This Week’s Top Stories: Canadian Real Estate Worse Than The 90s Bubble & Toronto Delinquencies Rise

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

Canadian Real Estate

Canada Makes The 90s Real Estate Bubble Look Like Affordable Housing

Canadian real estate became just a little more affordable, according to the RBC Affordability Index. A median household would need to spend 59.5% of its income on debt servicing to buy a home in 2023. It was small, but it was the first decline in three years. The minor progress is really emphasized by the fact that housing in Canada remains less affordable today than it was during the peak of the 90s bubble.

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Toronto Real Estate Is Following Canada’s Climbing Mortgage Delinquencies 

Toronto real estate is seeing a rise in mortgage delinquencies, following the national trend. The city’s delinquency rate reversed course, and climbed to 0.08% in Q1 2023—the highest level since Q3 2021. It’s not particularly high, but the increase is happening at a time where lenders are going to extreme lengths to avoid payment delinquencies. Still, the City’s real estate market is showing stress, meaning it might be worse than thought. It’s not a trend observed in Montreal or pricey Vancouver. 

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Canada’s Money Supply Is Growing At The Slowest Rate On Record

Canada’s money supply is growing at the slowest rate on record, and that’s bad news. Bank of Canada data shows the M2++ broad money supply showed the lowest annual growth on record in April 2023. On the inflation front, that’s a positive since it means demand is starting to taper from the unusually high stimulus levels. However, since Canada’s economy has been largely driven by credit, it means a slowdown in economic growth is rolling out. 

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Canadians Are Applying For Credit Cards Not Mortgages, Subprime Growth Surges

Consumer credit agency Transunion found fewer Canadians are looking for mortgages and car loans. All but one major credit segment saw applications for new accounts fall sharply. The exception was credit cards, where the number of new accounts surged 20% when compared to the previous year. Compounding concerns —lower quality borrowers, like those with subprime credit scores, are the fastest growing borrower segments. 

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Canadian Inflation Slowing, But Not Enough To Prevent Rate Hike: BMO

Canadian inflation is showing some encouraging signs, with May’s annual growth lower than expected. BMO warned the details of that report aren’t as positive as they might seem. The bank found short-term signs of inflation growth remain stubborn, which is exactly what the Bank of Canada warned would be a concern. This reinforces the likelihood of another rate hike, since they absolutely don’t want to see inflation growth reaccelerate, potentially leading to even more rate hikes.  

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