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The Bank of Canada has stayed the course on interest rates in its final scheduled announcement of the year, indicating no change to its projection that its policy rate will rise in the middle quarters of 2022. The central bank said that while it was “closely watching” the inflation issue that has dominated headlines in recent weeks, it would hold its benchmark rate steady at 0.25% with rate hikes likely to begin at some point around the middle of next year. While it said the economy had “considerable momentum” into the fourth quarter, the Bank also noted the new Omicron variant of COVID-19 as a cause of some uncertainty having led to tightened travel restrictions in several countries and a decline in oil prices. The [...]

In its most recent rate setting the Bank of Canada decided, once again, to hold steady at 0.25%.  But in comments after the announcement, Governor Tiff Macklem sounded a new tone on inflation.  He said the Bank will stand up to it, and not just let inflation manage itself. Inflation in Canada is running at about 4.4%, more than double the Bank’s target, and it is forecast to rise even higher.  Up until now Macklem has called it “transitory”, suggesting inflation would sort itself out and return to normal, once post-pandemic labour shortages and supply bottlenecks ease. In his comments after the rate setting, Macklem revealed the Bank is now forecasting that inflation will be worse, and will last longer, than originally anticipated.  And, he [...]

Canadian home buyers are taking their mortgages to the max. The latest Consumer Survey by Canada Mortgage and Housing Corporation suggests more than 65% of recent home buyers bought the maximum amount of house they could afford. It may be a little surprising that number is not higher given the results of a recent, separate, survey on affordability by one of the big banks. It shows the median home price shot up by $38,000 between the first and second quarter of this year.  That is the widest margin in more than 25 years.  Compared to Q2 of 2020, the median price is up by $89,000. According to the report income growth and low interest rates had been helping to improve affordability over the past two [...]

The Bank of Canada made its fifth interest rate decision of 2021 and updated its outlook for inflation and economic growth. The Bank held its overnight rate at 0.25% and suggested that Canada’s economic recovery, while slightly slower than expected so far, should be stronger than anticipated in 2022. The next scheduled date for announcing the overnight rate target is September 8, 2021. The next full update of the Bank’s outlook for the economy and inflation, including risks to the projection, will be published in the MPR on October 27, 2021.

As COVID-19 continues to be pushed down in Canada, consumer spending is expected to go up.  The latest survey by the Bank of Canada suggests that will lead to an even greater demand for homes. The Bank’s Survey of Consumer Expectations, for the second quarter of 2021, indicates there is a general, overall optimism about the end of the pandemic and that consumers are prepared to do some spending as the virus fades and health restrictions are lifted. The survey indicates 40% of respondents managed to save more money than usual during the pandemic.  That group expects to spend about 35% of those savings over the next 2 years.  They indicate that much of that spending will be on activities that have been restricted during [...]

Much of the economic talk so far this year has centered on interest rates.  The main questions have been when they will start to rise and by how much.  In an attempt to provide answers economists and analysts monitor a key factor that guides interest rate policy: inflation. Inflation has been a non-issue in North America for the better part of 40 years.  That’s largely because after the last significant bout of inflation, in the late ‘70s through the mid ‘80s, central banks in Canada and the U.S. were given the job of keeping it under control.  At that time the Bank of Canada rate topped 21%, and mortgage rates looked more like credit card interest. Interest rates are the traditional tool used to control [...]

Inspecting your home on a regular basis and following good maintenance practices are the best ways to protect your investment in your home. There is always something to do around the house, especially when the season changes. Spring is the time to assess winter damage, start repairs and prepare for warmer months. Here are 5 tips for you and your clients to properly maintain your homes this spring. Exterior inspection and repairs Take advantage of the spring weather to do an outdoor inspection of you home. Examine the foundation wall to see if it sustained any damage over the winter. Watch for cracks or leaks and repair as required. Look for low spots that may have formed next to the foundation that could trap water. [...]

The Bank of Canada hold its target for the overnight rate at the effective lower bound of 0.25%. Canada’s economy was strong through to late 2020, but the lockdown measures did have an impact on the economy. The rate will have to stay low to help recuperate from the economic impact of COVID-19. This is good news for homeowners and buyers looking to get into the market. The next scheduled date for interest rate announcement is June 9, 2021. Read the full report by Bank of Canada here.

The “B” word has started floating back into discussions about Canada’s housing market.  The latest numbers from the Canadian Real Estate Association help to explain why worries about a bubble are on the rise. Sales activity in February jumped nearly 40% compared to a year earlier, setting a new record.  Sales rose nearly 7% compared to January.  The national average price surged by 25% year-over-year.  New listings rebounded month-over-month in February but inventories remain at record lows.  Nationally there is just 1.8 months of supply. The Bank of Canada has expressed concerns about overheating.  Governor Tiff Macklem has noted that there are signs that real estate speculation is on the rise. "What we get worried about is when we start to see extrapolative expectations, when [...]

Home sales and home prices are breaking records. Housing starts are beating expectations. The Toronto and Vancouver housing markets occupy prominent places on a new, global list of least affordable cities.* Now, Bank of Canada Governor Tiff Macklem says there are early signs Canada’s housing market is overheating.  During a session with an Alberta business audience Macklem said there are signs of “excess exuberance” in the housing market. So far, he said, the move toward bigger houses further away from city centres has not been speculation.  The BoC sees it as a response to a need for more working and family space for people who no longer need to go in to the office.  The Bank supports its argument by pointing to the fact that [...]