Chris Gregoris

On March 6th (as anticipated), the Bank of Canada has decided to hold the overnight rate @ 5%.

They continue to re-iterate that it is too early to discuss rate cuts even though CPI came in at 2.9% in January. They also reiterated its concern for risks of inflation and pledge to continue its policy of quantitative tightening.

Canadian inflation

• Shelter-price (living costs) inflation remains elevated “and is the biggest contributor to inflation” - at approximately 28%

• Underlying inflationary pressures persist: year-over-year and three-month measures of core inflation are in the 3% to 3.5% range, and the share of CPI components growing above 3% declined but is still above the historical average 

Canadian economic performance and employment

• The Canadian economy grew in the fourth quarter by more than the BoC expected, “although the pace remained weak and below potential” 

• Real GDP expanded by 1% after contracting 0.5% in the third quarter

• A strong increase in exports boosted growth

• Employment continues to grow more slowly than the population, and there are now some signs that wage pressures may be easing

Outlook

• Next interest rate announcement is April 10, 2024 – widely expected to hold again

• BoC expects inflation to “remain close to 3% during the first half of the year before gradually easing.”

• It noted that its Governing Council is still concerned about risks to the outlook for inflation, particularly “the persistence in underlying inflation.” Governing Council wants to see “further and sustained easing” in core inflation and said it continues to focus on the balance between demand and supply in the economy, inflation expectations, wage growth, and corporate pricing behaviour. 

• Concerns around global risks (Red Sea shipping routes, which have impacted global shipping costs — that could feed into higher inflation if they escalate)

• "The assessment of the governing council is that we need to give higher interest rates more time to do their work," said Macklem.

• The Bank of Canada has maintained that it takes about 18 to 24 months for interest rate changes to work their way through the economy. "It would be great if this worked faster, it would be great if it was less painful. But unfortunately, monetary policy, it does work slowly," Macklem said. "It is an indirect channel. It's got to work through the economy. It takes time to do that."

• Future progress on inflation is expected to be gradual and uneven.

• After Wednesday’s decision, traders in overnight swaps pared their bets on a June rate cut. A cut is still fully priced in for the July decision, just as it was before the policy statement. 

If you have any questions regarding Mortgage interest rates, where they currently are and were they are most likely heading, please do not hesitate to reach out. Our Team is always ready to assist

Kind Regards,

Chris Gregoris

Fingers crossed for those looking forward to Spring… winter looks to be coming to an end soon.  With mild temperatures the residential real estate market has picked right up.  Population growth and a resilient economy has continued to support the overall demand for housing.  Greater Toronto Area home sales were up on an annual and monthly basis in February 2024. Selling prices also edged upward compared to a year earlier, the average selling price was up 1.1% to $1,108,720. 

With the Bank of Canada holding interest rates, homebuyers are coming to terms with the current costs of borrowing and are taking advantage of the new inventory of homes that are coming to market.   There were 5607 homes sold across the GTA in February,  up almost 18% compared to February of last year and up 32.7% from January 2024. 

The Toronto Regional Real Estate Board's Chief Market Analyst Jason Mercer has reported that as we move through 2024, an increasing number of buyers will re-enter the market with adjusted housing preferences due to higher borrowing costs. In the second half of the year, predicted lower interest rates will further boost demand for home ownership. First-time buying activity will also be a contributing factor, as many renters look to trade high monthly rents for a long-term investment in which they can live and build equity.  

Population growth continues at a record pace, with the anticipated lower borrowing costs, the demand for housing, both ownership and rental, will also increase over the next two years. The new construction market has begun to pick up as buyers look for choice and affordability.  New inventory will continue to play a key role keeping supply and price in check.  The GTA desperately requires this inventory and with the growth in population not slowing down the need for housing will only continue.  Therein lies the opportunity to invest in real estate.  Developers of new homes and condominiums, at the moment, have incredible incentives that will not last as our Real Estate market starts to improve.  If you were ever considering investing in real estate or would like to know more about available options please do not hesitate to contact me.  

Be sure to get out and enjoy this unseasonably warm weather and I look forward to connecting with you soon.

Kind Regards,

Chris Gregoris