Top Stories

This Week’s Top Stories: Bank of Canada Expects A Larger Housing Contraction, and “Free Money” Is Ending

Time for your cheat sheet on this week’s top stories.

Canadian Real Estate

Bank Of Canada Quietly Revised Its GDP Forecast To Show A Larger Housing Contraction

The Bank of Canada (BoC) didn’t raise rates, despite the housing market getting out of control. However, it appears a part of the concern is Canada has little industry outside of housing. In the previous estimates, the central bank lowered the GDP forecast to 4.0% in 2022, down from 4.3% in the last forecast. Behind the recent revision lower is a larger than previously forecast contraction for housing.

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Canada Will Use Reverse Of Program Used To Boost Housing, End Of “Free Money”: NBF

One of Canada’s largest banks warned clients the country would have a tough time keeping up with the US. The Bank of Canada (BoC) has forecast the neutral rate will be lower in the future. To keep up, National Bank is forecasting the BoC will use quantitative tightening (QT). QT is the exact opposite of quantitative ease (QE), which drove home sales and prices higher.

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Canada Is Seen As More Corrupt As Money Laundering Estimates Hit $113 Billion

Canada’s squeaky clean reputation is quickly fading, as it’s seen as increasingly corrupt. Transparency International updated its annual Corruption Perception Index for 2022. Canada has continued to slide further down the organization’s list, for various reasons. The reasons for the drop include money laundering, and a lack of whistleblower protection. The anti-corruption organization said they’ve recently seen commitments to help lower corruption. Now all Canada has to do is start executing on those commitments.

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How High Will The Bank Of Canada Hike Rates? We Asked The Country’s Top Experts

The Bank of Canada (BoC) interest rate decision surprised many experts, but not the ones we asked. We assembled a panel of 13 leading economists and finance experts, and asked for their forecast. We then assembled a Cleveland-style dot plot to map the general sentiment. Despite market-wide expectations for a rate hike, the dot plot correctly shows no hike. See what else they expect for the rest of the year as far as interest rates.

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The Bank Of Canada Didn’t Raise Rates, It Raised Its Inflation Forecast

The Bank of Canada (BoC) didn’t raise interest rates to cool inflation, but does know it’s a problem. The BoC  increased annual CPI growth to 4.2% for 2022, up from 3.4% a year ago. Forecasts are significantly above the 2.0% target the central bank aims to maintain. By not raising rates last week, they made a conscious decision to embrace higher inflation. This is reflected in their forecast revisions, despite them glossing over the issue.

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Canadian Average Net Worth Nears $1 Million As Growth Rises 3x Faster Than Normal

Canadian households have seen their net worth soar at one of the fastest rates ever. The average household net worth hit $981,900 in Q3 2021, up 16.9% ($142,300) from a year before. About 58.5% of the surge in net worth was due to real estate, with the asset equal in size to 40% of total net worth. Of course, to enjoy that boost you need real estate, which is getting hard for young people to get.

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Canadian Real Estate Markets Have Seen A “Typical” Home Increase Up To $400,000

Canadian real estate prices are rising even faster in some commuter towns. Across the country, a typical home was $798,200 in December, up 26.6% ($167,500) higher than last year. Cities like Oakville have seen prices climb 36.4% ($404,900) over the past year though. Cities have become so expensive, the gap between the suburbs and cities is quickly closing.

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Canadian HELOC Debt Just Made The Biggest Jump Since March 2020

Canadian HELOC debt hasn’t done much over the past couple of years, but that just changed. The outstanding balance reached $168.03 billion in November, up 0.73% ($1.21 billion) from a month before. It was also 2.71% ($4.69 billion) lower than the same month last year. Annual growth might have been negative, but the huge monthly gain was the biggest since 2020 and the biggest November since 2011. 

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If Canada Skips The Rate Hike It’s Due To Ukraine, Not The Economy: National Bank

National Bank of Canada saw very few reasons not to hike interest rates over the next month. The economy is ripping higher and showing strong growth, and housing is… well, housing. Employment was stellar and showed even greater improvement with the recent revisions. The only reason the bank saw rates being held back is due to geopolitical risk in Ukraine. Coincidentally, the central bank cited geopolitical risk as one of the reasons they didn’t hike rates a few days later.

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