According to Bloomberg, which obtained a copy of the meeting’s “minutes-like summary” released Wednesday, BoC officials had discussed scenarios under which rate reductions would be deemed appropriate.

However, they had varying opinions regarding the timing and evaluation for such conditions.

“There was some diversity of views among governing council members about when there would likely be enough evidence that these conditions were in place, and how to weight the risks to the outlook,” the meeting’s summary stated.

Council members also expressed concerns over a spring housing rebound and how this could exacerbate inflationary pressures.

“If the housing sector rebounds in the spring, shelter price inflation could be pushed up, delaying the return of CPI inflation to the 2% target,” the summary said. “If inflation proves more persistent than expected, monetary policy would likely need to remain restrictive for longer.”

Statistics Canada released new data this week revealing that inflation eased by 2.8% in February. This has led to some speculation that the BoC will begin cutting rates as early as June.

Source CMP
By Mika Pangilinan

Bob Dugan, CMHC’s chief economist, said the national housing shortage has pushed developers to concentrate on multi-unit projects in Canada’s major urban areas.

Additional data revealed that adjusted starts in February soared by 79% in Vancouver but dipped by 31% in Montreal.

Since housing starts can vary greatly month over month, CMHC also calculated the six-month moving average of the seasonally adjusted annual rate.

February’s moving average was 245,665, up 0.4% from January. But this pace remains below the six-month trend of over 277,000 starts observed in late 2022.

Commenting on CMHC’s release, TD economist Rishi Sondhi said housing starts in the first quarter are expected to fall short of the figures recorded in the fourth quarter of 2023.

“In the first two months of Q1, housing starts are below their fourth quarter level, suggesting some potential downward pressure on residential investment growth in the first quarter,” said Sondhi. “We think they’ll head lower as the year progresses, with past weakness in home sales filtering through into home building.”

Source CMP
By Mika Pangilinan

While a drop in interest rates is expected to present a boost to the Canadian commercial mortgage market this year, borrowers should realize rates are unlikely to dip dramatically in the coming months, according to a top broker in the space.

Peter Quinn, director at Multi-Prêts Hypothèques in Quebec, told Canadian Mortgage Professional that a mild decline in rates was likely to be one of the themes of the year for the commercial space, in addition to the much-discussed wave of renewals occurring in 2024 and 2025.

“Many clients are hoping for a significant drop in fixed interest rates which, in my opinion, will not happen,” he said. “The economic indicators are still very strong, so I don’t see much of a decrease before 2025.

“In addition, more than 60% of the mortgage loans in Quebec’s multi-unit and commercial real estate portfolio will mature in 2024/25. Several clients will renew their mortgage loan and will experience a significant increase which most certainly will cause a financial deficit for several buildings.”

That backdrop could result in more sales and a possible reduction in prices, Quinn said, as well as clients who have refinanced their properties in the past gearing up for a new market of opportunities.

“It’s important to be patient as we return to a volatile market,” he said. “For these reasons, and considering the volatility of this market and the potential for inflation to rise again, I don’t believe that interest rates will decrease significantly in the coming years.”

What should commercial mortgage brokers focus on at present?

Top of mind for commercial brokers in the current market, according to Quinn, should be attentiveness and efficiency when dealing with clients – as well as remaining innovative in mortgage brokerage operations and staying attuned to market fluctuations and trends.

Those were all key considerations for Quinn throughout the market turbulence of 2022 and 2023, with his business’s strong performance amidst a stormy economy helping him clinch the Canadian Mortgage Award last year for Broker of the Year – Commercial.

The achievement marked the fulfilment of a goal Quinn had established since beginning his career in the commercial space in 2015. “I tried for the first time in 2020 to get this prestigious award, but at that time I was not ready and I did not win,” he said.

“I therefore continued my growth efforts and won the prize in 2023. [It] allowed me to be recognized among my peers but above all, in the eyes of my clients and my business partners, which added a lot of credibility to my business.”

That momentum has helped carry Quinn into 2024, with business remaining robust in spite of the unpredictable market conditions. The broker told CMP his book had witnessed “significant growth” in the year to date, with a hoped-for increase of at least 35% based on files being processed.

“In addition, we’re in the process of opening the Ontario market, and I believe that our progress will be increasingly important in this new province,” he said. “We’re very confident of doubling our business volume very quickly by 2026.”

Register now for the 2024 Canadian Mortgage Awards

This year’s Canadian Mortgage Awards are fast approaching, with the eagerly anticipated gala dinner and awards ceremony to take place on May 2 at Toronto’s Congress Centre.

Excellence Awardees have recently been revealed for the most prestigious date in the mortgage industry calendar, with winners to be named on the night. Mortgage professionals from across the country are set to convene for a memorable evening to celebrate the best and brightest the industry has to offer – and registration is still open for what’s set to be an unmissable event in Toronto.

Simply follow the link above to register – with all guest details due on or before April 11, 2024 at 5pm EST.

Renowned Etalk anchor Tyrone Edwards is set to preside over proceedings, which will see a cocktail reception followed by the awards ceremony and dinner banquet, and a post-awards celebration fronted by Ascension Groove Band.

