This Week’s Top Stories: Canadian Mortgages Get More Expensive, and The Low Rate Era Is Over

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

Canadian Real Estate

Bank of Canada Warns The Era of Low Rates Is Over

The Bank of Canada doesn’t see low interest rates returning anytime soon. Over the past 3 decades, the central bank argues that various factors have applied pressure to lower rates. As those pressures wind up, interest rates will have to climb to maintain inflation at a stable level. Going forward, they want to set the expectation that the past few years were more of an anomaly than standard.

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Canada’s Cheapest Mortgages Are About To Get More Expensive 

Mortgage rates are climbing after a brief pullback that sent home prices soaring. The 5-year fixed term mortgage is the most popular option, and currently the cheapest, and is tied to 5-year government bond yields. Over the past month, those bond yields have surged higher, also driving mortgages higher. Yields aren’t finished climbing either, and that means neither are mortgage rates.

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Canadians Brace For Higher Mortgage Rates After Bank of Canada Hike

Canada’s economy is much more resilient than thought, said the central bank. Inflation remains significantly elevated, unemployment is low, and GDP is still surging higher. This has led the central bank to raise interest rates further, in an attempt to throttle demand. In addition to hiking the overnight rate to 4.75%, the highest level in over a decade, they’re engaging in quantitative tightening. This will further reduce credit liquidity, leading to higher borrowing costs. 

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Most Canadians Are Waiting For Rates To Drop To Buy A Home:  BMO Survey

BMO’s Real Financial Progress Index survey revealed most households are waiting for lower interest rates to buy a home. The survey also found that shelter costs are the number one concern for households, with 37% stating that it’s holding back their progress. In other words, the average person doesn’t understand the relationship between low rates and their own shelter instability.  

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Bank of Canada Needs Higher Rates To Stabilize Real Estate & Counter Fed: Scotiabank

Scotiabank warns the Bank of Canada needs to hike rates soon to help stabilize housing and the economy. Low rates are helping to boost real estate prices, and that’s driving inflation and economic instability. If the central bank doesn’t continue to raise rates until the speculative mindset is broken, the risk of higher shelter costs far outweighs the risk of defaults, according to the bank. They further add, don’t count on help from the Federal government, who has been actively stimulating home buying demand. 

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  • Ian 10 months ago

    Hot economy?

    Conservatives obviously blame the Liberals for the economic pain Canadians are feeling from sky high prices for everything on top of ever increasing monthly rent/mortgage payments.

    Joe Renter and Jane Mortgager in 416/905 will eat it up

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