BoC Cuts, Housing Market, and IWD
Bank of Canada Cuts Rates… Blame Coronavirus
Two weeks ago, an interest rate cut would have sounded like an extreme corona-measure. Well folks, it happened.
Last Wednesday, the Bank of Canada (BoC) lowered the overnight rate by 50 basis points to 1.25% amidst fear that the coronavirus will cause a global recession. This came 1 day after the U.S. Federal Reserve slashed its rate by the same margin.
Before we get you up to speed on what this all means, here’s a refresher on what the heck exactly is “the interest rate” and a basis point is:
THE INTEREST RATE (aka the overnight rate) determines the interest major banks must pay when borrowing/lending one-day funds between one another. In VERY simple terms, lower rates = cheaper cost of borrowing = more spending & economic stimulation.
A BASIS POINT is a unit that describes the percentage change in a financial instrument where 1 basis point = 1/100th of a percent. So 50 basis points = 0.5%, got it?
Generally speaking, when the central bank lowers interest rates there is an immediate positive effect on financial securities such as loans and mortgages, and people tend to feel more inclined to borrow and less inclined to save (which, in the short term, sounds like a good thing, BUTcould lead to way too much debt…)
Economists fear that a rate cut is too blunt a tool to solve the economic corona-crisis and argue that lower interest rates won’t push demand back into the aviation and tourism industries or fill in Chinese supply chain gaps. On top of this, with the overnight rate now lower, it will be more difficult to lower in the future if the economy REALLY goes to S*%t.
So, why did our central bank slash rates?
The Governor of the BoC, Stephen Poloz, addressed the topic last Thursday, stating that “declining consumer confidence [due to coronavirus] would naturally lead to reduced activity in the housing market…lower interest rates will actually help to stabilize the housing market, rather than contribute to froth.” You can read the full speech here.
The Canadian Housing Market is Heating Up….
The major implication of slashing the BoC’s interest rates Canada will soon become apparent in the Canadian housing market. Economists are speculating that increased borrowing power is the last thing Canada’s housing industry needs right now, given housing pricing and demand is already ultra-high. FYI, the amount of homes on the market in December hit a 12-year low.
A decrease in the Bank of Canada’s interest rate will result in a corresponding fall in variable and fixed mortgage prime rates provided by banks. As a result of this decrease, new borrowers will now be incentivized to purchase a house and apply for a mortgage.
The result is likely to be a rapid increase in housing demand – not ideal in already-squeezed markets like Toronto and Vancouver. In addition, some economists are predicting that depending on the trajectory of the virus’ spread, this month’s rate cut could be followed by more Coronavirus related cuts in the future, furthering an already bullish real estate market.
What does this mean for Canadians? Well, if you’re a homeowner, this is good news for you. The price of your house is likely to go up this spring as competition among buyers intensifies. If you are a potential home buyer, expect bidding wars.
It (was) International Women’s Day, Btches
As you may have seen on your Insta feeds this weekend, March 8th was International Women’s Day (IWD), which has been observed since 1908. Economically speaking, we still have a ways to go in terms of equality, right here in Canada.
Here are (just some of) the battles we’re still fighting:
Gender Wage Gap:
Yup, folks, the gender wage gap still persists in Canada – even despite some great progress. In 2018, men had an average wage of $31.05 per hour while women made $26.92 an hour.
The gender wage gap also varies by race and ethnicity. Non-minority women made 92 cents more than visible minority women, and visible minority men made on average 72 cents more than visible minority women.
Women in Trades
Only 3 percent of the 934 000 people working in the industrial, electrical and construction trades in Canada are women. 1 in 10 apprentices are women. Significant barriers to entry into the trades for women range from a culture unwelcoming to women, a lack of female role models,and not being able to find well-fitting work apparel (which poses a safety risk).
Women in Leadership Roles
Female representation in professional leadership roles is still a work in progress. Women only account for 25% of vice president positions and 15% of CEO positions in Canada. Of the top 500 companies in Canada, 109 companies had no women on their board of directors. Women are still less likely to be promoted over their male peers to managerial roles, and this is especially true for women of colour.
On the positive side, many corporations have used IWD as a conversation starter or an opportunity to raise funds for women’s advancement. On the other hand, many more have used IWD as a meaningless marketing ploy (at best), or an opportunity to whitewash previous anti-women corporate policy (at worst).
While the authenticity of corporate engagement with IWD is debatable, we’ve highlighted some notable corporate campaigns from IWD 2020 below:
Proctor & Gamble is teaming up with TIME Magazine to name 100 Women of the Year. TIME famously names one person a year to be recognized and since its inception in 1927, and has only chosen four women to have standalone features, the most recent being Greta Thunberg in 2019.
Knix, a Canadian intimates company celebrated for their inclusive product line and advertisements has made headlines again for their latest commercial Age Doesn’t Matter. A range of women in age, body shape, and race are captured confidently dancing in their bra/underwear sets. Portraying women’s bodies at all stages of life unfiltered is a major step towards normalizing unsexualized female bodies in the media.
Canadian fashion brand Aritzia is donating 5% of sales on March 8th to charities that support women. Organizations like the YWCA, The Shoebox Project, and the Minerva Project are a few of the lucky recipients.