Time for your cheat sheet on this week’s top stories.
Canadian Real Estate
Global bond yields are rising, and they’re about to take Canadian mortgage rates with them. The Government of Canada (GoC) 5-year bond hit a multi-year high, and other yields are following suit. Since credit markets are competitive, this means mortgage rates will also rise. The move reinforces the belief that interest rates will be “higher for longer.”
Canadians are looking for unemployment benefits despite claims that this is a strong labor market. Statistic Canada (Stat Can) data revealed that unemployment claims had the most significant July since 2008. At the same time, the agency also reported the number of disqualified claims has been rising sharply too. Not only is the labor market potentially weaker than thought, but households may be weak too, falsely trying to capture benefits to top up their budgets.
Ontario’s real estate industry is now on the student loan forgiveness train, but there’s a catch—they want to swap the debt for downpayment funds. The Ontario Real Estate Association (OREA) has released a report entitled “The Impact of Student Loan Debt on Homeownership,” which found young adults find student debt a hurdle to buying a home. OREA has a few suggestions on how the government should solve this, including swapping the debt for downpayment funds. It’s a suggestion that may provide brief relief but inevitably push home prices higher. Nice try.
Canada’s inflation rate has been rising since June, with gasoline prices and rents being the main drivers. Canada briefly held the title of lowest inflation in the G7, but that’s no longer true. The BoC target inflation rate is 2%, and Canada is currently double that at 4%, making it a fairly middle-of-the-road performer compared to other G20 countries. In contrast, most G20 countries are now closer to their goals.
Canadian new home construction starts are declining and expected to pull back further due to weak demand and rising interest rates. End-users are priced out, and investors no longer have the leverage to purchase new construction. This is expected to continue until the economy recovers, and credit finds a healthier relationship with construction costs.