Younger Canadians tend to be more worried about their personal debt levels amid progressively higher costs, according to a recent Equifax Canada poll.

Approximately 52% of respondents in the 18-34 age range reported anxiety about their personal debt levels, a markedly higher share than the overall average of 39% of other respondents, Equifax said.

More than one-third (36%) of young adults said that they missed a bill payment this year, versus 23% of all other respondents.

“Canadian consumers are concerned about their ability to pay their bills on time, manage their debt, and protect their personal financial data,” Equifax said. “Nearly half of those surveyed indicated that they have never received financial education.”

While 45% of respondents are worried about paying off debt such as mortgagesand student loans, only 18% have sought professional advice or counselling for debt management. Younger adults were also more likely (42%) to get their financial knowledge via social media compered to all other demographics (22%).

“Financial education is an essential building block towards financial resilience to help people make informed financial decisions and protect their well-being,” said Julie Kuzmic, senior compliance officer for consumer advocacy at Equifax Canada. “We need to talk about money more to empower Canadians of all ages and backgrounds to build financial resilience.”

Data security should be more of a priority

An estimated 32% of respondents said that they never check their credit reports, a mechanism that Equifax Canada described as an effective way to spot the tell-tale signs of identity theft.

“Among younger adults (aged 18-34), 32% believe they are unlikely to become victims of identity theft, compared to 19% of all respondents,” Equifax said.

“Additionally, younger adults surveyed stated that they are less likely to use up-to-date anti-virus protection for their computers (61% versus 72% of the general population).”

Source CMP
By Ephraim Vecina

The Bank of Canada struck a “hawkish tone” in its latest policy rate announcement that points to the possibility of another rate hike if the situation calls for it, according to Sherry Cooper, chief economist at Dominion Lending Centres (DLC).

Cooper acknowledged the slowdown in economic activity since late 2022, which has “dramatically reduced” demand since then.

“The output gap–the difference between the actual growth in GDP and its potential growth at full employment–is essentially closed, suggesting that demand pressures have been easing,” she noted. “[The BoC] had previously expected the output gap to close in early 2024.”

At the same time, Cooper is anticipating the central bank to aim for a delicate balance in its coming policy announcements.

“The bank does not want to boost interest-sensitive spending, such as housing and durable goods purchases, by assuring markets that its next move will be a rate cut,” Cooper said.

Coupled with inflation remaining sticky at levels much higher than the BoC’s 2% target, Cooper is expecting the policy status quo to persist for a prolonged period.

“I expect the bank to pause rate hikes for the next six to nine months,” she said. “When they finally begin to ease monetary policy, they will do so gradually, taking the overnight rate down to roughly 4% by the end of next year.”

Elevated inflation likely to persist, BoC head says

Bank of Canada governor Tiff Macklem recently said that further interest rate hikes are still on the table due to sustained inflationary pressures.

“Our 2% target is now in sight… [but] monetary policy still has work to do to restore price stability for Canadians, and we are committed to staying the course,” Macklem said.

Data from Statistics Canada showed that the annualized pace of inflation posted a small drop to 3.7% in September.

“Overall inflationary pressures are persisting and larger-than-normal price increases remain broad-based across the goods and services Canadians buy regularly,” Macklem said.

Source CMP
By Ephraim Vecina

The Bank of Canada indicated yesterday that it’s prepared to raise interest rates again if required – but its acknowledgement that the economy is slowing substantially is a positive sign, according to Canadian Imperial Bank of Commerce (CIBC) deputy chief economist Benjamin Tal.

The central bank left its policy rate untouched for a second consecutive month in its October 25 decision, holding that trendsetting rate steady at 5.0% while also emphasizing that further rate hikes could be on the cards.

Still, its optimistic tone on the labour market – where it said job vacancies and employment gains were easing – suggested it believes it can afford to leave rates where they are barring major negative developments, according to Tal.

“They maintained hawkish language which makes sense, because… this is a biased bank,” he told Canadian Mortgage Professional. “They just cannot keep you relaxed about interest rates. They have to keep you guessing. That’s exactly what they’re doing: they’re admitting that the economy is slowing down, and that’s a good thing.

“Overall, I think [the decision is] no big surprise. It’s a Bank that’s willing to raise again if needed. The focus is inflation, the focus is the labour market – but they admit that the past hikes in interest rates are impacting the economy.”

Could stickier-than-expected inflation prompt another rate hike?

The central bank’s 10 rate hikes since March 2022, which have spiked its benchmark rate by 475 basis points, are “dampening economic activity and relieving price pressures,” it said in its Wednesday statement.

However, inflation remains a significant concern, with the Bank noting that its preferred measures of core inflation do not appear to be ticking downwards. It still expects consumer price index (CPI) inflation to hit its 2% target in 2025 – but next year is now projected to see higher inflation than previously anticipated, averaging around 3.5% through the middle of next year.

Tal said the Bank is probably striking a mostly cautionary tone on inflation, with current trends unlikely to convince it a further rate increase is required.

The central bank has made its second-to-last scheduled rate announcement of the year.

The Bank of Canada has left its policy interest rate unchanged in its latest decision, opting not to raise rates further amid signs that the national economy is beginning to slow.

The central bank announced this morning that it was holding that trendsetting interest rate steady at 5.0%, the second time in a row it has kept rates where they are as inflation continues to moderate and economic growth remains largely flat.

