January 31, 2025 • 15 mins
In this episode, I am back with another "Market Update" solo show, where I go over some of the latest news in mortgage tech in Canada.
In this episode I cover: → The upcoming "renewal cliff" in the Canadian mortgage market, where over 50% of mortgages will be up for renewal in the next two years, presenting both challenges and opportunities for mortgage professionals. → The $500 billion investment initiative called Stargate, led by companies like OpenAI, NVIDIA, and Oracle, aimed at developing advanced artificial intelligence (AI) and achieving Artificial General Intelligence (AGI), and what you can do to be ready for this tech. → The potential impact of a 25% tariff from the US and Canada's retaliation, which could force the Bank of Canada to raise the overnight rate by 300 basis points, or 3%.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Hey, everyone.
(00:00):
Tom here coming today with another
great episode.
This one, we are doing another
market update.
It's been a couple of weeks.
Some exciting things happening inthe market.
A lot of them are from the US, thenew administration.
There's some things happening,some good, some bad, everything in
between.
Not going to comment, try to get
too political on it.
And I don't think I do in this
episode, but more so saying, OK,what are the impacts for us in the
(00:22):
mortgage market?Canada, and there are some real
direct impacts.
You don't think so, but very
quickly it comes up and impactsthis market.
So we discuss all of that.
We discuss some other big things
happening in the mortgage marketand how you can use technology to
address these trends that arehappening.
So interesting episode for sure.
We'll see you on the other side.
Hey, everyone.
Welcome back.
Today, we're going to be doinganother market update.
(00:50):
This one is a little bit ofmortgage, a little bit more
general, what we're seeing maybeat the economy at large.
But for all these things, ofcourse, we do want to bring it
back to mortgage tech.
So we're going to do the best we
can for that.
But there's some pretty
interesting big trends going at abit more of a macro level.
And so I want to make sure Iaddress those.
Let's get right into it here.
There's three kind of big teams I
want to talk about.
(01:11):
For starters, I think this is
something that... a lot of peopleare aware of, but I think there
was a recent thing that I've seen.
The post itself is a little bit
older, but it was new to me and Iwanted to share it with you guys.
And really it's the stats behindthe renewal cliff, the renewal
wall, renewal again, and whateveryou want to call it, all the
renewals that are coming up reallyin the next, call it two years.
And really it is two years.
So the one that I saw that came
(01:32):
up, this is from Wawa.
I don't know if they have a
podcast, but they have a website,they have an Instagram account.
They have a lot of great statsthat they publish.
I think actually recently, PurePoly have referenced one of their
stats or studies that they did.
So they have really quality data
and they do a lot of good work.
And yeah, as you can see here, I
just pumped them up in terms of...
Their stats, I think it's a great,
(01:52):
in terms of information, I wish itwas a little bit more visual, we
could see it.
But what it is here is basically,
this is from Q4 last year, thestats available then.
Each column is one of the bigseven banks, which I think do 90 %
of the mortgages in Canada.
And then each row is when the
renewals are coming up in theirbook, in their portfolio.
And really the punchline is this,is that if you look at the first
three rows, for those are actuallyon the YouTube channel.
(02:14):
If you don't know our YouTubechannel, please go there, check it
out.
It's really great to see these
visuals.
If you're just listening, I'll
describe it to you.
Really what it says is over the
next two years, 25, 26, 50%, halfof all mortgages are going to be
renewing.
So yeah, it's real.
I mean, all those things thatpeople have been telling you about
is confirmed here.
The idea of this renewal cliff is
(02:34):
happening.
It is going to come quick.
And I think we got to be ready forit.
And so what does being ready forit mean?
Well, I think with this renewalcliff, there's a couple of things
to keep in mind.
First of all, a lot of borrowers
are coming up on renewal, probablystill higher rates.
So if someone's renewing from2020, for sure it's going to be a
higher rate.
From 2021, probably going to be a
higher rate.
If they took a three -year, three
(02:55):
years ago, I was one of thosepeople.
It might be a little bit more onpar, so maybe we have to worry
less about those people.
