23 Jun

Canadian Inflation Rose to 3.2% in May as Core Inflation Remained Subdued

General

Posted by: Jen Lowe

Canadian Inflation Rose to 3.2% in May as Core Inflation Remained Subdued
Higher gasoline prices pushed Canadian inflation to a more than two-year high, while underlying inflation pressures showed little sign of accelerating, with core measures broadly unchanged and price gains less broad-based.

Canada’s annual inflation rate rose to 3.2% in May, Statistics Canada reported Monday, marking its highest level since December 2023. The increase exceeded economists’ expectations, with Bloomberg’s survey consensus forecasting a 3.0% gain, up from 2.8% in April. On a monthly basis, consumer prices climbed 1.0%, also coming in above forecasts.

Despite the headline surprise, measures of underlying inflation suggest price pressures remain relatively contained as the economy continues to adjust to slower population growth and the adverse effects of U.S. trade policies on exports.

Excluding food and energy, inflation accelerated to 1.6% year-over-year, while the consumer price index excluding gasoline increased 2.2%. The average of the Bank of Canada’s preferred core inflation measures—the trim and median indexes—held steady at 2.1%. However, on a three-month annualized basis, both gauges picked up sharply to 2.3%, indicating some recent firming in underlying inflation trends.

Financial markets initially interpreted the report as supportive of tighter monetary policy. The Canadian dollar strengthened briefly before reversing course, trading at US$0.7062 per Canadian dollar. Meanwhile, the two-year Government of Canada bond yield rose roughly two basis points to 2.79%. Overnight index swaps continue to price in nearly one quarter-point Bank of Canada rate increase by year-end.

The conflict in the Middle East continued to drive higher energy costs in May, with gasoline prices rising 33% from a year earlier, according to Statistics Canada. Air transportation prices also surged, increasing 7.4% after falling 1.7% in April. Airlines are experiencing higher operational costs, notably for jet fuel.

Since then, easing tensions between the United States and Iran has helped push oil prices lower, with Canadian gasoline prices retreating to their lowest levels since mid-March. If sustained, the decline should provide some relief to consumers and help moderate headline inflation in the months ahead. Earlier this month, Bank of Canada Governor Tiff Macklem said he expects inflation to remain near 3% in the near term before gradually returning to the central bank’s 2% target.

Gasoline prices increased 33.2% year-over-year in May, accelerating from a 28.6% gain in April. The escalation was largely driven by supply concerns linked to the conflict in the Middle East, particularly disruptions associated with the closure of the Strait of Hormuz. These uncertainties pushed gasoline prices higher for a third consecutive month. As a result, Canadians paid the highest prices at the pump since June 2022, when Russia’s invasion of Ukraine triggered similar supply fears and a sharp increase in global energy costs.

Four of the eight major components accelerate in May
Prices for fresh fruit rose at a faster pace year over year in May (+5.3%) compared with April (-0.5%). Berries and grapes mostly drove the acceleration. On a year-over-year basis, prices for fresh vegetables increased 9.0% in May, following a 4.1% rise in April. The upward movement was attributed to higher prices for broccoli, cauliflower, tomatoes and lettuce. Tomato prices rose 45.2% in May due to supply contractions in Mexico, stemming from poor weather and a reduction in planted acreage following the implementation of US tariffs.

On a month-over-month basis, prices for fresh vegetables rose 5.5% in May following a decline of 3.9% in April. This is the largest monthly increase in May since 2008 and is attributed to reduced supply and higher fuel costs.

Collectively, higher prices for fresh fruit and fresh vegetables contributed to an acceleration in inflation for food purchased from stores, rising 4.3% year over year in May, the 16th consecutive month it has outpaced headline inflation on a year-over-year basis. Food prices will continue to rise, reflecting a 40% increase in nitrogen fertilizer prices during the planting season.

Shelter inflation continued to moderate in May, with prices rising 1.7% year-over-year, down slightly from 1.8% in April. The homeowners’ replacement cost index fell 2.5%, marking its 13th consecutive decline. Other owned accommodation expenses, including real estate commissions, decreased 2.1% following a 2.7% drop in April. Meanwhile, mortgage interest costs edged lower, declining 0.2% year-over-year compared with a 0.1% decline in April, extending a 33-month trend of slowing mortgage cost inflation.

Rent inflation also eased modestly, rising 3.5% from a year earlier versus 3.6% in April, the slowest pace of rent growth since January 2022.

Price growth for durable goods was unchanged at 1.9% year-over-year in both April and May. A notable source of upward pressure came from computer equipment, software, and supplies, where prices rose 3.9% after declining 0.2% in April. Higher costs for key components such as random-access memory (RAM) and solid-state drives (SSDs), driven by strong demand from artificial intelligence data centres and limited production capacity, contributed to the increase.

