Canada's central bank has its pedal to the metal on monetary easing. Its cut today was a jumbo 50 beeper, which should yank the benchmark prime rate to levels (5.95%) last seen two years ago.

The Bank's announcement reads like a doctor's note for a sick economy. The economy “continues to be in excess supply,” the “labour market remains soft,” and inflation is “now back around the 2% target." The BoC's basically writing a prescription for rate cuts while trying not to say the word "recession," like a politician avoiding the word "tax."
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Essentially, Governor Tiff Macklem's giving us all a permission slip to borrow money, noting that if all goes to plan, "we expect to reduce the policy rate further."

"...We are back to low inflation," he reassured in his press conference today. (Mind you, average core inflation is still 35 bps above target, but who are we to quibble?) "We want to see growth strengthen," he added, and typically what Macklem wants, Macklem gets.
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The economy is crawling

Growth prospects are dim this year. Capital Economics, for one, is predicting our economy will have as much excess capacity as a Weight Watchers meeting on New Year's Eve.

"The economy will remain in a position of excess supply well into 2025, which will continue to put downward pressure on inflation," the economics firm predicts. "Accordingly, it seems unlikely to us that the 50 bp cut today will be a one-off."

Economist David Rosenberg is singing a similar tune, warning not to pay too much heed to the fact that the Fed may cut slower. "The reality is that Canada is experiencing far less fiscal policy stimulus than is the case in the U.S., and the impact of the prior rate hikes is percolating with far more intensity seeing as in Canada, there is no such thing as a 30-year fixed-rate mortgage."
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Mortgage aftermath

Here are six ways today's rate nuke just changed mortgagors' lives:

Eight weeks from now, Ottawa will start letting insured first-timer buyers and insured new-build buyers stretch their payments for five more years. It's government-approved repayment procrastination designed to get buyers buying and builders off the couch and onto a construction site.

The move from 25- to 30-year insured amortizations will boost buying power 7%+ for those who qualify. Which, in Toronto or Vancouver, might get you an extra closet or that premium doorknob you've been eyeing.

Insured rule changes will also mean fatter mortgages and better volumes, precisely what lenders and originators have been waiting for. In fact, if fixed rates cooperate, Q1 could be the mortgage industry's hottest first quarter since 2021—when "transitory inflation" was still a thing.

Forget Bay Street's stuffy suits - Community Savings is the biker gang of credit unions, roaring down the mortgage highway with advertised rates that'll make a banker's toupee fly off. We're talking the likes of 3.99% on a five-year fixed.

Given its aggressive pricing, it's not surprising that Community Savings is growing at a 10% annualized clip, 2.4 times the growth rate of credit unions overall.

To see what makes it tick, we spoke with Mike Schilling, President & CEO. He touched on:

• Why/how the CU prices so aggressively
• What drives fixed and variable discounts
• The capital benefit of insured mortgages
• Regulatory capital changes in B.C.
• How credit unions like his haven't stress-tested switches for years
• The lack of sophistication in policymaking for insurable mortgages
• Pricing non-parity in his retail and broker channels
• How consolidation hurts rural mortgage customers.

The video and transcript are below...