But for those people who are going
to be coming off those much lowerrates from those COVID days, for
them, I basically just say, youneed to get in front of them a lot
quicker.
It's not enough for them if they
see this big jump.
they're almost for sure going to
be rate shopping, right?They're not just going to see the
(03:16):
big jump and say, hey, I'm goingto take your word for it that this
is the market now.
They're going to validate that
assumption.
And on top of that, what's
happening is, okay, yes, they'regoing to maybe be more shoppers,
more people looking around.
And the banks are being pretty
aggressive right now.
They are going out there and they
are competing on rates.
So, you know, maybe that borrower
banks personally with RBC, they goto their local branch, they get a
great rate.
And, you know, that's a tricky
(03:38):
deal to close.
So I think you just have to be
aware of those people.
So I'd say, bringing it back to
the mortgage tech, I'd say, take alook at your database, filter for
those people who are coming up forrenewal that did get, you know,
maybe those low rates in 2020,2021, and start reaching out to
them sooner and really try anddrive the conversation away from
rate.
Obviously, rate is very important.
But really what you can do withthat is, I would say, go from
(03:59):
being just the transaction and gotowards the trusted advisor.
So don't just say, hey, this ishappening.
You have to sign some papers anddo it.
You know, be the advisor, right?Come in and say, OK, this thing's
happening.
But before you do anything, before
you sign anything, let's take astep back.
How are things going in your life?What personal goals do you have?
What's changed in the past fiveyears?
And if you can do that.
you know, you're changing the
value you provide, obviously, as abroker from just the person who
(04:22):
can get you their mortgage and therate that transaction to being
someone who helps them moreoverall.
So I'd say, yeah, bringing it backis identify those people as early
as possible, and then set up acadence, make sure you're reaching
out and providing that value.
The other thing I'd say too with
this, especially those people, ifthey are on a variable rate and
they kind of went through theirroller coaster up and down,
they're still probably a littlebit sore.
A lot of these people might besaying, hey, I did that variable
(04:44):
rate.
It really bit me last time.
I want to go to a fixed rate.
And I'm not saying that variable
or fixed one is better than theother.
I think we just have to do ourjobs as brokers and say, okay,
well, yeah, there's these twothings.
But just because you had a badexperience over the past five
years with a variable rate, yes,that was extraordinary times.
It doesn't mean that's going tohappen again.
Historically, this is how theserates have compared and just
giving the clients that educationto make the best decision
(05:05):
possible.
So those are the big trends I'm
seeing.
And I feel that now is the time to
jump on it because if you want toestablish yourself as that trusted
advisor, you can't just wait for aday before the renewal, right?
You kind of have to help them andhold their hand through that
journey.
Okay, so that's number one.
Obviously, a really importantthing and it's a trend we'll
continue to monitor.
Number two, this is where we kind
(05:26):
of maybe zoom out a little bit.
but I think it's also very
important.
This week, the Trump
administration, beside OpenAI,NVIDIA, who makes the chips for
OpenAI, Oracle, that's right,SoftBank, which is a big Japanese
investor, they've pledged thisStargate project.
I don't know if people have heardof this, but it's a pretty cool
project.
Already, they committed $100
billion across all these differentplayers, pulling that money
together.
And they say it's going to reach
$500 billion.
billion dollars over the next four
years in investment.
And really, they're just making
(05:47):
the next level AI.
And so this is really cool.
I'm sharing the OpenAI website.
They go into the details, the
people who are backing it, thetimelines.
They kind of leave it.
They say, hey, all of us look
forward to continue to build anddevelop AI.
And in particular... AGI for thebenefit of all humanity.
(06:09):
So AGI is that artificial generalintelligence, right?
The type of intelligence thatwould compete head to head with
humans in terms of their reasoningand all that.
But of course, maybe much moreknowledge and depth and obviously
resources available to them.
It's kind of that monolithic.
That's the big goal for a lot ofthese AI companies is this AGI
that can really do anything,right?
So that GB in general.
It's exciting, of course.
You know, these types of thingsare very, very exciting.
(06:33):
I think that's great to see thattype of investment.
It's great to see that people areexcited to do these things.
