BC Housing and Mortgage Insights Newsletter May 23, 2024

This week, Canada's inflation fell to 2.7% in April, raising expectations for a June rate cut. Despite the spring typically boosting the housing market, uncertainty and potential rate cuts have slowed activity. Meanwhile, British Columbia focuses on upzoning and public housing to combat its housing crisis. In the U.S., a slight inflation drop may lead to lower mortgage rates. Subscribe to the BC Housing and Mortgage Insights Newsletter

Canada’s inflation rate falls to 2.7% in April, driving up odds of June rate cut

Canada's annual inflation rate dropped to 2.7% in April, fueling expectations for an interest rate cut in June. Statistics Canada attributed the slowdown from 2.9% in March to declining prices for food, services, and durable goods. This data boosts confidence among economists and financial markets, with the probability of a June rate cut now over 50%. Finance Minister Chrystia Freeland highlighted the government’s efforts to support the Bank of Canada in creating favorable conditions for lower rates.

Spring should be a boom time for the housing market, it's not

Typically, spring sees a booming housing market in Canada, but 2024 is different. Uncertainty about the economy and pending interest rate cuts from the Bank of Canada have slowed market activity. The Teranet-National Bank Composite House Price Index shows stable prices in April, with modest gains in some cities and declines in others. Many first-time buyers are waiting on the sidelines, hoping for rate cuts by summer. Despite current sluggishness, population growth, limited supply, and anticipated rate cuts might boost prices later this year.

To Fight the Housing Crisis, Upzone and Build Public Housing

British Columbia's housing crisis is severe, with urgent action needed to increase density and build public and nonprofit housing. Despite several new policy measures, the province still struggles to meet housing demands. To effectively tackle this issue, BC must upzone for higher densities, increase capital grants and loans, and develop more public housing projects. By allowing nonmarket housing to be built without restrictive rezoning processes, the province can reduce costs and delays, ensuring more affordable housing is available where it’s most needed. This strategy will help alleviate the housing crisis and meet future demand.

Falling Inflation in April Paves Way For Possible Mortgage Rate Reduction

April's Consumer Price Index (CPI) report revealed a slight decline in inflation, dropping to 3.4% from March's 3.5%. This decrease could lead to lower mortgage rates, providing relief for the housing market struggling with high borrowing costs. The Federal Reserve, aiming to curb inflation, may consider rate cuts if this trend continues. A drop in the 10-year Treasury yield, following the CPI release, hints at potential mortgage rate reductions. Lower borrowing costs could boost housing market activity, making homeownership more accessible for many Americans.