Offsetting some of these gains, price growth slowed across several other durable goods categories. Increases were more modest for tools and household equipment (+1.1%) and passenger vehicles (+2.5%), while prices for household appliances fell 5.7% year-over-year, a steeper decline than previously recorded.

Bottom Line

Today’s inflation report reinforces our view that higher gasoline prices will temporarily boost headline inflation while further eroding household purchasing power. However, these energy-driven increases, largely tied to geopolitical tensions, are unlikely to trigger a broader surge in underlying inflation. While food and transportation continue to account for a disproportionate share of price growth, inflationary pressures across the economy are generally moderating amid a softer labour market and slowing domestic demand.

May data support our base-case scenario that the Bank of Canada will remain on hold through the remainder of 2026. Policymakers will continue to closely monitor incoming inflation data and stand ready to tighten policy if price pressures broaden and become more persistent, but for now, underlying inflation trends remain consistent with a patient, wait-and-see approach.
Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
10 Jun

Bank of Canada Holds Policy Rate Steady

General

Posted by: Jen Lowe

Bank of Canada Holds Policy Rate Steady
Today, the Bank of Canada once again held the policy rate at 2.25%. This is the bottom of the Bank’s estimate of the neutral overnight rate, where monetary policy is neither expansionary nor contractionary. With inflation hovering at 2.8% and core inflation falling to 2.0% (as of April data), the Governing Council sees the current overnight rate as appropriate, as the Bank continues to look through the inflationary impact of the war in Iran. The war is in its fourth month, and oil prices and interest rates have risen considerably as a result. The war is disrupting supply chains, weakening economic activity and pushing up inflation. At the same time, the US administration continues to propose new tariffs, and the future of CUSMA remains uncertain.

CUSMA negotiations are underway, but they are unlikely to go on beyond the July 1 mandatory date for the formal review of the pact required by the treaty. On that date, the U.S., Canada, and Mexico are each supposed to declare whether they want to renew the deal for another 16 years (out to 2036), renegotiate it, or decline to renew. The three countries are set to miss the July 1 renewal milestone, with negotiations expected to stretch on for months or potentially years. Missing the date does not kill the deal. If the three don’t agree to a full 16-year extension, the agreement stays in force and shifts into a mechanism of rolling annual reviews that can continue for up to a decade. The treaty doesn’t formally expire until July 1, 2036, unless a party withdraws entirely. US Trade Representative Jamieson Greer said that on July 1, “I don’t think we’re going to renew it outright, but we’ll engage in the separate negotiations” — explicitly signalling the date is a starting point, not a hard conclusion. Dominic LeBlanc, the minister responsible for US trade, met with Greer in Washington and afterward suggested that July 1 “shouldn’t be seen as a crucial date.” Mexican and US officials say the scope and complexity of the issues — auto rules of origin, the 50% Section 232 steel/aluminum tariffs, and other disputes — make resolution by July 1 unlikely.

While first-quarter GDP growth in Canada showed a small contraction, economic growth has been solid in the US, boosted by consumption and AI-related investment. In the euro area, growth is subdued, with higher energy prices weighing on activity. China’s economic growth continues to be supported by strong exports, while oil imports have slowed substantially. Oil demand destruction is evident as China has chosen to limit energy use and draw down inventories.

Financial conditions in Canada have eased since the April Monetary Policy Report (MPR). Global equity markets have been buoyant, and bond yields, though volatile, have generally trended higher. The Canadian dollar has weakened against the US dollar and other currencies.

Canada’s economy contracted in the final quarter of last year. It weakened a bit further in Q1, but incoming data suggest that the first-quarter figure was weighed down by the 10% surge in imports, which has already reversed in the newly released April merchandise trade data. The flash estimate for April GDP is a more solid 0.4% quarter-over-quarter level (or 1.6% at an annual rate). The central bank expects growth to rebound in Q2, but even so, the economy is expected to remain in excess supply.
As expected, Canadian CPI inflation rose to 2.8% in April. Measures of core inflation declined to about 2%, and the share of CPI components growing above 3% is close to its historical average. Food price inflation moderated but remains high, and shelter inflation continued to slow. With global oil prices still elevated—roughly $10 per barrel above our April MPR assumptions—total inflation is expected to hover around 3% in the near term before gradually easing towards 2%.

In other news, the US CPI inflation report for May was released this morning:

  • US inflation accelerated again in May as the war in Iran pushed up energy prices, outpacing wages for a second straight month. The US consumer price index climbed 4.2% from a year earlier, the most since early 2023.
  • Core CPI, which excludes food and energy, increased 0.2% from April, a touch below expectations and taking some of the sting out of the Fed debate.
  • The energy index rose 3.9% in May, accounting for over 60% of the monthly all-items increase.
  • But other categories saw slower gains or outright declines: Grocery prices rose 0.1%, while transportation services, health insurance and new vehicle prices fell.
  • The breadth of price increases also declined, providing another sign that inflation has likely peaked.
  • The S&P 500 opened lower while Treasuries and the dollar wavered on the news.

