July 5th, 2022 Mortgage Industry Update
The Bank of Canada announced on June 1st that its overnight lending rate will increase to 1.50% from 1.00%. The prime rate has increased to 3.70% from 3.20%. Inflation globally and in Canada continues to rise, largely driven by higher prices for energy and food. Canadian economic activity is strong and the economy is clearly operating in excess demand. The Bank of Canada suggests that they will more than likely continue to raise interest rates over this year to tackle higher than anticipated inflation rates.
Additionally this week:
– Canadian insurance provider PolicyAdvisor: Mississauga is the most expensive city in the country (when it comes to cost of living versus income) in which to live and the second-most unaffordable large urban area in all of Canada and the United States, behind New York City.
– Poll by Canada Life: 45% of Canadians who are currently renting will either continue doing so indefinitely, or aren’t certain when they will get into homeownership. Those in the 25-29 age bracket are around twice as likely to never purchase a home or continue renting indefinitely.
– Bank of Canada: In 2016, a house in the suburbs 50km outside of downtown Toronto would typically be worth about 33% less than a similar home in the city. Even in 2019, before the pandemic, gap had narrowed to 26%. But the average cost benefit had shrunk to just 10% last year.
– Right at Home Realty: 80% of Ontario homeowners say they will not be selling their homes in the next 2 or 3 years (versus 77% share last year). Only 19% of potential first-time home buyers in Ontario are intending to buy in the next two to three years, compared to 30% in 2021.
– Statistics Canada: Inflation hit a new landmark high in May, accelerating at a yearly pace of 7.7% and reaching its highest rate since 1983. Increased from 6.8% in April as the recent surge in prices across the board showed little sign of abating.
– Zumper report: The Canadian housing market continues to witness a dramatic climb in rental prices. The majority of Canadian cities included in the report (60 per cent) experienced double-digit year-over-year rent price increases.
– The Bank of Canada said in a study that the closure of many downtown services coupled with a desire for more living space increased demand for homes in suburban areas. This shift weakened the so-called proximity premium typically associated with homes in more urban areas.
Stay tuned for the next update!
For any questions and concerns please do not hesitate to call Harpreet Singh The Mortgage King at (416) 795-1919.