Be sure to register now for what’s gearing up to be an unforgettable night for Canada’s mortgage industry.

Source CMP
By Fergal McAlinden

New data has unveiled the Canadian areas witnessing the most significant surges in house prices from January 2023 to January 2024, with Bancroft, Ontario leading the pack.

According to real estate experts at calgaryhomes.ca, which scrutinized house sales data from The Canadian Real Estate Association (CREA), Bancroft emerged as the frontrunner, with an average price surge of $71,200, marking a notable rise of 14.7%.

In January 2023, homes in Bancroft had an average price of $484,800, which soared to $556,000 by January 2024. This spike, almost 17 times the national average, has been attributed to a growing trend of remote work arrangements, drawing individuals seeking solace in Bancroft’s natural allure without compromising their professional commitments.

Calgary, Alberta, secures the second spot with an increase of $52,000, reflecting a 10.1% rise from $517,400 in January 2023 to $569,400 in January 2024. The city’s robust economy, driven by sectors such as energy, finance, and technology, alongside its vibrant cultural scene, has been attributed for its appeal as a residential destination.

Fraser Valley, in British Columbia, clinches third place, after seeing a 5.2% rise, from $958,600 to $1,008,800 over the same period. Its verdant landscapes and inviting communities continue to draw both residents and visitors.

The Lower Mainland, also in BC, follows closely, seeing a 4.7% rise of $50,000, while Greater Vancouver, registering a 4.3% hike of $48,300, rounds off the top five.

Ontario’s Sudbury secures sixth place, seeing a $47,100 increase, reflecting a 12.1% rise from $390,800 to $437,900, while Mauricie in Quebec posted a 14.8% rise – meaning its home values climbed by $34,100 year over year.

Greater Moncton in New Brunswick and Vancouver Island saw prices jump by $32,800 and $30,900 respectively. Concluding the list, Grey Bruce Owen Sound in Ontario saw a 5.5% rise of $29,600.

A shift to rural areas

A spokesperson for calgaryhomes.ca attributed the surge to Canada’s diverse landscapes and vibrant communities, highlighting a shift towards rural areas driven by remote work trends. “More rural areas, such as Vancouver Island and Fraser Valley, are seeing a great rise in house prices, moving away from previous trends which saw the more urban areas seeing a rise in house prices due to greater demand for easy access to workplaces. This could be a result of remote working becoming more mainstream,” they noted.

A total of 52 Canadian areas were included in the study, spanning cities, counties, regions, islands, and metros. Benchmark prices for January 2023 and January 2024 were compared to determine the numerical and percentage changes, with areas ranked accordingly.

Source CMP
By Jonalyn Cueto

“I thought that they might open the door a little bit to the possibility of rate cuts,” Porter said. “There was the one slight nod in that direction, that they see some signs that wage pressures are starting to ease a bit.

“But I think the overriding message was that we all have to be patient – this is going to take some time. They need at least a few more months of good inflation data, or better inflation data, before they can become comfortable. And I think the watchword here is patience.”

Could the BoC push back its timeline for rate cuts?

BMO’s forecast still envisages a first cut by the central bank in June. Still, Porter said that’s by no means a “foregone conclusion” – and that there appears next to no chance of the Bank deciding to start cutting earlier.

“A lot of things would have to go miraculously right in the next five weeks to get them cutting in April,” he said. “I seriously doubt they’d be ready. Even June is starting to look a little bit questionable, because they’d have to start teeing that up relatively soon if they’re expecting to cut rates into June.”

Would-be homebuyers waiting for rates to start falling were left disappointed by the Bank’s latest call, although it seems increasingly clear the days of rate hikes are in the past.

Prospective buyers are likely to take confidence from the chance of lower rates at some point in 2024, Porter said – but they shouldn’t expect a rapid decline in rates after the first cut.

“I think if you’re looking to get into the market, you would be somewhat encouraged by the talk that rates are likely to come down slowly, gradually,” he said. “But you might not be thrilled about the caution that the central bank governor has indicated around that view, that this is going to take some time and rates are not going to come down as fast as they went up.

“I like to say rates took the elevator up; they’re going to take the staircase down. This is going to be a pretty slow walk down the mountain, I think.”

If economic trends continue to play out as expected, Porter said BMO expects the Bank of Canada to trim rates to 4% by the end of this year and 3% by the end of 2025 – although that’s by no means a surefire thing in light of the central bank’s continuing cautious outlook.

“I think if we’re going to be off, it’s that rates are a little bit higher than what we’re projecting at the end of both years,” he said. “In other words, this whole backing down in rates might take a little bit longer.”

Should the Bank of Canada be focusing on different inflation measures?

The Bank has faced criticism in recent weeks for its focus on inflation measures that include shelter costs and mortgage interest payments, both of which have rocketed amidst rate hikes since 2022.

Those measures, critics have highlighted, will remain high as long as the Bank keeps interest rates at their current elevated level.

Nonetheless, Porter said there’s a case to be made for the Bank’s current approach – and noted that CPI-median, one of governor Tiff Macklem’s preferred ways of gauging inflation that isn’t heavily influenced by mortgage interest costs, has remained high.