Overall, today’s US CPI report sent a clear signal that consumers are pulling back on nonessential spending, pushing back against businesses’ attempts to raise prices. This should ease fears of Fed rate hikes following the blowout May payrolls report. Bloomberg News suggests that they still expect the Fed to hold rates steady at the June 12 meeting and to cut the overnight fed funds rate by 25 basis points in the fourth quarter of this year.

Bottom Line

The Bank of Canada has shown its willingness to bolster the Canadian economy amid unprecedented trade uncertainty and a record oil price shock. Ottawa, too, has taken actions to reduce the burden of higher prices on Canadians by temporarily eliminating the excise tax on oil. PM Carney is also working to diversify Canada’s trade away from the US, a strategy that has thus far been remarkably successful. As the charts below show, Canadian export diversification is gaining momentum. In addition, goods imports are also shifting away from the US to the rest of the world.

We continue to maintain the view that the Bank of Canada will keep rates steady this year. If inflation broadens and accelerates, rate hikes are possible, but that is not our baseline forecast. The Bank of Canada will be reluctant to tighten into housing market weakness. While housing activity strengthened in May, momentum is muted, and affordability improvements are likely to taper off in the coming months as trade tensions and the war keep oil prices and interest rates elevated.
Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
1 Jun

Canada’s Economy Edges Into A Technical Recession For the First Time Since 2020

General

Posted by: Jen Lowe

Canada’s Economy Edges Into A Technical Recession For the First Time Since 2020
Statistics Canada reported this morning that the Canadian economy contracted slightly, by 0.1%, at a seasonally adjusted annual rate in the first quarter (Q1) of 2026. That follows a 1% contraction in the fourth quarter, a downward revision from the previously reported 0.6% decrease.

Higher imports of goods, particularly gold, were offset by accumulations of business inventories. Decreased business and government capital investment was offset by higher household spending, as final domestic demand edged down 0.1%.

On a per capita basis, real GDP increased 0.2% in the first quarter of 2026, as the population declined for a second consecutive quarter and GDP remained unchanged.

The surprise decline in the first quarter stands in contrast with forecasters’ expectations. Economists surveyed by Bloomberg were anticipating a 1.5% annualized increase in the first quarter, aligning with the Bank of Canada’s projection.

The last time Canada recorded two consecutive quarters of negative growth was in 2020 during the COVID-19 pandemic. Before that, it was in 2015 amid low oil prices.
The loonie fell to a session low after the report, trading at C$1.3822 per US dollar as of 8:58 a.m. in Ottawa. Canadian government bond yields dipped to a daily low, extending outperformance versus Treasuries, with the two-year benchmark falling 5 basis points to 2.792%.

The weaker-than-expected GDP data coincides with a looser job market, painting a softer picture of the Canadian economy as US tariffs continue to squeeze some businesses.
Bottom Line

The weaker-than-expected economic activity comes amid sustained political pressure on affordability, driven by a spike in oil prices stemming from the closure of the Strait of Hormuz following the war in Iran. With April inflation data for Canada coming in softer than expected, the Bank is likely on hold for the time being.

A flash estimate for industry-based data in April suggests the economy bounced back with 0.4% growth, driven by increases in mining, quarrying, and oil and gas extraction, as well as in manufacturing, transportation, and warehousing. That followed a 0.1% decline in March.

In direct contrast to the US, Canadian business capital investment in the first quarter posted a fifth consecutive decline, shrinking 3% on an annualized basis, driven by lower spending on engineering structures. In the US, business capital spending is booming, driven by AI-related data centre expenditures.

Business investment in residential structures fell 2.0% in Q1 of this year, following a 2.4% decline in the fourth quarter of 2025. The first-quarter decline was led by continued weakness in resale housing activity (termed “ownership transfer costs”), which fell 9.9% in the first quarter of 2026, following a 3.4% decline in 2025 overall. In the first quarter of 2026, new residential construction edged down 0.1%, led by decreased absorptions (the indicator for sales) of completed units, while work put in place for row homes and apartments increased.

Government capital investment also shrank 9.6% annualized after a sharp increase in weapons-system spending in the fourth quarter. StatCan noted that despite this decrease, the $8.3 billion outlay on weapons systems in the first quarter was still well above the average quarterly spending recorded since 1981.

Household spending increased 1.5% annualized in the first quarter, led by higher spending on financial services. However, the report noted Canadians pulled back on travel and vehicle purchases.

The household saving rate slowed to 3.5%, its lowest level since the first quarter of 2024, as spending rose faster than income.

Meanwhile, corporate income rose for a third consecutive quarter, up 1.6% on a quarterly basis, helping to explain the continued appreciation in stock markets.

