Canadian Mortgage Interest Rate Hike and Real Estate Market Correction to Buyer’s Market.

Canada’s housing market is off to a cold start in 2023, as both homebuilding and sales activity show multi-year lows.

**Canadian Mortgage Interest Rate Hike and Real Estate Market Correction to Buyer’s Market.**

As per Canada Real Estate Association (CREA) homebuying hit a 14-year low for the month of January. Sales volume was 37.1 per cent below the same month last year, the second-best January ever on record.

Sales were down three per cent on a month-over-month basis, which as per CREA effectively gave back small gains seen in December 2022.

In non-seasonally adjusted terms, the national average home price in Canada was $612,204 in January, down 18.3 per cent year over year.

CREA’s benchmark Home Price Index is now down 15 per cent from the peak seen in February 2022.

Prices drops are steeper in some Ontario and B.C. markets, but CREA flagged Calgary, Regina and Saskatoon, and St. John’s, N.L., as some cities where prices are holding steadier.

Some real estate markets appear to have already hit their bottom and are seeing prices trend up on a monthly basis.

The housing market had “a lot to struggle with” in January, factoring in the implementation of a new foreign buyer ban and anti-flipping tax from the federal government.

Bank of Canada continued its interest rate hike campaign with a cumulative 75 basis points of increases to its policy rate across December 2022 and January 2023. As such, current falling sales and prices last month are not much of a surprise.

Evidently price wise it’s a better time for buyer to take advantage of Buyer’s Market situation now.

There are predictions from Bank of Canada says they won’t raise the rate in near soon but they did not remark they might even reduce it as well.

Looks like Spring 2023 market condition looks more like Buyer’s Market. Buyers will dominate the deal as there are predictions.

Bank of Canada hikes key interest rate 50 basis points for 1st time in 22 years!!

The Bank of Canada is raising its target for the overnight rate by 0.5 per cent to 1 per cent.

Canada’s central bank says it will also stop buying government bonds and begin quantitative tightening (QT), beginning April 25.

The Bank of Canada raised its target for the overnight rate to 0.50 per cent.

Canada’s central bank says more rate hikes are coming but says “the unprovoked invasion of Ukraine by Russia is a major new source of uncertainty.”

The Bank of Canada raised its target for the overnight rate to 0.50 per cent.

Source: https://www.bankofcanada.ca/core-functions/monetary-policy/key-interest-rate/

Despite record high inflation, Bank of Canada holds interest rate steady & Unchanged

Bank of Canada maintains policy rate,removes exceptional forward guidance

The Bank of Canada today held its target for the overnight rate at the effective lower bound of ¼ %, with the Bank Rate at ½ % and the deposit rate at ¼ %. With overall economic slack now absorbed, the Bank has removed its exceptional forward guidance on its policy interest rate. The Bank is continuing its reinvestment phase, keeping its overall holdings of Government of Canada bonds roughly constant.

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The next scheduled date for announcing the overnight rate target is March 2, 2022.

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The global recovery from the COVID-19 pandemic is strong but uneven. The US economy is growing robustly while growth in some other regions appears more moderate, especially in China due to current weakness in its property sector. Strong global demand for goods combined with supply bottlenecks that hinder production and transportation are pushing up inflation in most regions. As well, oil prices have rebounded to well above pre-pandemic levels following a decline at the onset of the Omicron variant of COVID-19. Financial conditions remain broadly accommodative but have tightened with growing expectations that monetary policy will normalize sooner than was anticipated, and with rising geopolitical tensions. Overall, the Bank projects global GDP growth to moderate from 6¾ % in 2021 to about 3½ % in 2022 and 2023.

In Canada, GDP growth in the second half of 2021 now looks to have been even stronger than expected. The economy entered 2022 with considerable momentum, and a broad set of measures are now indicating that economic slack is absorbed. With strong employment growth, the labour market has tightened significantly. Job vacancies are elevated, hiring intentions are strong, and wage gains are picking up. Elevated housing market activity continues to put upward pressure on house prices.

The Omicron variant is weighing on activity in the first quarter. While its economic impact will depend on how quickly this wave passes, it is expected to be less severe than previous waves. Economic growth is then expected to bounce back and remain robust over the projection horizon, led by consumer spending on services, and supported by strength in exports and business investment. After GDP growth of 4½ % in 2021, the Bank expects Canada’s economy to grow by 4% in 2022 and about 3½ % in 2023.

