Time for your cheat sheet on this week’s top stories.
Canadian Real Estate
Canadian households are shying away from mortgages and picking up more personal loans. The outstanding balance of household debt reached $2.9 trillion in May. A new record, but also the slowest rate of growth since the Great Recession. Higher interest rates are certainly slowing mortgage borrowing, but strangely they aren’t having the same impact on consumer loans. Personal loans continue to accelerate, as households warm up to the segment.
Canadian housing starts surged higher, but the trend is still showing a slowdown. Housing starts launched 41% higher in June, making the biggest jump in a decade. BMO was quick to highlight the increase is still far from the 2021 high—back when policymakers promised to double the speed of building. The bank reiterated the goal policymakers promised is unrealistic, especially as qualified demand shrinks.
Canadian inflation is slowing, does that mean it’s time to cut interest rates? Annual growth for the headline CPI came in at 2.8% in June, below the consensus estimate. However, that’s the headline—core and median measures, preferred by the central bank, are still much higher, and stickier. Until those indicators fall, major banks don’t expect interest rates to fall.
Canadian real estate is so slow, even the industry is revising its forecast lower. The Canadian Real Estate Association (CREA) lowered its home sale forecast by 75,000 units in 2023 and 2024. Despite higher prices, only a handful of buyers are convinced the market is still hot, with credit growth grinding lower. Higher interest rates are beginning to kill excess demand, but it’s unclear if rates can stay at this level long enough to erode the speculative mindset.