I mean, there's always a littlebit of fear.
And I think in maybe previousadministrations, there were some
fear and I totally understandthose.
But I think as I've talked aboutin this podcast many times, you
know, it's how you use the tools,right?
It's not the tool itself that'sgoing to be dangerous.
(06:56):
It's how you use it.
And the same applies obviously
for...
This industry, it's not that this
tool is going to come and wipe outall the jobs.
It's going to be the people whocan use these tools most
effectively will be able to taketheir business to the next level.
That's really the opportunityhere.
So really the point with this andbringing it back to the technology
is these things are happening.
They are moving.
They're moving quick.
And we're not there yet.
(07:17):
I've worked with thousands ofbrokers across Canada.
I don't know anyone who'simplemented some AI thing today
and changed the game, was able totriple their output.
That's not here yet.
Maybe it could be here in the
next, call it five years -ish.
And five years sounds like a long
time, but it's really not.
What I say now is start preparing,
right?You really got to start preparing.
You got to say, what feeds theseAI systems?
It's going to be your data.
And so that's really my call to
(07:38):
action for most people this yearis to start preparing your data.
Ask yourself, can I get a list ofall my clients?
Okay, great.
Can I get a list of all my deals?
You know, those are things,hopefully it's a quick yes.
But then start getting into it.
Can I get a list of every email
that I've ever sent all myclients?
Can I get a list of or a recordingof every single phone call I've
(08:00):
ever sent to my clients?These are all things that an AI
can basically chew up and dosomething with, right?
It's all food, so to speak, oroxygen for these AI systems.
And so although they're not hereyet to maybe eat that meal, I'm
going to continue that analogy,even though it sounds a bit weird.
I think our job right now in themortgage industry and elsewhere.
is to prepare that meal as best aspossible, right?
Have it ready to go.
So when these systems come, it's
(08:21):
very easy to feed it in.
And that's how you'll be able to
take advantage.
So the call to action is very
simple.
It's just start taking a look at
your systems this year.
It's not an immediate thing, but
it is a in the short term thing.
and say, do I have a good handle
on all my data?Do I have open APIs?
Do I know what it means to have anopen API, right?
And learn about those things asthey are going to be important.
(08:43):
I don't think it's an optionalthing, right?
Some people say, oh, APIs and thisand that, it's too much.
It's the same analogy of, I alwayssay, probably 30 years ago, people
said the same thing about emails.
At emails, that's complicated.
That's a computer thing.
You know, I prefer fax and, you
know, I don't see anyone usingjust faxes anymore.
It's going to be the same thing,right?
So you need to be able to learnthese things, open API, what those
mean, make sure your systems thatyou use have these open APIs and
(09:04):
so you're in the best positionpossible to take advantage of
these, you know, really quiteexciting developments that are
happening.
Okay, Let's Roundout is another,
you know, semi -higher leveleconomic political type thing, but
this is a really cool, I think,impact or... I say cool, but you
know, it's a little bit scary too.
And what I'm referring to is
tariffs.
So we've all heard the threats,
you know, they're coming, they'regoing.
I'm not going to comment on howreal I think they are, who really
(09:25):
knows at this point.
But I think what I want to talk
about is Scotia came out and said,okay, well, if these are real, and
if Canada retaliates in the waythat they say they're going to do,
then what that actually means, andyou can see it on the chart here,
it's an interesting chart thatsays, okay, I'm going to do worst
case scenario.
If tariffs are 25%, and with
retaliation, then what that meansis that they think the Bank of
(09:47):
Canada is going to have toincrease overnight rate by 300
basis points, right?So that's 300 above where they are
today, another 3%.
That's huge, right?
That's significant.
Obviously, that's a huge jump.
It would impact all variable rateholders.
Absolutely.
It would.
obviously affect the bond market,which would then affect the fixed
rates.
So I was shocked when I saw 300,
right?That's a really big number.
And it has a lot of downstreamconsequences.
We'll get to those consequencesjust a sec, but I do want to give
(10:09):
a shout out.
The website I'm on is actually the
Deedit website.
