![]() That could cause further troubles for the country’s rate-sensitive housing market and people with home equity lines of credit and uninsured mortgages might want to consider speaking with a broker to discuss refinancing, Zlatkin said, adding she’s seeing more people hit their trigger rates. ![]() “At this point, the Bank of Canada may have no choice but to increase rates again in the new year.” “We’re seeing inflation numbers still very high and we’re still seeing a lot of Canadians well-employed and recession clearly hasn’t hit,” Zlatkin said. The unemployment rate is at 5.2 per cent, a level most economists deem full employment - meaning anyone who wants a job has one or can get one - at a time when demand for labour hasn’t let up. Consumer price growth has slowed, but it’s still near seven per cent. To construct these, we rely on scenarios published by Moody’s Analytics in the runup to a potential debt ceiling crisis in 2021, which provided the general contour of potential. While higher interest rates have taken some of the heat out of the country’s real estate market, economic readings are coming in stronger than expected. Forecasting the effects of a debt default on the housing market requires monthly time series projections of the unemployment rate and 30-year mortgage interest rate. Governor Tiff Macklem is walking a delicate balance between bringing down inflation levels not seen in four decades while preventing the economy from tipping into recession. The central bank warned last week that half of all mortgage holders will find their mortgage payments have risen by the end of 2023 others will feel the effect as they renew in the coming years. The bank also warned that rates may have to stay higher for longer until inflation is defeated.Zlatkin was speaking just days after the Bank of Canada lifted the policy rate by 50 basis points, bringing it to 4.25 per cent when 11 months ago it sat near zero. He said the Alberta forest fires could also cut into confidence. "And then with the Bank of Canada holding the rates steady, they may have re-evaluated the situation." Fading optimism?īut according to Bolduc, that optimism which came with a new rise in real estate prices, may fade once people realize they too will likely be affected by rising mortgage costs. "You may have had people who were expecting ," said Bolduc. So, why, amidst all the warnings, is consumer confidence on the upswing, I asked Walter Bolduc, the economic forecaster who compiled the Conference Board report, in a phone interview on Wednesday.īolduc said the reason for the increase in confidence may be partly seasonal, but he also attributed it to the pause in the Bank of Canada's increase in interest rates. ![]() While central bankers insist there are no plans to reduce interest rates, a shock to funding costs is the kind of drastic situation where it could happen. "If global stresses were to return and persist, bank funding costs could rise beyond the higher levels intended by tighter monetary policy," said Rogers. Compounding the problem could be a global shortage of money, meaning that banks could have to restrict lending, even in emergencies. In the prior FSR, the bank warned Canadians were accumulating too much mortgage debt.Īmong this year's warnings, there are concerns banks could face a shortage of cash reserves, if demand for money exceeded conventional sources, including the cash Canadians hold on deposit. (Fiona Goodall/Getty Images)Ī year ago, the bank warned rising interests would hurt the fortunes of those who bought homes when interest rates were low and prices were high. But Canadian borrowing has continued to rise as a perentage of GDP, while it has been falling in comparable nations. BMO and Scotiabank were the first in what is likely to be a trend by all the Canadian banks to set aside extra hundreds of millions of dollars - more than a billion for BMO - to cover loans that borrowers cannot afford to pay back in full.Ī for sale sign is pictured in Auckland, New Zealand during their property boom which has been compared to Canada's. On Wednesday, the latest arrivals to the misery party were the Canadian commercial banks. The gloomy warnings have been coming thick and fast. Just as new consumer confidence figures from the Conference Board of Canada show "a three month streak" of growing optimism, worrywarts from the commercial banks, the Canada Mortgage and Housing Corporation (CMHC) and the Bank of Canada, seem to be saying "not so fast."įor Canadians trying to make sense of a series of frightening headlines, the difficult question is whether the warnings of potential economic turbulence are a signal to take the crash position or if we should trust our fellow travellers who seem to be taking the distressing indicators with a grain of salt. It is an unfortunate rule that bad things also happen to optimistic people. ![]()
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