December 17th, 2024 Mortgage Industry Update
The Bank of Canada announced on December 11th that its overnight lending rate will be cut to 3.25% from 3.75%! The second consecutive cut of 50 bps. Marks the fifth back to back rate cut! Inflation has dropped below the 2% target now. We can expect further decreases. The prime rate now decreases to 5.45%.
Additionally this week:
– Former Bank of Canada governor Stephen Poloz (2013-2020) believes country is in recession and that population growth contributed to misleading perception of economy’s health. Immigration had skewed economic data and painted picture of economy that’s stronger than it actually is.
– CMHC Residential Mortgage Industry Report Fall 2024: Share of mortgages for owner-occupied homes declined from 75% in Q3 2019 to 70% in Q3 2023, while mortgages for investment properties rose to 17%, up from 13% in 2019. Trend highlights growing investor interest in real estate.
– CMHC: 85% of mortgages up for renewal in 2025 were signed back when Bank of Canada’s interest rate was at or below 1%. At least 1.05 million homeowners with a mortgage will soon face a renewal at “significantly higher interest rates,” which it notes is a “concern” for the economy.
– In Q3 CMHC insured nearly 65,000 multi-unit residential units, up 26% from 2023. Almost 30,000 were newly constructed units. Has insured more than 206,000 units so far in 2024, up from 156,000 in 2023. Insured volumes totalled $47.6 billion in the first three quarters of 2024.
– CIBC: Nearly half of Canadians are currently planning, executing, or have recently completed home improvements and renovations. The average expected renovation cost now reaching $19,000 – nearly double the $10,000 reported in 2019.
– Statistics Canada: GDP expanded at annualized rate of 1% in Q3, a modest pace of growth that likely means the Bank of Canada will continue lowering interest rates in the months ahead. The Bank had expected GDP growth to come in at 1.5%, while economists forecast a 1.1% increase.
– RE/MAX Canada: National average residential price is predicted to rise by 5% in 2025, with sales activity increasing in 33 of 37 surveyed regions. Expects 44% of regions to favour sellers, 33% of regions to experience balanced conditions, and 17% of regions to be buyer-favoured.
– According to Ben Rabidoux of Edge Realty Analytics, the central bank could cut its policy rate down to 1.75% by July, driven by troubling economic trends he sees ahead. This would bring the prime rate to 3.95%, ultimately lowering interest rates for variable-rate mortgages.
– Equifax Canada: 1.3 million Canadian consumers missed a credit payment in Q3, a 11% yearly increase. Among mortgage holders rate eased to 9.5%. Consumer debt up 4% to $2.54 trillion. Non-mortgage debt rising 3.8% and taking the average to $21,810 per active credit consumer.
– US president-elect Donald Trump has issued warning to impose 25% tariff on all products entering USA from Canada and Mexico starting on first day of his new administration. To put pressure on both bordering countries to halt passage of drugs and illegal immigrants into the US.
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.
