its overnight rate by 0.25% last Wednesday, as expected, and lenders wasted no time in increasing their prime rates, on which our variable-rate mortgages are priced, by the same amount. The key question now is what happens next? Should we expect more increases by the BoC at their upcoming meetings? Or will the BoC adopt a more cautious wait-and-see approach? How will our economy, with its newfound momentum still far from assured, respond?

Last week’s Canadian and U.S. employment data make it a virtual certainty that both the Bank of Canada and the U.S. Federal Reserve will raise rates this month. In today’s post I provide the highlights from the latest employment reports for both countries and discuss the implications for both our fixed and variable mortgage rates.