MLN NewsStream

Two-year bond traders are going all-in on rate-cut bets. Exhibit A is the following chart. It shows Canada's 2-year yield, a leading indicator for BoC rates. It just made an 8-month low on Friday after failing to rebound above its 18-month average.

To some, technical analysis might seem like financial voodoo, but history doesn't lie. When the 2-year yield undershoots its 18-month moving average without a significant bounce, that's historically been a harbinger of BoC cuts within three to twelve months.

This could be the best year for mortgage investment corporation (MIC) returns in decades, at least for some of them.

That's the outlook from the head of Canada's largest residential MIC, Will Granleese, Director and Portfolio Manager at Antrim Investments. His MIC has been around for three decades, and when asked about 2024, his reply was glowing: "I see this as a golden age for private lending."

That would strike some as unintuitive—i.e., that a MIC manager is popping champagne bottles when the housing market is supposedly heading towards recession. To get some context, we caught up with Will a few weeks ago. He served up an insider's scoop on why non-institutional mortgage lending could be this year's Cinderella finance story.

For those with a few bucks and a dream, playing Monopoly with real-life rental properties could again become a pastime in 2024/25.

To set that stage, let's start with six truths that bolster the case for rental investing:

1. Rents have soared double-digits to record highs — any higher and they'd need a space suit
2. Mortgage rates should test gravity further in 2024, with at least four BoC cuts now fully priced in
3. Lower rates stoke demand and appreciation; other things equal
4. 7-figure population growth also fuels our extreme housing demand
5. Almost no reputable economists are projecting high unemployment
6. Despite government incentives, it may be years before builders are willing and able to build fast enough.

Knowing the above, countless potential property investors wonder if they should take the plunge and buy before the crowd. They know what prices can do when rates dive in a tight real estate market. And they know that the best way to build wealth in a country where ¾ of us say we're overtaxed is to amass tax-efficient capital gains.

So with that, let's unwrap this mystery box of a question, and sprinkle in some investing best practices while we're at it.

In the last three months of 2023, the 4-year swap rate—a leading indicator of fixed mortgage pricing—plunged 125 bps. The descent trimmed down fixed rates by about 60 bps.

For the average Joe/Josephine getting a new $300,000 mortgage, that means a cool $8,700 that they don't have to fork over in interest over the next five years. It's like finding a forgotten tax refund in your junk drawer.

Now, a 125 bps drop is no small decline, but it's a somewhat typical move when the market thinks rates have peaked. In the short term, however, some say the drop in yields was excessive, and maybe we all overdid it with the confetti and rate cut talk.

Or did we?

In 2024, the pulse of the economy might as well be taken by checking the mortgage market's blood pressure. Mortgages are that critical to Canada's outlook.

Millions of borrowers want to know what lies ahead, as do mortgage pros. But we didn't want to write some dry-as-sawdust mortgage prediction article. Luckily, when MLN needs answers, we know who to ask.

In today's bulletin, these seven industry all-stars foretell what's on the mortgage horizon for 2024, sharing essential advice in the process:

• Collin Bruce, Lead Broker of the DLC Collin Bruce Team
• Dan Eisner, CEO of True North Mortgage
• Hash Aboulhosn, President & Co-Founder of Rocket Mortgage Canada
• James Laird, Co-founder of Ratehub & Co-CEO of CanWise Financial
• Jim Tourloukis, President of Verico Advent Mortgage Services
• Ron Butler, Mortgage Broker at Butler Mortgage
• Tracy Valko, Principal Broker, Valko Financial Ltd.

This isn't your run-of-the-mill crystal ball gazing. Each of these industry moguls dropped multiple truth bombs for the year ahead. Enjoy...
​​