Imports surged 12% on an annualized basis, reflecting gold shipments that were offset by accumulations of business inventories.

Exports fell 0.5%, led by a decline in passenger cars and light trucks, which US tariffs have battered. Meanwhile, higher shipments of crude oil and crude bitumen, as well as natural gas, offset much of that decline.

Finally domestic demand fell 0.4%, following a 2.7% increase in the previous quarter.

All in, I expect the Bank of Canada to remain on hold at the June 10th announcement meeting. Next Friday, we will see the May employment report, which is likely to remain tepid, prompting the Governing Council to hold the overnight rate steady at 2.25% for the fourth consecutive time, choosing to look through the short-term impact of higher oil prices on inflation while monitoring softer economic conditions.
Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
8 May

Weak Jobs Report in April drives Unemployment Rate Up to 6.9%

General

Posted by: Jen Lowe

Weak Jobs Report in April drives Unemployment Rate Up to 6.9%
Employment in Canada edged down by 17,700 in April, following a 14,000 gain in the prior month, missing the consensus forecast for a 15,000 increase. On a year-over-year basis, employment in April was up by 67,000 (+0.3%), but recorded a net decline of 112,000 (-0.5%) over the first four months of 2026.

The result marked a second straight month of limited movement after February’s sharp 84,000-job decline. Full-time employment fell by 47,000, while part-time positions increased by 29,000. Employment levels were broadly unchanged across the private and public sectors and among self-employed workers.

Employment varied little across major age groups in April. The unemployment rate rose among youth aged 15 to 24 to 14.3% and among core-aged men to 6.1%. Regionally, employment declined in Quebec, Newfoundland and Labrador, Saskatchewan, and New Brunswick, while Ontario added 42,000 jobs. Meanwhile, the employment rate slipped 0.1 percentage points to 60.5%.

Average hourly wages among employees were up 4.5% (+$1.64 to $37.77) on a year-over-year basis in April, following growth of 4.7% in March (not seasonally adjusted).
In April, the unemployment rate rose 0.2 percentage points to 6.9%, as more people searched for work (+51,000; +3.4%). The unemployment rate has increased 0.4 percentage points since January 2026, but remained below the recent peak of 7.1% observed in August and September of 2025. On a year-over-year basis, the unemployment rate was virtually unchanged in April 2026.

The proportion of unemployed people who had been continuously searching for work for 27 weeks or more—considered long-term unemployment—was 22.5% in April. This proportion was little changed both in the month and compared with 12 months earlier. However, it remained significantly above the pre-COVID-19 pandemic average of 17.1% observed from 2017 to 2019.

At the same time, the monthly layoff rate (0.6%) in April remained in line with the pre-pandemic average, showing no recent elevation (not seasonally adjusted).
The participation rate—the proportion of the population aged 15 and older who were employed or looking for work—rose by 0.1 percentage points to 65.0% in April as more people were in the labour force searching for work. The increase was concentrated among core-aged people, whose labour force participation rate rose 0.3 percentage points to 88.5%.

On a year-over-year basis, the overall labour force participation rate was down 0.3 percentage points in April. This largely reflected population aging, which has put downward pressure on the labour supply as more individuals have entered retirement. Among core-aged people, the labour force participation rate was up 0.3 percentage points year over year, while for youth aged 15 to 24, it was little changed.

On a month-over-month basis, employment decreases in April were concentrated in information, culture and recreation (-25,000; -2.8%), construction (-16,000; -1.0%), and in ‘other services’ (-13,000; -1.6%), an industry which includes repair and maintenance as well as personal services.

Employment change by industry, April 2026
On the other hand, employment increased in business, building and other support services (+22,000; +3.2%), health care and social assistance (+18,000; +0.6%) and in accommodation and food services (+13,000; +1.1%).

On a year-over-year basis, employment was little changed across most industries in April, with the notable exception of health care and social assistance, which was up 119,000 (+4.1%) over the period.

The cumulative decline in employment since January comes as US tariffs continue to loom over businesses and the war in Iran heightens global uncertainty, two forces expected to shape the Canadian economy this year. With the 50% rise in oil prices, demand destruction is already well underway.

Another important fundamental in the labour market is the rapid development of AI, which is already causing enormous layoffs, especially in the U.S. See the chart below.
Bottom Line

In other news, the US employment report was also released this morning, showing the strongest two-month gain since 2024.

US employers added more jobs than expected for a second month, and the unemployment rate held steady in April, indicating the labour market is holding up despite rising energy costs sparked by the war in Iran.

Nonfarm payrolls rose 115,000 last month after an even bigger surge in March, marking the strongest two-month increase since 2024, according to Bureau of Labour Statistics data out Friday. The unemployment rate was unchanged at 4.3%. The report showcases a labour market that may be gaining momentum after near-zero job growth last year. It showed hiring advanced across a variety of sectors, and follows other data indicating layoff activity remains low.