In its statement accompanying the decision, the Bank said it was prepared to raise the policy rate further if required, emphasizing its concern that “progress towards price stability is slow and inflationary risks have increased.”

Overall inflation slowed more dramatically in September than markets had expected, to 3.8%, while gross domestic product (GDP) growth also moderated noticeably towards the end of the summer.

Despite its stated concern over inflation, those factors evidently helped convince the central bank, which has already raised interest rates 10 times to the tune of 475 basis points since March 2022, that its strategy aimed at tamping down inflation and cooling the economy was proving largely effective.

Move comes as little surprise to markets

Markets had widely expected the Bank to announce no change in this month’s announcement, its penultimate scheduled decision on interest rates for 2023. Odds of an October hike plunged from 43% to 13% on the back of the latest inflation data, according to Reuters.

The move isn’t expected to have a significant impact on Canada’s housing market, with activity having already slowed considerably since the beginning of the central bank’s rate-hiking path.

Ahead of the Bank decision, RE/MAX Canada president Christopher Alexander told Canadian Mortgage Professional a pause “isn’t going to sway activity one way or another.”

Current high interest rates, he said, have already weighed down heavily on demand and pushed many would-be buyers out of the market.

The Bank of Canada is scheduled to announce its final decision on interest rates for 2023 on December 6.

Source CMP
By Fergal McAlinden

Canada will narrowly avoid an outright recession, but the central bank’s multi-decade-high interest rates will likely restrict economic growth down to near-zero levels for a prolonged period, according to the consensus of economists recently polled by Bloomberg.

The poll, which was conducted from October 13-18, also found that Canadian GDP will be essentially flat in the fourth quarter, only slightly ticking up to a 0.3% annualized pace by Q1 2024.

“Both figures are a downgrade from the previous month’s survey, and project growth that’s well below the rate at which Canada’s population is increasing,” Bloomberg said in its release of the poll results.

The Bank of Canada’s elevated interest rates are expected to do their job in reining in runaway inflation, with the pace anticipated to settle at 3.3% in Q1 2024 and then retreat further to 2.1% in the second half of the year.

Economists’ consensus pegged the first BoC rate cuts occurring in the second quarter of 2024, albeit at a languid pace.

The poll’s median prediction for the central bank’s benchmark policy rate is at 4% by the end of end of next year, versus the previous consensus for 3.75%.

North America’s central banks likely to pare down rates beginning 2024

A recent analysis by Royal Bank of Canada (RBC) projected that North American central banks are likely to make their first cuts next year, although rates are also as likely to remain higher than pre-pandemic levels to keep inflation pressures in check.

“We have argued before that there are good reasons to think that an era of unusually cheap money has come to an end,” RBC said. “That doesn’t mean interest rates will stay at today’s levels – most central bankers still view the level of interest rates currently as ‘restrictive.’

“For now, the aggressive run-up in interest rates since early 2022 means central banks are no longer in catch up mode and additional interest rate moves are highly data dependent [in the near-term].”

Source CMP
By Ephraim Vecina

Canada’s mortgage and housing markets have seen plenty of turbulence throughout this year amid climbing interest rates and cooler sales activity – but while challenges will persist in 2024, there’s room for optimism looking ahead.

That was the message from a panel at this week’s Mortgage Professionals Canada (MPC) national conference in Toronto, convening top executives from leading lenders to hear their thoughts on how the market is likely to play out next year.

While a dramatic turnaround isn’t in the cards for Canada’s still-tepid housing market, opportunity will still present itself in 2024, according to participants in the panel – moderated by Canada Guaranty senior vice president of sales and marketing Mary Putnam.

Marina Bournas, RFA Mortgage Corporation’s president and chief executive officer, highlighted the cyclical nature of the mortgage market, and said her company was looking to the future with a positive outlook.

“I think we’re in an industry where it comes in ebbs and flows, and we’ve been through multiple changes: there have been regulatory changes, market changes,” she said. “So I’m an optimist.

“With that being said, I do think 2024 will probably look very similar to 2023, and hopefully there’s some optimism with rates for the latter part of the year.”

Top of mind for RFA at present, according to Bournas, is gearing up for busier times ahead by strengthening existing relationships and adding new talent.

“We’re trying to ensure we’re working on the foundation, working on continuing to build that trust with our brokers,” she said, “working to hire and train and just be ready when it starts up again – because it absolutely will.”

Certainty on interest rates required before market shifts again

Yousry Bissada, CEO of Home Trust Company, told the audience that while demand was still definitely present in the housing market, buyers and sellers alike required clarity on when interest rates are likely to fall before stepping back into the fray.

It is the fourth of Canada’s five major banks to face penalties for such violations this year

The annual pace of housing starts was up by 8% in September compared with the previous month, according to the national housing agency.

Canada Mortgage and Housing Corporation (CMHC) said on Wednesday that September saw a seasonally adjusted annual rate of 270,466 units in September, a jump from 250,383 the previous month that was driven mainly by a quicker pace of urban housing starts.

Those starts were up 9% on a month-over-month basis, according to CMHC, while the annual pace of multi-unit urban starts accelerated by 10% to 207,689 units.

The rate of single-detached urban starts increased slightly, rising by 3% to 43,077 units last month, while the annual rate of rural starts came in at 19,700 units.

Stronger homebuilding activity last month came as a welcome change from August, when the trend in housing starts came in largely flat – rising only 0.8% on a monthly basis.

Source CMP
By Fergal McAlinden