So Reuven and their team over
there, they do a lot of good jobdoing analysis on this type of
stuff.
So anybody wants to read more
about it, there's a great articleon this that Deedit's put
together.
But yeah, this chart here is
showing that 300 basis points.
And so, yeah, talking about those
(10:30):
downstream effects of that, it'stough to say for sure.
I'd say there's two things I'd sayprobably we need to think about
is, number one, just, okay, ifthis really happens, educating the
client.
That goes back to honestly what I
was saying earlier.
really about being the trusted
advisor, you know, for anybody whois looking at that variable or
(10:52):
maybe on the variable rate, it's agreat touch point, right?
So being able to go into yourdatabase, filter through, say
who's on the variable rate andsay, hey, FYI, who knows how
likely this is, but if this is arisk, if this is something that
maybe you're thinking about andyou still want to do it, here are
the options to switch from avariable to a fixed and lock in
that rate so you can insulateyourself from this type of threat.
You know, just letting people knowthat they can kind of make their
(11:14):
own decision probably on howlikely or unlikely it is.
But I think that awareness isreally good.
So it's a great touch point.
I would use it as that touch point
to see if there is that appetiteto switch.
And also going back to the earliertalking about when we are
recommending at renewal orwhatever it is, a variable rate
saying, hey, this is something,you know, one thing that I've
heard some brokers say back in2020 when they did recommend a
variable rate and then it wentthrough that roller coaster, you
(11:36):
know, they lost a little bit ofsleep on it, right?
And so as a broker and to reallyestablish yourself as that trusted
advisor, you know, hang your haton the work that you do.
You just want to let people awareof this, right?
So even if they do go into thisvariable rate and in this whatever
percentage you put scenario that300 basis points go up, you can be
proud and say, for all my clients,I at least made them aware of this
sort of thing.
So when it does happen, it's not
(11:57):
about blame or anything, but theycan say, you know, Tom or whoever
still have my best interest inmind.
This was my choice to go in andtake this risk.
And I'm living with that.
That's okay.
But you can still maintain thatrelationship.
So I think it's a good thingthere.
And then the second thing with it,this is, I think, maybe more, I
think it's just my two cents.
I don't think it's too much more
than that.
But we also got to think about the
(12:17):
likelihood of that 300 basispoints increase.
And this is in order to combatinflation.
And so I think that 300, that's ahuge increase.
I think that it's higher than itwas at its highest.
I think at its highest, peoplewere really just barely hanging on
by their fingertips in some cases.
They're really great to see that
relief valve as rates startedcoming down.
If they were to spike again, Ithink that's going to cause a lot
of heartburn for a lot of people.
(12:38):
And I think it's not going to be
great for the real estate market.
And so I think for the Bank of
Canada, yes, this is what'srequired to combat inflation.
But I think they have to decidealso in this unlikely scenario,
maybe putting on my tinfoil hathere a bit, but going down that
rabbit hole, what's the lesserevil?
This 300 basis points increasethat's going to maybe really tank
the real estate market.
going to maybe put some people in
some negative equity?Or do we just let inflation rip a
(13:00):
little bit?And that's going to affect
everything.
It's going to affect asset prices.
It's going to affect everything inbetween.
More than likely than not, I justland in the middle.
They have to decide, okay, do wewant this increase in the basis
points or do we want to see theinflation?
So it's this really interestingdynamic.
You know, the goal obviously is tostrike the balance so that prices
of assets don't go crazy up orcrazy down because at the end of
(13:23):
the day, Canada is a real estateeconomy.
So they're looking at real estatevery closely.
That's the ideal is we strike apolicy rate that doesn't.
make things go way up or way down.
So we'll see.
That's their goal, but it could goreally either way in this one.
So it'll just be a reallyinteresting one to watch.
Like I said, there's not too muchof a point to that little ramble
that I did there.
I think it's just an interesting
thing, at least for anyone in theindustry to at least think about
(13:46):
and say, you know, is this type ofincrease very likely?
What's that going to dodownstream?
And at the end of the day,policymakers, what do they have in
mind and what are their goals?So that about wraps up this
episode.
