TD spells out dangers of Bank of Canada cutting rates too soon
In the coming months, the Bank of Canada is likely to begin its policy rate cuts despite sticky inflation continuing to exceed the institution’s 2% target – but TD economists are warning that this will pose a significant challenge in the central bank’s attempts to communicate to the public and anchor household inflation expectations. “The central bank will have to cut interest rates in the face of stubbornly high shelter costs because to neglect to do so risks running the economy aground,” TD said in a new analysis. “In turn, this could amplify household inflation expectations, which are sensitive to …
Market recovery likely a ‘second half of the year story’: CEO
An upturn for Canada’s mortgage and housing markets could be in the cards for 2024 – but that recovery is unlikely to be a straightforward one, with progress set to be steady rather than spectacular. That’s the view of Donaldson Capital founder and CEO Drew Donaldson (pictured), who told Canadian Mortgage Professional that while the outlook for this year’s market was positive, he expected activity to remain subdued – and rates to stay relatively high – in its opening months. “I just don’t think it’s going to be a straight line,” he said. “As much as I’m optimistic for 2024, I still …
Bank of Canada governor considers rate cuts but says it is still too early
The Bank of Canada’s top official has stated that while the bank considered cutting interest rates when inflation was headed towards its 2% target, it is still too early to do so, as reported in an article by Bloomberg. Tiff Macklem, he Bank of Canada’s governor, said that once officials are assured that price pressures are set on a downward trend, the central bank will consider whether or not it can lower its current policy rate. “I know it is tempting to rush ahead to that discussion. But it’s still too early to consider cutting our policy rate,” said Macklem. …
Canadian home prices drop to levels not seen in 14 months
Canadian home prices saw their largest drop in more than a year despite persistent high borrowing costs impacting potential buyers. The Canadian Real Estate Association released data showing the benchmark price of homes in Canada fell by 1.1% in November from the previous month. This marked the biggest decline seen since September 2022 and was the third consecutive decrease as the benchmark price now stands at $735,000. Home sales dropped by 0.9% in November month-over-month as mortgage rates remain at high levels. New listings also fell by 1.8%, while the sales-to-new listings ratio stood at 49.8%. With the same statistic …
Is it too early to discuss Bank of Canada rate cuts?
The Bank of Canada’s decision to leave rates unchanged on Wednesday was an unsurprising one – but its continuing indication of a willingness to raise rates means it’s “probably premature” to discuss cuts at present. That’s according to Bank of Montreal (BMO) chief economist Doug Porter (pictured), who told Canadian Mortgage Professional that the central bank appears keen to pour cold water on the idea that it’s finished with rate hikes despite increasing certainty from financial markets. “The fact that they kept rates unchanged was absolutely expected, but we also thought they would still talk about the possibility of rate hikes, even …
Rent rates spike due to early completions, data suggests
An early influx of purpose-built units in various markets led to a noticeable increase in Canada’s average rents in October, according to a new report by Rentals.ca and Urbanation. This was especially apparent in Alberta, Quebec, and Nova Scotia, which all benefited from “a combination of strong population growth and large infusions of new rental supply priced at above-average market rents,” the report said. Data from the Canada Mortgage and Housing Corporation showed that a total of 36,292 new rental units were completed in these three provinces over the past year. This combined figure accounted for roughly 55% of rental apartments …
How concerned are Canadian homeowners about meeting their mortgage obligations?
Canadian homeowners are continuing to express concern about their ability to meet their mortgage payments, according to a new report by RATESDOTCA. The new survey found that 35% of homeowners were concerned about not being able to pay their mortgages over the next three years. While 51% of these respondents were younger than 55, there were 59% of respondents said they were not concerned about such payments. About 72% of these respondents were older than 55. Minorities (53%) were more likely to be concerned about their ability to pay their mortgages compared to respondents who were non-visible minorities (32%). The …
How severe could the upcoming mortgage renewal shock be?
Canada will see nearly $1 trillion in mortgage renewals due by 2026, which could impel a massive increase in average monthly mortgage payments, according to Dylan Smith, senior economist at think-tank Rosenberg Research & Associates. In turn, the increases could lead to what Smith described as a “demand shock” that would place significant stress “on the housing market in particular and the economy in general.” “Given that the vast majority of fixed-rate mortgages and fixed-payment, variable-rate mortgages had locked in low interest rates before or in the early stages of the 2022/23 hiking cycle as consumers shifted away from fully …
Has the recent home listings surge eased Canada’s housing supply crisis?
While Canada’s new residential resale listings have increased for the six straight months up to September 2023, their levels have only returned to their long-term average, according to TD economist Rishi Sondhi. “New resale listings have certainly increased, [but] they haven’t gone up so much as they’ve returned to a kind of normalcy,” Sondhi said. “The Bank of Canada has since paused its hiking campaign, but the elevated interest rate backdrop has hit home sales in Ontario hard.” Crucially, the current pace of housing construction is struggling to keep up with Canada’s inflation-fuelled population growth. “When you look at how housing …
How can mortgage brokers prepare for the upcoming renewal wave?
The coming six to 24 months are set to mark an important point in the mortgage journey of scores of borrowers across Canada, with renewals arriving at a time of significantly higher interest rates than the years immediately before and during the pandemic. Mortgage professionals gearing up for that impending flurry can maximize their opportunities in the market, according to nesto principal broker and co-founder Chase Belair (pictured top), by ensuring their renewal process is comprehensive and optimized ahead of what’s sure to be a busy period for brokers. He told Canadian Mortgage Professional that clear communication with clients and a …