The relative weakness of the Canadian labour market will discourage the Bank of Canada from tightening monetary policy too soon. To be sure, inflation remains a risk as higher energy costs become embedded in the price of a wide array of goods and services. The Bank will be reluctant to respond with rate hikes over the next few announcement dates.

Trade negotiations will accelerate in the coming months as the future of CUSMA is determined. It is hard to imagine the Bank of Canada tightening in the face of such a weak housing market.
Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
29 Apr

Bank of Canada Holds Policy Rate Steady

General

Posted by: Jen Lowe

Bank of Canada Holds Policy Rate Steady
Today, the Bank of Canada once again held the policy rate steady at 2.25%. This is the bottom of the Bank’s estimate of the neutral overnight rate, where monetary policy is neither expansionary nor contractionary. With inflation hovering at 2.4% and core inflation falling to 2.0%, the Governing Council sees the current overnight rate as appropriate, as the Bank looks through the inflationary effects of the war in Iran.

“The evolving conflict in the Middle East is causing heightened volatility, and US trade policy continues to reshape global trade patterns. Both are ongoing sources of uncertainty. The Bank’s April outlook assumes tariffs remain unchanged and the global benchmark price of oil declines to US$75 per barrel by mid 2027, still well above pre-war oil prices”. According to the BoC, if that happens, inflation should peak around 3% in April and ease back to the 2% target by early next year.

“The Iran war has led to sharply higher energy prices and transportation disruptions, diminishing growth prospects in oil-importing countries and boosting inflation worldwide. In the United States, growth is still expected to be solid over the projection horizon, boosted by AI-related investment and consumption growth. China’s economy is supported by robust exports. In the euro area, higher prices for oil and natural gas will weigh on economic activity.”

Bond yields are modestly higher since January, while equity markets, which weakened sharply at the outset of the war, have recovered. Since the start of the war, the US dollar has appreciated against most major currencies.

“The outlook for economic growth in Canada is little changed from the January Monetary Policy Report (MPR) projection. After a contraction in the fourth quarter of 2025, growth is forecast to have resumed in early 2026. Consumer and government spending are supporting economic activity, while tariffs and trade uncertainty are weighing on exports and business investment. Housing activity declined in the fourth quarter and is held back by slow population growth, economic uncertainty and ongoing affordability issues. The labour market is soft, with subdued employment growth over the past year and job losses in sectors targeted by US tariffs. The unemployment rate remains in the 6½%‑7% range, reflecting both weak hiring and fewer job seekers.”

The Bank’s April forecast projects GDP growth of 1.2% in 2026, rising to 1.6% in 2027 and 1.7% in 2028 as growth in exports and business investment resumes along a lower trajectory. With GDP growing slightly above potential, the current excess supply in the economy is gradually absorbed. While the war in Iran may alter its composition, overall GDP growth is little changed in the updated forecast: Since Canada is a large net exporter of oil, higher oil prices increase national income even as consumers are squeezed by higher gasoline prices.

The Bank’s press release goes on to say that “CPI inflation will likely rise further in April to about 3%. Based on the assumption that oil prices will ease, inflation is forecast to come down to the 2% target early next year and remain around 2% over the projection horizon.

Against this backdrop and taking into account the current projection, Governing Council decided to maintain the policy rate at 2.25%. We are closely monitoring the impact of the conflict in the Middle East and the economy’s response to US tariffs and trade policy uncertainty. Governing Council is looking through the war’s immediate impact on inflation, but will not let higher energy prices become persistent inflation. As the outlook evolves, we stand ready to respond as needed. The Bank is committed to maintaining Canadians’ confidence in price stability through this period of global upheaval.”

WTI crude oil futures jumped more than 5% to above $105 per barrel on Wednesday, amid no signs of a near-term end to the conflict with Iran or the reopening of the Strait of Hormuz. The surge comes as markets weigh the United Arab Emirates’ shock exit from OPEC alongside signs that the conflict involving Iran may persist. Reports that Donald Trump is preparing to extend a blockade on Iranian ports have heightened fears of prolonged supply disruptions, particularly through the critical Strait of Hormuz.

Negotiations remain stalled, with both sides entrenched, raising expectations that the standoff could drag on for weeks. Meanwhile, US inventory data showed sharp declines in crude and fuel stockpiles, while exports surged to record highs above 6 million barrels per day, underscoring tightening global supply. Gasoline and refined fuel prices have also spiked, amplifying inflation concerns worldwide as energy markets remain on edge.

The Canadian dollar weakened, and market-driven interest rates rose despite the Bank of Canada’s rate hold. The Fed is expected to follow suit this afternoon, maintaining its policy rate at 3.5% to 3.75%.
Bottom Line

The Bank of Canada has shown its willingness to bolster the Canadian economy amid unprecedented trade uncertainty and a record oil price shock. Ottawa, too, has taken actions to reduce the burden of higher prices on Canadians by temporarily eliminating the excise tax on oil. PM Carney is also working to diversify Canadian trade away from the US.