Yeah, another market update, some
big things going down at the macrolevel.
Of course, they're starting southof the border, but like a lot of
things, we get impacted prettydirectly from it.
So it's important to payattention.
Thanks so much for listening thisweek.
(14:06):
If anybody has any other marketupdates, things that I might have
missed, feel free to leave in thecomments.
I'll try to address it on the nextmarket update episode.
But until then, bye for now.
Hey, everyone.
(00:00):
Tom here coming today with another
great episode.
This one, we are doing another
market update.
It's been a couple of weeks.
Some exciting things happening inthe market.
A lot of them are from the US, thenew administration.
There's some things happening,some good, some bad, everything in
between.
Not going to comment, try to get
too political on it.
And I don't think I do in this
episode, but more so saying, OK,what are the impacts for us in the
(00:22):
mortgage market?Canada, and there are some real
direct impacts.
You don't think so, but very
quickly it comes up and impactsthis market.
So we discuss all of that.
We discuss some other big things
happening in the mortgage marketand how you can use technology to
address these trends that arehappening.
So interesting episode for sure.
We'll see you on the other side.
Hey, everyone.
Welcome back.
Today, we're going to be doinganother market update.
(00:50):
This one is a little bit ofmortgage, a little bit more
general, what we're seeing maybeat the economy at large.
But for all these things, ofcourse, we do want to bring it
back to mortgage tech.
So we're going to do the best we
can for that.
But there's some pretty
interesting big trends going at abit more of a macro level.
And so I want to make sure Iaddress those.
Let's get right into it here.
There's three kind of big teams I
want to talk about.
(01:11):
For starters, I think this is
something that... a lot of peopleare aware of, but I think there
was a recent thing that I've seen.
The post itself is a little bit
older, but it was new to me and Iwanted to share it with you guys.
And really it's the stats behindthe renewal cliff, the renewal
wall, renewal again, and whateveryou want to call it, all the
renewals that are coming up reallyin the next, call it two years.
And really it is two years.
So the one that I saw that came
(01:32):
up, this is from Wawa.
I don't know if they have a
podcast, but they have a website,they have an Instagram account.
They have a lot of great statsthat they publish.
I think actually recently, PurePoly have referenced one of their
stats or studies that they did.
So they have really quality data
and they do a lot of good work.
And yeah, as you can see here, I
just pumped them up in terms of...
Their stats, I think it's a great,
(01:52):
in terms of information, I wish itwas a little bit more visual, we
could see it.
But what it is here is basically,
this is from Q4 last year, thestats available then.
Each column is one of the bigseven banks, which I think do 90 %
of the mortgages in Canada.
And then each row is when the
renewals are coming up in theirbook, in their portfolio.
And really the punchline is this,is that if you look at the first
three rows, for those are actuallyon the YouTube channel.
(02:14):
If you don't know our YouTubechannel, please go there, check it
out.
It's really great to see these
visuals.
If you're just listening, I'll
describe it to you.
Really what it says is over the
next two years, 25, 26, 50%, halfof all mortgages are going to be
renewing.
So yeah, it's real.
I mean, all those things thatpeople have been telling you about
is confirmed here.
The idea of this renewal cliff is
(02:34):
happening.
It is going to come quick.
And I think we got to be ready forit.
And so what does being ready forit mean?
Well, I think with this renewalcliff, there's a couple of things
to keep in mind.
First of all, a lot of borrowers
are coming up on renewal, probablystill higher rates.
So if someone's renewing from2020, for sure it's going to be a
higher rate.
From 2021, probably going to be a
higher rate.
If they took a three -year, three
(02:55):
years ago, I was one of thosepeople.
It might be a little bit more onpar, so maybe we have to worry
less about those people.
But for those people who are going
to be coming off those much lowerrates from those COVID days, for
them, I basically just say, youneed to get in front of them a lot
quicker.
It's not enough for them if they
see this big jump.
they're almost for sure going to
be rate shopping, right?They're not just going to see the
(03:16):
big jump and say, hey, I'm goingto take your word for it that this
is the market now.
They're going to validate that
assumption.
