The Bank of Canada's Governing Council faced a divergence in opinions regarding this year's rate cuts during their deliberations before the March press release. However, the February inflation data pointed towards an imminent need for rate adjustments, given the significant slowdown in both inflation and the economy.

Despite the positive impact of a surge in new immigrants on economic activity, the outlook for consumer spending remains overshadowed by the looming wave of mortgage renewals over the next two years. Many individuals are bracing themselves for substantial monthly payment hikes, which are likely to constrain discretionary spending. Moreover, persistent high food prices continue to weigh heavily on consumers, with no significant reduction despite a decline in food inflation.

Looking ahead, a June rate cut seems inevitable, with the possibility even arising for a relaxation in monetary policy at the April 10 meeting. Optimism surrounds the upcoming spring housing season, with home prices already showing signs of an upward trajectory since February. While home sales have been lackluster, the anticipated warmer weather may prompt a surge in existing home listings, balancing the market dynamics between buyers and sellers.

First-time homebuyers, fueled by the fear of further price escalations, may seize the opportunity to enter the market. Many are considering securing two- or three-year fixed-rate mortgages to hedge against uncertainties, with a significant number having diligently saved since 2022.

Furthermore, the Alt-A market appears primed for a resurgence, with several alternative lenders boasting strong balance sheets and diversified portfolios. Talks of creating a demand for Alt-A mortgage-backed bonds are gaining traction, offering potentially high-yielding bonds with reasonable credit ratings, thanks to the diverse mortgage pool sourced from every province in Canada.

Stay tuned for more insights as we navigate the evolving economic landscape.