Archive for the 'BOC Rate Increase' Category

July 11 and July 12, 2018 were busy days for the Canadian real estate market.

On July 11, 2018 news broke of a Bank of Canada interest rate increase to 1.5% — the highest interest rates have been since December of 2008.

Then, on July 12, 2018, the Teranet-National Bank House Price Index came out showing that house prices are making up lost ground in the second half of 2017.

While unrelated, both announcements share a commonality: they indicate what could be on the horizon for the Canadian housing market.

In its July 11 announcement, the Bank of Canada (BOC) referenced Canadian housing trends.

The BOC stated that household spending is being dampened by higher interest rates and tighter mortgage lending guidelines. It referenced recent data suggesting housing markets are beginning to stabilize following a weak start to 2018.

The following day, the House Price Index released, showing the same stabilization. The composite index in June 2018 was up 0.9% from May 2018, indicating that some of the ground lost in the second half of 2017 is being recovered.

However, even though the numbers are showing recovery, the index increase is still weak for this time of the year. According to the June 2018 report, written by National Bank of Canada senior economist Marc Pinsonneault, if the Index were purged from seasonal patterns, it would have been flat over the past three months.

Different types of dwellings are also affecting the Index. For instance, condo prices have risen rapidly in Toronto and Vancouver since the beginning of 2018 (after seasonal adjustment, up 7.8% and 16.3% annualized respectively).

Prices for other types of dwellings have held their ground, which could be reassuring in the wake of higher interest rates and stricter mortgage rules, such as the B20 lending guidelines.

In summary, the good news is that:

  • Canadian household debt levels are going down. This is also good for lenders who are stress testing mortgages and looking at other components, such as the Gross Debt Service Ratio (GDS) – the amount of total housing-related debt a person carries – and the Total Debt Service Ratio (TDS) – amount of total debt a person carries.
  • Even as interest rates rise, and mortgage regulations become stricter, house prices for more traditional dwelling types are holding steady.
  • Condo prices are still on the rise, indicating that they continue to be a popular and affordable.
  • While not at a record high, the House Price Index has shown stabilization. Only time will tell if this trend continues, but many economists are predicting it will.

The next BOC rate announcement is set for September 5, 2018. It is appears unlikely, however not impossible, for there to be another increase at that. The Royal Bank of Canada predicted in July of 2018 that the BOC will continue to raise interest rates to 2.25% by the first half of 2019, but growing household income will provide some offset.

GeoWarehouse’s tools can help you continue to assess property information in a changing real estate market. A neighbourhood search can tell you the property values of a certain area. You can also find condo buildings, demographics, property information, and more.

Even as uncertainty remains, our real estate technology will help you stay agile and provide your clients with their best options.

Learn more today about how we can help. Visit www.geowarehouse.ca.

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April 2018 won’t be seeing an interest rate increase the Bank of Canada announced this week.

On April 18, 2018, the Bank of Canada (BOC) decided to hold its key interest rate at 1.25% but warned of hikes to come in the future. They cited the Canadian real estate market as a factor in this decision.

“Slower economic growth in the first quarter primarily reflects weakness in two areas,” BOC wrote in its release.

“Housing markets responded to new mortgage guidelines and other policy measures by pulling forward transactions to late 2017. Exports also faltered, partly owing to transportation bottlenecks. Some of the weakness in housing and exports is expected to be unwound as 2018 progresses.”

The mortgage guidelines and other housing policy measures were referenced as well in the March 2018 BOC announcement.

The lack of change means that those with variable-rate mortgages, or those who are up for mortgage renewal, have more time to lock in to a fixed rate if they so choose before interest rates increase again.

The recent quarterly MNP consumer debt index survey found that 43% of respondents said they are already feeling the effects of higher interest rates in Canada. 51% said they fear the rising interest rates could affect their ability to pay down debt. One-third of the respondents said the rising interest rates could possibly push them toward bankruptcy.

One thing BOC made clear in the April 18 announcement is that more interest rate increases are coming.

“Some progress has been made on the key issues being watched closely by Governing Council, particularly the dynamics of inflation and wage growth,” BOC stated.

“This progress reinforces Governing Council’s view that higher interest rates will be warranted over time, although some monetary policy accommodation will still be needed to keep inflation on target.”

Despite the housing market cool off in the beginning of the year, BOC expects inflation and wage growth to pick up the slack in the coming months.

Experts are predicting there will be more interest rate increases in 2018. The next BOC announcement is scheduled for May 30.

GeoWarehouse can help you identify new real estate leads and opportunities even with increasing interest rates. Our tools include accurate, up-to-date, accessible property information that makes you the expert.

Learn more about how we can help your real estate business thrive at www.geowarehouse.ca.

 

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BOC rate increaseFluctuating economy conditions create a well-known international financial domino effect. When market conditions show negative response to fluctuations, one of the adverse effects the economy bears is a tightening of credit conditions. From there, a financial domino effect can create a larger economic instability, which, in turn, can have dramatic impact on housing markets.

Let’s look at a recent chain of events that began overseas and ended up impacting the housing market within Canada:

  • Earlier this year gas prices dropped to lows not seen in years, to well under a dollar. This resulted in our own dollar sinking.
  • This drop then resulted in the BOC deciding to take measures to protect the economy by lowering interest rates.
  • In January 2015, the BOC reduced the country’s lending rate by .25.

This only fueled an existing rate-war between mortgage lenders.

Think about how this chain of events has impacted your overall business these last few months. Did you witness an increase in business as a result?

Now that gas prices have inched their way back up, what’s next for the Canadian economy – specifically housing and other domestic economic contributors? Some believe that increased gas prices spell a rise in the value of the Canadian dollar, which would then prompt the BOC to feel confident enough to increase interest rates.

However, this line of thinking is based on the assumption that the only factor impacting the BOC’s monetary policy is the price of oil. This isn’t the case. So how CAN we predict what will happen next?

If you are a real estate sales professional who pays close attention to the economy, we’re interested in your predictions for Canadian interest rate activity through 2015. As many believe that recovery from the 2008 recession remains one of this past century’s most difficult, how much more complicated would that make any further economic instability?

We’d love to hear from you on this! Please post your feedback and ideas on our Facebook page , Twitter @GeoWarehouse or in our LinkedIn Group

Regardless of how interest rates may fluctuate, GeoWarehouse remains a steadfast tool for your real estate due diligence.  Remember, GeoWarehouse is the premier, online due diligence tool for viewing property ownership history, comparable sales, value, home ownership, and registered mortgages, as well as obtaining condo certificates, surveys, Parcel Registers*, MPAC assessment reports and more. Call us today at 1-866-237-5937.

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