“I appreciate the fact that outside of mortgage costs alone, inflation is basically at 2%. That is true,” Porter said. “But some other costs have actually come down because mortgage rates are up. Things like new home prices have actually dropped because mortgage rates are up.

“I think if you look at the overall shelter basket, it’s pretty indicative of what shelter costs are doing…. And the median measure is still rising by more than 3%. If I had to pick one number that I’d be watching in the months ahead, it would be that median price measure. And I do think it’s not a bad measure. It’s fairly pure, and it doesn’t really get affected directly by those soaring mortgage interest costs.”

Source CMP
By Fergal McAlinden

He told Canadian Mortgage Professional that the central bank’s continuing caution on interest rates showed it was in no rush to introduce its much-anticipated first cut of the year.

“I was expecting them to specifically mention concern about the strong start to the housing market that we’ve had for the year,” he said. “I don’t think they’d be pleased to see… prices up 7% December-January, up strongly over last January.

“So I don’t think they would be pleased to see that even before they’ve cut rates, housing continues to be so red hot. And I was surprised they didn’t mention that specifically.”

When will the Bank of Canada cut interest rates?

The Bank appears to be taking a “wait-and-see” approach to rates as it continues to weigh up how economic data is playing out, Laird said, with its latest decision marking the fifth time in a row that its benchmark rate has remained unchanged.

It’s unlikely to give many clear signs that a cut is imminent until it actually begins to lower rates, he added, to stave off the risk of heating up the economy even further.

“I think we might not know the cut is happening until it actually occurs, because I think even announcing it, or that they’re thinking of it, will be the opposite of the goals that they’re trying to achieve,” he said.

That caution is partly because of the market resurgence that took place in spring of last year when the central bank strongly suggested its rate-hiking path was at an end, bringing about a spike in home sales and prices across the country.

Inflation began to jump unexpectedly as a result – and the Bank was forced to hastily bring rates higher again with a pair of summer hikes.

“In a way, I think that’s what the Bank is terrified of,” Laird said. “It was just when they announced [at the start of] 2023 that they thought they were done hiking rates, that caused a strong housing market, consumer spending to go higher than they wanted, and a surge in inflation.

“So they’ve seen that happen. Their announcement of a hold, and sort of forecasting of normal rate hikes, caused things to go [against] the way they wanted them to. My expectations are the Bank will cut later and by less than what the market is expecting.”

Is the housing market set for a busy spring?

Still, while rates are not on the wane anytime soon, the fact that no further hikes look likely means consumer confidence toward the housing market is set to continue growing.

That’s both because buyers are now used to rates at their current levels, and looking ahead in expectation that rates will be lower later in the year, according to Laird.

“I’d say a lot of people are looking at this and saying, ‘OK, rates have been like this for a little while. I understand it. I can afford it at this level,’ and looking out they’re saying, ‘OK – I can afford it, or maybe it’s a slight stretch, but it seems like the trajectory is [towards] the current rates or lower.’”

Could that mean the housing market is set for strong activity in the months ahead, or will it take the first cut for homebuying to heat up even further?

“If people are assuming what [the Bank] will do and making the decisions based on that right now, we might just have a strong spring market period, because of that sentiment and expectation,” Laird said.

Source CMP
By Fergal McAlinden

Observers including TD Economics have highlighted the difficulty of returning inflation towards the Bank’s 2% target while interest rates – and by extension, mortgage interest payments – remain high.

“In order to get to 2%, ironically, you need to cut,” Tal said. “I think that’s something that will be coming. But I think that they are still unwilling to do the adjustment, remove mortgage interest payments from the calculation – and that’s something that will complicate the message. But none of that will change my mind that the first cut will be in June.”

What does the latest BoC decision mean for the housing market?

Major Canadian housing markets including Toronto have seen homebuyers step off the sidelines in growing numbers since the beginning of the year, emboldened in part by growing confidence that rate hikes are at an end and lower borrowing costs are on the way.

“Buyers are coming back slowly. I think we know that buyers do care about the level [of rates], but also they care about the trend,” Tal said. “And they know that the trend is basically down as opposed to up in terms of future rates.

“So that’s something that takes some people into the market. I think that that trend will accelerate when we actually see cuts – let’s say in June. So that will be accelerated in terms of more people in the market.”

Lower rates are also likely to impel more sellers to enter the market, Tal said – with that increased supply from the resale market set to prevent prices from rising dramatically even as homebuying picks up in the spring.

Still, even if the Bank chooses to cut rates in June, there seems little prospect of a housing market surge that month, he added. “I don’t know if I would use the word ‘surge’ – but I definitely would use the word ‘improvement,’” he said. “I think the fall will be strong.”

While there was no indication of coming rate cuts in today’s statement, Tal said Canadians also shouldn’t be surprised by the Bank’s cautious tone.

“I think people should not be disappointed by the language because the Bank cannot really use dovish language in this environment,” he said. “They will keep it for later.”

Source CMP
By Fergal McAlinden