While COVID-19 continues to affect economic activity unevenly across sectors, the Governing Council judges that overall slack in the economy is absorbed, thus satisfying the condition outlined in the Bank’s forward guidance on its policy interest rate. The Governing Council therefore decided to end its extraordinary commitment to hold its policy rate at the effective lower bound. Looking ahead, the Governing Council expects interest rates will need to increase, with the timing and pace of those increases guided by the Bank’s commitment to achieving the 2% inflation target.

Information Source: https://www.bankofcanada.ca/2022/01/fad-press-release-2022-01-26/

The Bank of Canada today lowered its target for the overnight rate by 50 basis points to 1 ¼ percent. Feb/05/2020

BREAKING NEWS

BANK OF CANADA ANNOUNCEMENT

The Bank of Canada today lowered its target for the overnight rate by 50 basis points to 1 ¼ percent.

The Bank of Canada today lowered its target for the overnight rate by 50 basis points to 1 ¼ percent. The Bank Rate is correspondingly 1 ½ percent and the deposit rate is 1 percent.

The Bank of Canada notes: “While Canada’s economy has been operating close to potential with inflation on target, the COVID-19 virus is a material negative shock to the Canadian and global outlooks, and monetary and fiscal authorities are responding.”

Furthermore, the bank adds that “as the situation evolves, Governing Council stands ready to adjust monetary policy further if required to support economic growth and keep inflation on target. While markets continue to function well, the Bank will continue to ensure that the Canadian financial system has sufficient liquidity.”

We will continue to keep you informed on any further developments.

https://www.bankofcanada.ca/2020/03/fad-press-release-2020-03-04/

Two Big Six banks hike benchmark rates by Approximately 45 BPS, Despite BOC holding its rate.

Two Big Six banks hike benchmark rates by Approximately 45 BPS, Despite BOC holding its rate.

Two of Canada’s biggest banks are raising their benchmark rates for five-year, fixed-rate mortgages.

TD says as of Wednesday it increased its posted rate for five-year fixed mortgages to 5.59 per cent from 5.14 per cent.

Mortgage planner and rate comparison website founder Robert McLister says the increase is “unusual”as the benchmark rate hasn’t seen a jump of 45 basis points or more since March 2010.

TD spokeswoman Julie Bellissimo says a number of factors are considered when determining rates including the competitive landscape, the cost of lending and managing risk.

Meanwhile, Royal Bank spokesman AJ Goodman says the lender plans to raise its posted rate for a five-year fixed mortgage on Monday to 5.34 per cent compared with the 5.14 per cent currently posted.

McLister says the actual rates banks offer to borrowers are not seeing an increase, but notes the Bank of Canada uses the posted rates at the big banks to calculate the rate used in stress tests to determine whether homebuyers qualify for loans.

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Source : The Canadian Press | Apr 27, 2018

https://gtarealtyagent.wordpress.com/2018/04/27/two-big-six-banks-hike-benchmark-rates-by-approximately-45-bps-despite-boc-holding-its-rate/

Bank of Canada makes interest rate announcement | Mar 07, 2018

Bank of Canada makes interest rate announcement | Mar 07, 2018

Good news…No increase to Bank of Canada rate yesterday!

A cautious Bank of Canada kept its key interest rate on hold Wednesday as it bought itself more time to monitor mounting trade-related uncertainties out of the United States.

Many experts now believe the central bank will likely wait until the second half of the year before raising the rate again. Some say the next hike might not come until 2019 and at least one economist said Wednesday that, depending how things evolve, the bank could even lower the rate this year.

Perfect time to place your client in a variable rate mortgage….www.centumfirst.ca

The Bank of Canada kept its key interest rate target on hold as it pointed to a climate of broadening, important unknowns around trade.

In explaining its decision to maintain its benchmark rate at 1.25 per cent, the central bank notes that recent trade policy developments are a key source of uncertainty for the Canadian and global outlooks.

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U.S. President Donald Trump recently added threats of steel and aluminum tariffs to an already uncertain context for Canada that includes concerns over NAFTA’s renegotiation and competitiveness following tax-cut announcements south of the border.

The Bank of Canada notes fourth-quarter growth was weaker than expected, largely due to higher imports, and that it’s still assessing impacts on housing markets from new policies, including mortgage rules.

But it says global growth continues to be solid and broad-based, the economy is running near capacity, inflation is close to target and wage growth has improved, although still remains below where many expect it should be.