And on top of that, what's
happening is, okay, yes, they'regoing to maybe be more shoppers,
more people looking around.
And the banks are being pretty
aggressive right now.
They are going out there and they
are competing on rates.
So, you know, maybe that borrower
banks personally with RBC, they goto their local branch, they get a
great rate.
And, you know, that's a tricky
(03:38):
deal to close.
So I think you just have to be
aware of those people.
So I'd say, bringing it back to
the mortgage tech, I'd say, take alook at your database, filter for
those people who are coming up forrenewal that did get, you know,
maybe those low rates in 2020,2021, and start reaching out to
them sooner and really try anddrive the conversation away from
rate.
Obviously, rate is very important.
But really what you can do withthat is, I would say, go from
(03:59):
being just the transaction and gotowards the trusted advisor.
So don't just say, hey, this ishappening.
You have to sign some papers anddo it.
You know, be the advisor, right?Come in and say, OK, this thing's
happening.
But before you do anything, before
you sign anything, let's take astep back.
How are things going in your life?What personal goals do you have?
What's changed in the past fiveyears?
And if you can do that.
you know, you're changing the
value you provide, obviously, as abroker from just the person who
(04:22):
can get you their mortgage and therate that transaction to being
someone who helps them moreoverall.
So I'd say, yeah, bringing it backis identify those people as early
as possible, and then set up acadence, make sure you're reaching
out and providing that value.
The other thing I'd say too with
this, especially those people, ifthey are on a variable rate and
they kind of went through theirroller coaster up and down,
they're still probably a littlebit sore.
A lot of these people might besaying, hey, I did that variable
(04:44):
rate.
It really bit me last time.
I want to go to a fixed rate.
And I'm not saying that variable
or fixed one is better than theother.
I think we just have to do ourjobs as brokers and say, okay,
well, yeah, there's these twothings.
But just because you had a badexperience over the past five
years with a variable rate, yes,that was extraordinary times.
It doesn't mean that's going tohappen again.
Historically, this is how theserates have compared and just
giving the clients that educationto make the best decision
(05:05):
possible.
So those are the big trends I'm
seeing.
And I feel that now is the time to
jump on it because if you want toestablish yourself as that trusted
advisor, you can't just wait for aday before the renewal, right?
You kind of have to help them andhold their hand through that
journey.
Okay, so that's number one.
Obviously, a really importantthing and it's a trend we'll
continue to monitor.
Number two, this is where we kind
(05:26):
of maybe zoom out a little bit.
but I think it's also very
important.
This week, the Trump
administration, beside OpenAI,NVIDIA, who makes the chips for
OpenAI, Oracle, that's right,SoftBank, which is a big Japanese
investor, they've pledged thisStargate project.
I don't know if people have heardof this, but it's a pretty cool
project.
Already, they committed $100
billion across all these differentplayers, pulling that money
together.
And they say it's going to reach
$500 billion.
billion dollars over the next four
years in investment.
And really, they're just making
(05:47):
the next level AI.
And so this is really cool.
I'm sharing the OpenAI website.
They go into the details, the
people who are backing it, thetimelines.
They kind of leave it.
They say, hey, all of us look
forward to continue to build anddevelop AI.
And in particular... AGI for thebenefit of all humanity.
(06:09):
So AGI is that artificial generalintelligence, right?
The type of intelligence thatwould compete head to head with
humans in terms of their reasoningand all that.
But of course, maybe much moreknowledge and depth and obviously
resources available to them.
It's kind of that monolithic.
That's the big goal for a lot ofthese AI companies is this AGI
that can really do anything,right?
So that GB in general.
It's exciting, of course.
You know, these types of thingsare very, very exciting.
(06:33):
I think that's great to see thattype of investment.
It's great to see that people areexcited to do these things.
I mean, there's always a littlebit of fear.
And I think in maybe previousadministrations, there were some
fear and I totally understandthose.
But I think as I've talked aboutin this podcast many times, you
know, it's how you use the tools,right?
It's not the tool itself that'sgoing to be dangerous.
(06:56):
It's how you use it.
And the same applies obviously
for...
This industry, it's not that this
tool is going to come and wipe outall the jobs.
