Mortgage rates in Canada have skyrocketed over the past two years. So far, the damage to the housing market seems to have been limited. As you see from the chart below, mortgages in arrears have barely ticked up since early 2022 while the variable mortgage rate has nearly tripled. The speed and size of the variable mortgage rate increase certainly causes some alarm, however, we have heard about the impending housing market collapse for the last 30 years and, so far, all of the predictions have been wrong.

 

Source: Stephen Gordon Twitter

 

Another chart that I found interesting was the labour market slack below. The labour market slack is the unemployment rate minus the job vacancies rate. Basically, it tells us whether or not there are enough jobs for people if they want to work. If the unemployment rate is 5% and job vacancy rate is 5% then the labour market slack is 0% which would mean that there are enough jobs for anyone who wants one. As you can see from the chart below, there are still an abundance of jobs for people to take. It's hard to imagine the economy or the housing market getting too far off side in an environment where there are still lots of jobs available.

 

Source; Stephen Gordon Twitter

 

I've also included a piece from our CIBC Economics team entitled "When the Fed says jump, we say, how high?".

 

As always, if you have any questions, please feel free to give us a call at any time.

 

Have a great weekend.

 

Milan