There will continue to be substantial frictions that limit the geographical diversification of trade sought by Ottawa. The US is Canada’s only neighbour; hence, there is a lack of alternative markets that equal the US in size and scale, and, before Trump, in shared values on free trade.

In his speech before the press conference today, Governor Tiff Macklem suggested that, “if the United States were to impose significant new trade restrictions on Canada, we may need to cut the policy rate further to support economic growth. Alternatively, if oil prices continue to increase, and particularly if they remain elevated, the risk that higher energy prices become ongoing generalized inflation increases. If this starts to happen, monetary policy will have more work to do—there may be a need for consecutive increases in the policy rate.

It is highly unlikely that the Bank of Canada would tighten monetary policy when the housing market is as depressed as it is today.
Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
17 Mar

Canada’s Annual Inflation Rate Slowed to 1.8% in February from 2.3% in January

General

Posted by: Jen Lowe

Canadian Inflation Falls More Than Expected to 1.8% in February
Canada’s inflation rate slowed by more than expected last month, before the oil shock of the Iran war. The yearly inflation rate fell to 1.8% in February from 2.3% in January, Statistics Canada reported on Monday.

Justin Trudeau introduced a temporary GST/HST break on a range of goods in January 2025, which expired in mid-Feb 2025. This raised the price level in February 2025, reducing inflation in today’s CPI reading. While the tax holiday initially drove annual headline inflation higher due to base effects, it’s now reversing and causing a deceleration that will likely be reflected in the March inflation data as well. This is very good news for the markets, particularly if the war with Iran comes to a relatively short conclusion.
Core inflation measures also eased by more than expected in February. The consumer price index excluding food and energy rose 2%, while the central bank’s trimmed and median measures of inflation both fell to 2.3%.

Shelter prices continued to decelerate last month, and were up just 1.5% from a year ago, the slowest pace in five years amid weak housing resales and smaller rent price increases.
Prices for food — a major sore spot for Canadian consumers — also rose at a slower rate. Yearly inflation for food purchased from stores was 4.1% in February, down from 4.8% the previous month. The deceleration was led by weaker price growth for frozen or fresh beef.
Still, grocery prices are up a cumulative 30.1% over the past five years.

Meanwhile, a more modest year-over-year deceleration in gasoline prices last month helped moderate the slowdown in headline inflation, with prices at the pump down 14.2% from 16.7% in January.

Gasoline prices were up 3.6% on a monthly basis, largely driven by higher oil prices ahead of the Middle East conflict and supply disruptions in some producer countries, Statcan said. Higher oil prices from the conflict in Iran are likely to show up in next month’s CPI data.
Bottom Line

It is very good news that the inflation backdrop softened last month, before the onslaught of the Iran war and the oil price shock. Some of the weaker base effects will be evident in the March CPI data as well, mitigating the impact of soaring energy and commodity prices on next month’s headline inflation number.

The Bank of Canada and the U.S. Federal Reserve will remain on the sidelines on Wednesday as a relatively quick end to the Iran war would keep a lid on inflation. President Trump has asked NATO countries to send warships to the Middle East to help open the Strait of Hormuz. The sooner the war ends, the sooner the oil price shock will dissipate. Given the uncertainty, the central banks will do best to keep their powder dry this time around, particularly given that labour markets in both countries have weakened substantially.
Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
27 Feb

Refinancing or Switching Your Mortgage in BC: What You Should Know

General

Posted by: Jen Lowe

27 Feb

Fixer Upper or Purchase Plus Improvements Mortgage: What BC Buyers Need to Know

General

Posted by: Jen Lowe

Fixer Upper or Purchase Plus Improvements Mortgage: What BC Buyers Need to Know

By Jen Lowe – Mortgage Broker

You’ve found “the one” — a home with amazing bones in British Columbia — but it needs work. Maybe it’s cosmetic, maybe it’s structural, maybe it’s just not move-in ready.

So what are your options? Do you buy as-is and renovate later? Or can you finance the purchase and the improvements up front?

Today I’m breaking down the difference between buying a fixer-upper the traditional way versus using a Purchase Plus Improvements mortgage — and which makes sense in BC’s real estate market.

The Traditional Fixer-Upper Approach

This is the route most buyers start with:

  1. You get pre-approved for a standard mortgage

  2. You make an offer on the home “as is”

  3. Closing happens with a regular mortgage

  4. You renovate using personal savings, renovation loans, credit, or unsecured financing

There’s nothing wrong with this approach — and for many buyers it works fine — as long as you have the cash flow and savings to cover the updates.

But here are the downsides:

  • Renovations must be paid for after closing

  • You may need multiple sources of financing (credit cards, lines of credit, etc.)