It's going to be the people whocan use these tools most
effectively will be able to taketheir business to the next level.
That's really the opportunityhere.
So really the point with this andbringing it back to the technology
is these things are happening.
They are moving.
They're moving quick.
And we're not there yet.
(07:17):
I've worked with thousands ofbrokers across Canada.
I don't know anyone who'simplemented some AI thing today
and changed the game, was able totriple their output.
That's not here yet.
Maybe it could be here in the
next, call it five years -ish.
And five years sounds like a long
time, but it's really not.
What I say now is start preparing,
right?You really got to start preparing.
You got to say, what feeds theseAI systems?
It's going to be your data.
And so that's really my call to
(07:38):
action for most people this yearis to start preparing your data.
Ask yourself, can I get a list ofall my clients?
Okay, great.
Can I get a list of all my deals?
You know, those are things,hopefully it's a quick yes.
But then start getting into it.
Can I get a list of every email
that I've ever sent all myclients?
Can I get a list of or a recordingof every single phone call I've
(08:00):
ever sent to my clients?These are all things that an AI
can basically chew up and dosomething with, right?
It's all food, so to speak, oroxygen for these AI systems.
And so although they're not hereyet to maybe eat that meal, I'm
going to continue that analogy,even though it sounds a bit weird.
I think our job right now in themortgage industry and elsewhere.
is to prepare that meal as best aspossible, right?
Have it ready to go.
So when these systems come, it's
(08:21):
very easy to feed it in.
And that's how you'll be able to
take advantage.
So the call to action is very
simple.
It's just start taking a look at
your systems this year.
It's not an immediate thing, but
it is a in the short term thing.
and say, do I have a good handle
on all my data?Do I have open APIs?
Do I know what it means to have anopen API, right?
And learn about those things asthey are going to be important.
(08:43):
I don't think it's an optionalthing, right?
Some people say, oh, APIs and thisand that, it's too much.
It's the same analogy of, I alwayssay, probably 30 years ago, people
said the same thing about emails.
At emails, that's complicated.
That's a computer thing.
You know, I prefer fax and, you
know, I don't see anyone usingjust faxes anymore.
It's going to be the same thing,right?
So you need to be able to learnthese things, open API, what those
mean, make sure your systems thatyou use have these open APIs and
(09:04):
so you're in the best positionpossible to take advantage of
these, you know, really quiteexciting developments that are
happening.
Okay, Let's Roundout is another,
you know, semi -higher leveleconomic political type thing, but
this is a really cool, I think,impact or... I say cool, but you
know, it's a little bit scary too.
And what I'm referring to is
tariffs.
So we've all heard the threats,
you know, they're coming, they'regoing.
I'm not going to comment on howreal I think they are, who really
(09:25):
knows at this point.
But I think what I want to talk
about is Scotia came out and said,okay, well, if these are real, and
if Canada retaliates in the waythat they say they're going to do,
then what that actually means, andyou can see it on the chart here,
it's an interesting chart thatsays, okay, I'm going to do worst
case scenario.
If tariffs are 25%, and with
retaliation, then what that meansis that they think the Bank of
(09:47):
Canada is going to have toincrease overnight rate by 300
basis points, right?So that's 300 above where they are
today, another 3%.
That's huge, right?
That's significant.
Obviously, that's a huge jump.
It would impact all variable rateholders.
Absolutely.
It would.
obviously affect the bond market,which would then affect the fixed
rates.
So I was shocked when I saw 300,
right?That's a really big number.
And it has a lot of downstreamconsequences.
We'll get to those consequencesjust a sec, but I do want to give
(10:09):
a shout out.
The website I'm on is actually the
Deedit website.
So Reuven and their team over
there, they do a lot of good jobdoing analysis on this type of
stuff.
So anybody wants to read more
about it, there's a great articleon this that Deedit's put
together.
But yeah, this chart here is
showing that 300 basis points.
And so, yeah, talking about those
(10:30):
downstream effects of that, it'stough to say for sure.
I'd say there's two things I'd sayprobably we need to think about
is, number one, just, okay, ifthis really happens, educating the
client.