Governor Stephen Poloz was widely expected to hold off moving the rate because of weaker economic numbers in recent weeks and the expanding trade uncertainty.

Poloz has introduced three rate hikes since last summer, including an increase in January. The moves came in response to an impressive economic run for Canada that began in late 2016.

In the statement Wednesday, the bank reiterated it expects more hikes to be necessary over time, but that the governing council will remain cautious when considering future decisions.

They will continue to be guided by incoming data, such as the economy’s sensitivity to higher rates, the evolution of economic capacity and changes to wage growth and inflation, it said.

Source:The Canadian Press

https://gtarealtyagent.wordpress.com/2018/03/07/bank-of-canada-makes-interest-rate-announcement-mar-07-2018/

Canada’s major banks have been quick to react to the Bank of Canada’s decision to raise interest rates to 1.25%.

Major lenders hike rates following BoC decision

Canada’s major banks have been quick to react to the Bank of Canada’s decision to raise interest rates to 1.25%.

CIBC, RBC, Scotiabank and TD were among the first lenders to increase their prime lending rates by 25 basis points to 3.45%; the new rates take effect from today (Jan 18,2018).

The BoC rate hike was widely expected but what happens next is the burning question.

Although BoC governor Stephen Poloz painted a rosy picture of the Canadian economy at the end of 2017, his speech Wednesday noted that growth is forecast to slow to 2.2% this year and 1.6% in 2019, compared to the forecast 3% growth in 2017.

NAFTA also presents a challenge to the economy and the governor sounded a cautious tone over its uncertainty.

Governor Poloz said that while interest rates would need to rise over time, the Bank would need to provide some continued “monetary policy accommodation” to keep inflation in check and keep the economy operating close to its potential.

So when might those increases come?

CIBC Economics chief economist Avery Shenfeld says one more increase is likely this year – he’s forecasting early in the third quarter – with two further increases (50 basis points) in 2019.

TD’s senior economist Brian DePratto says that July is penciled in for the next increase but notes that data may present a case for that to be moved forward or pushed back.

Source: Canadian Press

https://gtarealtyagent.wordpress.com/2018/01/19/canadas-major-banks-have-been-quick-to-react-to-the-bank-of-canadas-decision-to-raise-interest-rates-to-1-25/

Big 5 banks increase prime rates after Bank of Canada’s interest rate hike

Big 5 banks increase prime rates after Bank of Canada’s interest rate hike

The Bank of Canada raised its key interest rate by a quarter of a point to 1.25% on Wednesday January 17, 2018.

Effective Wednesday January 17, 2018, the prime rate at the five banks will rise to 3.45 per cent from 3.20 per cent, matching the 0.25 percentage point increase to the Bank of Canada’s overnight rate.

A bank’s prime interest rate gets factored into a variety of loans, from variable-rate mortgages to lines of credit. Bank customers with loans based on the prime rate will see an immediate increase in their interest / mortgage payments.

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https://gtarealtyagent.wordpress.com/2018/01/17/big-5-banks-increase-prime-rates-after-bank-of-canadas-interest-rate-hike/

Average sales price in tight GTA market jumps 13% soaring high.

Average sales price in tight GTA market jumps 13% soaring high.

Homes in the Greater Toronto Area were selling for an average $822,681 in 2017, up 12.7% from the previous year.

The tight market put upward pressure on prices at the start of the year while the latter two thirds saw fewer sales and increased listings, helping to moderate price increases.

Toronto Real Estate Board members sold 92,394 homes through the MLS last year, down 18.3% compared to 2016 which was a record year. Provincial policy had a noticeable impact on the market.

“Much of the sales volatility in 2017 was brought about by government policy decisions,” said TREB president.

He added that research, including TREB’s own, showed that foreign home buying was not a major driver of sales in the GTA. But the Ontario Fair Housing Plan (FHP) had a psychological impact on the market.

In the fourth quarter though, the FHP’s influence weakened and sales increased following two quarterly declines. This was in part due to the impending OFSI mortgage underwriting rule changes.

“Looking forward, government policy could continue to influence consumer behavior in 2018, as changes to federal mortgage lending guidelines come into effect,” said TREB Officials

Means:

Sales Volume went low but Price went soaring high. What does it mean?

You can Think as a seller or Buyer?

Contact us to discuss more Investment opportunities.

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