  • You might end up paying higher interest on renovation costs

  • Budget overruns can become real stress points

For cosmetic updates (paint, flooring, minor kitchen refresh), this traditional route usually works. But what if the work is major?

What Is a Purchase Plus Improvements Mortgage?

A Purchase Plus Improvements mortgage lets you borrow money within your mortgage to cover renovations before or during the purchase.

Here’s how it works:

  • You secure financing for both the purchase price and the estimated renovation costs

  • The lender holds renovation funds in a holdback account

  • As renovation work is completed, funds are released (usually based on receipts or draws)

This means you don’t need separate financing like a personal loan or line of credit — everything is wrapped into one mortgage.

Why It Matters in BC’s Market

BC home prices — whether in Metro Vancouver, the Fraser Valley, Vancouver Island, the Interior or the North — are high. Many buyers are priced out of fully renovated homes.

But with a Purchase Plus Improvements mortgage, you can:
✔ Buy a home with great location and potential
✔ Finance needed improvements upfront
✔ Avoid high-interest consumer debt for renovations
✔ Simplify closing and renovation financing

In markets where inventory is low, this can be a game changer.

Key Differences: Traditional vs. Purchase Plus Improvements

Feature Traditional Purchase Purchase Plus Improvements
Financing purchase only ✔ ✔
Renovation funds included in mortgage ✘ ✔
One closing vs. multiple loans Multiple Single mortgage
Interest only on purchase price ✔ ✘ (interest on full amount)
Budget coordination needed Yes Integrated

What Kinds of Renovations Qualify?

Every lender has specific rules, but generally:

Acceptable renovations include:

  • Kitchen and bathroom upgrades

  • Replacing roof, windows, doors

  • Structural repairs

  • Foundation and electrical updates

  • Adding living space

Not typically funded:

  • Luxury finishes

  • Landscaping

  • Pools

  • Furnishings

The renovation has to add value to the property and make it more marketable.

How Lenders Value the Property

With Purchase Plus Improvements, lenders will underwrite based on the post-renovation value.

That means:
✔ They may ask for a contractor quote
✔ They may require a detailed renovation plan
✔ They may request an appraisal based on the future value

This is different from a traditional mortgage where lenders only see the current value.

Who It Works For in BC

A Purchase Plus Improvements mortgage can be a great fit if:

  • You’re comfortable with renovations, not just cosmetic but functional upgrades

  • You want to avoid consumer debt for renovation work

  • You have a renovation budget and contractor quotes ready

  • You want one mortgage instead of multiple debts

It’s especially useful for:

  • Buyers in competitive markets who have to compromise on condition to get in

  • Investors looking to add value

  • Families wanting to customize a home without high-interest renovation loans

What You Need to Get Started

Here’s what most lenders will ask for:

  1. Renovation Plan

    • Detailed list of work

    • Timeline and scope

  2. Quotes or Estimates

    • Quotes from contractors (three is ideal)

    • Breakdown of materials and labour

  3. Post-Renovation Value

    • An appraisal may be needed

    • Comparable homes after renovation

  4. Savings or Equity

    • Enough down payment to meet minimum requirements

    • Funds to cover unexpected overruns

The Pros and Cons: What You Should Know

Pros
✔ One source of financing
✔ Lower interest than credit cards/lines of credit
✔ Built-in plan for renovations
✔ Better control of cash flow

Cons
✘ May require more upfront documentation
✘ Renovation timeline must be realistic
✘ Funds are released in stages, not all at once

Is a Purchase Plus Improvements Mortgage Right For You?

If you’re buying a home in BC that needs significant improvements, and you want:

  • One loan instead of many

  • Better interest rate control

  • A path to increase home value on your terms

  • A lender that funds renovations responsibly

Then yes — this can be a strong solution.

But if you’re doing purely cosmetic work or have the cash to renovate without borrowing, a traditional purchase plus personal financing may still be appropriate.

Next Steps: Start With a Plan

Here’s how to move forward:

📌 Get pre-approved — know what you qualify for
📌 Create a renovation budget and contractor quotes
📌 Understand holdback requirements with your lender
📌 Build a timeline that matches the financing plan

Need Help Figuring It Out in BC?

I’m Jen Lowe, Mortgage Broker, and I help buyers across British Columbia make smart financing decisions — including whether a fixer-upper or a Purchase Plus Improvements mortgage is right for you.

Let’s look at your goals, renovation plans, and budget — and choose the smartest path to ownership.

27 Feb

The Ultimate First-Time Home Buyer’s Guide in British Columbia

General

Posted by: Jen Lowe

The Ultimate First-Time Home Buyer’s Guide in British Columbia

By Jen Lowe – Mortgage Broker

Buying your first home in BC is exciting — but if you’re staring at soaring prices, confusing programs, and mortgage math that feels like a foreign language, you are not alone. The good news? There are programs, incentives, and strategies that can make homeownership more attainable — if you know how to use them.