That goes back to honestly what I
was saying earlier.
really about being the trusted
advisor, you know, for anybody whois looking at that variable or
(10:52):
maybe on the variable rate, it's agreat touch point, right?
So being able to go into yourdatabase, filter through, say
who's on the variable rate andsay, hey, FYI, who knows how
likely this is, but if this is arisk, if this is something that
maybe you're thinking about andyou still want to do it, here are
the options to switch from avariable to a fixed and lock in
that rate so you can insulateyourself from this type of threat.
You know, just letting people knowthat they can kind of make their
(11:14):
own decision probably on howlikely or unlikely it is.
But I think that awareness isreally good.
So it's a great touch point.
I would use it as that touch point
to see if there is that appetiteto switch.
And also going back to the earliertalking about when we are
recommending at renewal orwhatever it is, a variable rate
saying, hey, this is something,you know, one thing that I've
heard some brokers say back in2020 when they did recommend a
variable rate and then it wentthrough that roller coaster, you
(11:36):
know, they lost a little bit ofsleep on it, right?
And so as a broker and to reallyestablish yourself as that trusted
advisor, you know, hang your haton the work that you do.
You just want to let people awareof this, right?
So even if they do go into thisvariable rate and in this whatever
percentage you put scenario that300 basis points go up, you can be
proud and say, for all my clients,I at least made them aware of this
sort of thing.
So when it does happen, it's not
(11:57):
about blame or anything, but theycan say, you know, Tom or whoever
still have my best interest inmind.
This was my choice to go in andtake this risk.
And I'm living with that.
That's okay.
But you can still maintain thatrelationship.
So I think it's a good thingthere.
And then the second thing with it,this is, I think, maybe more, I
think it's just my two cents.
I don't think it's too much more
than that.
But we also got to think about the
(12:17):
likelihood of that 300 basispoints increase.
And this is in order to combatinflation.
And so I think that 300, that's ahuge increase.
I think that it's higher than itwas at its highest.
I think at its highest, peoplewere really just barely hanging on
by their fingertips in some cases.
They're really great to see that
relief valve as rates startedcoming down.
If they were to spike again, Ithink that's going to cause a lot
of heartburn for a lot of people.
(12:38):
And I think it's not going to be
great for the real estate market.
And so I think for the Bank of
Canada, yes, this is what'srequired to combat inflation.
But I think they have to decidealso in this unlikely scenario,
maybe putting on my tinfoil hathere a bit, but going down that
rabbit hole, what's the lesserevil?
This 300 basis points increasethat's going to maybe really tank
the real estate market.
going to maybe put some people in
some negative equity?Or do we just let inflation rip a
(13:00):
little bit?And that's going to affect
everything.
It's going to affect asset prices.
It's going to affect everything inbetween.
More than likely than not, I justland in the middle.
They have to decide, okay, do wewant this increase in the basis
points or do we want to see theinflation?
So it's this really interestingdynamic.
You know, the goal obviously is tostrike the balance so that prices
of assets don't go crazy up orcrazy down because at the end of
(13:23):
the day, Canada is a real estateeconomy.
So they're looking at real estatevery closely.
That's the ideal is we strike apolicy rate that doesn't.
make things go way up or way down.
So we'll see.
That's their goal, but it could goreally either way in this one.
So it'll just be a reallyinteresting one to watch.
Like I said, there's not too muchof a point to that little ramble
that I did there.
I think it's just an interesting
thing, at least for anyone in theindustry to at least think about
(13:46):
and say, you know, is this type ofincrease very likely?
What's that going to dodownstream?
And at the end of the day,policymakers, what do they have in
mind and what are their goals?So that about wraps up this
episode.
Yeah, another market update, some
big things going down at the macrolevel.
Of course, they're starting southof the border, but like a lot of
things, we get impacted prettydirectly from it.
So it's important to payattention.
Thanks so much for listening thisweek.
(14:06):
If anybody has any other marketupdates, things that I might have
missed, feel free to leave in thecomments.
I'll try to address it on the nextmarket update episode.
But until then, bye for now.
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