BC Housing and Mortgage Insights Newsletter September 18, 2024

This week, we cover key topics like aggressive rate cuts from the Bank of Canada, new mortgage reforms unlocking homeownership, and the shifting impact of remote work on small city real estate. Stay informed with fresh insights every week.
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Mortgage rate war intensifies as rates dip below 4%

A fierce mortgage rate war is unfolding, with lenders offering unprecedented discounts to attract borrowers. For the first time in years, rates on 5-year fixed insured mortgages have dropped below 4%, driven by falling bond yields and aggressive competition among banks. This pricing battle, largely targeting insured mortgages, sees big players like RBC and CIBC slashing rates by as much as 25 basis points. As banks fight for market share, experts predict that this intense competition may continue for weeks, benefiting consumers looking for lower rates.

Strong housing market rebound could slow pace of rate cuts: BoC

The Bank of Canada is facing a dilemma as the housing market rebounds stronger than anticipated. While inflation has returned to the 2% target, ongoing growth in the housing sector could slow the pace of interest rate cuts. Economists are weighing potential scenarios, balancing the need to continue reducing rates against the risk of fueling inflation through rising home prices. With key economic data due before the next rate decision in October, the central bank remains cautious about declaring an end to its tightening efforts.

Government announces boldest mortgage reforms in decades to unlock homeownership for more Canadians

The Canadian government has unveiled its boldest mortgage reforms in decades, aimed at making homeownership more accessible for younger Canadians. Key changes include extending 30-year insured mortgage amortizations for first-time buyers of new builds, raising the insured mortgage cap to $1.5 million, and allowing easier switching between lenders at renewal. These reforms are part of a broader housing plan to build nearly 4 million homes and protect the rights of renters and buyers, all while addressing the current challenges in Canada's housing market.

Canada relaxes some mortgage rules to tackle housing crisis

Canada is introducing significant mortgage reforms in an effort to address the housing affordability crisis. Finance Minister Chrystia Freeland announced changes including raising the cap on insured mortgages to $1.5 million and extending 30-year mortgage amortizations to more first-time buyers and those purchasing new builds. These measures aim to increase homeownership access, particularly for younger Canadians. However, experts are divided, with some cautioning that the changes could fuel housing demand and push prices higher, potentially worsening affordability in the long term. The debate over their effectiveness continues.

CIBC forecasts ‘supersized’ Bank of Canada rate cut by year end

CIBC is forecasting a "supersized" rate cut from the Bank of Canada by year-end, potentially reducing rates by 50 basis points. With inflation nearly under control and economic conditions weakening, CIBC’s chief economist Avery Shenfeld predicts the central bank may need to act aggressively to prevent an economic downturn. The forecast suggests rate cuts could begin in October, followed by larger cuts in December and January. Rising mortgage renewal pressures and a softening labor market are key factors driving this prediction, as millions of homeowners face increased payments.

Inflation expected to ease to 2.1%, lowest level since March 2021: economists

Economists expect Canada's inflation rate for August to ease to 2.1%, its lowest level since March 2021, driven mainly by a drop in gasoline prices. This continues the trend of slowing inflation, with the annual rate down from 2.5% in July. RBC economists predict core inflation measures will also decline, bringing the headline rate close to the Bank of Canada’s 2% target. With inflation under control, the central bank has indicated it may accelerate rate cuts if necessary, but remains cautious if inflationary pressures persist.

Canada Is Killing Work-From-Home & It’s Bad News For Small City Real Estate

Canada’s push to reduce remote work is reversing the pandemic-era trend that drove economic growth in small cities. As policymakers aim to anchor workers back to larger, more expensive cities, this shift could negatively impact smaller cities that thrived on remote work-driven demand. Real estate in these regions, which experienced significant price increases, may now face a downturn as employees return to urban centers. Government mandates and the elimination of WFH tax credits are accelerating this reversal, raising concerns about the long-term value of homes in smaller cities.