This guide cuts through the fluff and gets you ready to confidently navigate the process from start to finish.

Who This Guide Is For

You’re a first-time home buyer if you’ve never owned a home anywhere in the world — and in BC that matters for a few key programs. Even if you co-owned a property before, there are still paths for you.

Step 1 — Know What You Can Afford Before You Look

Before you fall in love with a house online, you need a mortgage pre-approval.

A pre-approval gets you:
✔ A realistic price range
✔ Confidence when making offers
✔ Negotiating power
✔ A locked-in rate (for a period of time)

In BC’s competitive market — especially places like Vancouver, Victoria, and Kelowna — walking into an offer without a pre-approval is a disadvantage.

Step 2 — Programs & Incentives That Help First-Time Buyers in BC

There are several government and institutional programs that make buying your first home more accessible:

🏡 1. Property Transfer Tax (PTT) Exemption

Normally, buyers in BC pay a tax on the transfer of property title. But if you’re a first-time buyer, you may be fully exempt from this tax — saving thousands of dollars upfront.

Qualifies if:
✔ You are a first-time buyer
✔ You’ve never owned property anywhere
✔ You meet residency requirements

This one can make a big difference at closing, especially on homes under $500,000.

💰 2. First-Time Home Buyer Incentive (Federal)

This program lets you share in the equity of your home with the government — lowering your mortgage amount and monthly payments.

You can receive:

  • 5% on a resale home

  • 10% on a newly built home

This is not a grant — it’s equity that must be paid back when you sell or refinance.

Good fit if:
✔ You have stable income
✔ You want lower monthly payments
✔ You want to preserve savings

🪙 3. Home Buyers’ Plan (HBP)

Already contributing to your RRSP? The HBP lets you withdraw up to $35,000 tax-free to put toward your first home — and your partner can too, for up to $70,000 combined.

Important: You must repay it back to your RRSP over 15 years.

Step 3 — Your Down Payment: The Rules & Strategy

Here’s how minimum down payment works in Canada, and it definitely applies in BC:

  • Up to $500,000 → Minimum 5% down

  • $500,001–$999,999 → 5% of first $500K + 10% of the rest

  • $1M+ → Generally 20% down is required

Even if you can buy with 5% down, bigger down payments mean:
✔ Lower monthly mortgage costs
✔ Fewer lender restrictions
✔ Better interest rates
✔ Increased approval odds

Step 4 — Build or Strengthen Your Credit

If you haven’t lived in Canada long, or you haven’t had much credit here yet, lenders will look closely at your credit score.

Here’s what builds credit:
✅ A secured credit card
✅ On-time payments
✅ A mix of credit types (over time)
✅ Lines of credit or small personal loans (used responsibly)

The stronger your credit, the better mortgage options you’ll have — plain and simple.

Step 5 — How Your Income & Debt Affect Your Mortgage

Lenders look at more than just your down payment and credit score — they calculate how much of your income goes toward:

  • Mortgage payments

  • Property taxes

  • Heating costs

  • Other debts (car loans, student loans, credit cards)

This ratio determines how big of a mortgage you can handle. Too high, and your options shrink. Too low — and you unlock more buying power.

Step 6 — Closing Costs: What You Need to Budget For

People often forget closing costs — and they matter. In BC, expect to set aside about 1.5%–4% of the purchase pricefor things like:
✔ Legal fees
✔ Title insurance
✔ Appraisal fees
✔ Home inspection
✔ Property transfer tax (if you don’t qualify for exemption)
✔ GST (on new construction)

Having a clear picture of all upfront costs prevents last-minute stress.

Step 7 — A Simple Game Plan for First-Time Buyers

Here’s a proven path that works for most first-time buyers:

  1. Meet with a mortgage broker (like me!)
    → Get pre-approved

  2. Choose a realistic price range
    → Based on your goals, not your neighbor’s

  3. Explore programs & incentives
    → Maximize what’s available to you

  4. Organize your finances
    → Down payment + closing costs

  5. Make offers with confidence
    → You’ll know what you can afford

  6. Close and move in!
    → With a plan, not surprises

Final Word

First-time home buying in British Columbia can feel overwhelming — especially with rising prices and changing interest rates — but there are real tools and programs available to help you.

The key is this:
Preparation beats panic.
Know your numbers. Know your options. And if you need guidance, reach out before you start house hunting — not after you’ve lost out on a home because you were unsure of your buying power.

Need Help Mapping Your Path?

I’m Jen Lowe, Mortgage Broker, and I specialize in helping first-time buyers in BC:
✔ Navigate programs and incentives
✔ Understand down payments and credit
✔ Get mortgage pre-approvals that position them to win

Let’s build a plan that gets you into your first home — without the guesswork.