Latest news with #BankofCanada
Yahoo
2 hours ago
- Business
- Yahoo
Housing market might need a mindset shift, not another Bank of Canada rate cut, say experts
With few — or no — further Bank of Canada (BoC) rate cuts expected this year, the country's housing market is facing a stark reality: a recovery hinges less on borrowing costs and more on a psychological reset. For activity to resume, experts say buyers and sellers must abandon hopes of a return to super-low rates and accept that current conditions are the new normal. 'As long as they expect things to be better for them if they wait, they're going to wait,' said Tsur Somerville, a professor of real estate finance at the University of British Columbia. Confidence is the main issue, not interest rates, says CIBC economist Benjamin Tal. He argues that the economic uncertainty is profound, driven by weak investment, slowing consumer demand and unresolved trade tensions. 'We are basically very close to a recession. I suggest we are in a recession in Ontario already,' Tal said. That lack of confidence is keeping the market in a deep freeze, even as economists widely expect the Bank of Canada to hold its policy rate steady on Wednesday. While CIBC is calling for two potential cuts later this year, Tal admits it's a 'tough call,' with stubborn core inflation and surprising employment data. By next year, he says, 'you have to start thinking about the Bank of Canada hiking rates, not cutting rates.' This reality is trickling down to buyers, but creating two very different reactions. For some, stability is enough. In May and June, activity picked up in 'hot pockets' of Toronto and Vancouver as some buyers took the central bank's steady tone as a sign of certainty. 'Buyers are using that as, 'That's the confidence I need,'' said Samantha Villiard, a regional vice-president at ReMax Canada. For many others though, the pressure has long been nearly unbearable. Ron Butler, a mortgage broker at Butler Mortgage, says that for middle-class families, the half-a-percent rise in fixed mortgage rates in recent weeks was another deflating moment. Clients tell him: "It's not just this increasing rate. It's everything,' he said. 'It's just an endless kind of crushing affordability context that, you know, you can tell from the sound of their voice that this is like a grievance against them." I believe that higher rates, namely relative to what they were a few years ago, are here to Tal, economist, CIBC Should fixed rates, which have moved into the "low to mid-fours," start heading back towards five per cent, Butler warns the effect would be devastating. 'It will literally crush everyone's dreams.' For those with mortgages renewing, Butler's advice is urgent. 'Go back to every email, every touch point you've ever had from your bank and see if they did offer you a rate that started with a three ... You have to make absolutely sure you might have access to those low rates.' Still, some experts argue that an era of higher rates is a necessary correction. Tal says Canadians were 'spoiled' by historically low rates during the pandemic, which overheated demand. 'I believe that higher rates, namely relative to what they were a few years ago, are here to stay,' he said. 'And that's actually a very healthy situation, because if there was something that was mispriced in the market for a long period of time, it was cash.' If rates hold steady, housing prices might not fall much further — except in the condo segment, which Tal describes as being in a 'deep recession' where pre-sale activity is 'basically dead." Instead, affordability might improve gradually, led by rising wages. 'Every homebuyer is willing to spend up to the maximum they can spend,' said UBC's Somerville. 'So if interest rates stay at this level, then prices will adjust relative to incomes in such a way over time to make housing plausible... The most likely way is prices stay flat while incomes catch up.' Villiard says Toronto's stirring market (outside of condos) has both buyers and sellers 'coming to the table being reasonable,' but a sustained rebound likely depends on macroeconomic clarity — especially on the trade front. 'The catalyst? A decision on the trade negotiations. That is really what we're all waiting to see,' she said. Tal agrees, noting that the Bank of Canada is playing it safe until there's more certainty on tariffs. 'They don't want to take any chances with Trump,' he said. 'They need more information to make a decision.' John MacFarlane is a senior reporter at Yahoo Finance Canada. Follow him on X @jmacf. Download the Yahoo Finance app, available for Apple and Android. Error while retrieving data Sign in to access your portfolio Error while retrieving data Error while retrieving data Error while retrieving data Error while retrieving data
Reuters
4 hours ago
- Business
- Reuters
TSX hits record high as Celestica jumps, commodity prices rise
July 29 (Reuters) - Canada's main stock index rose to a new record high on Tuesday, led by gains for resource and technology shares as investor exuberance continued to underpin the market ahead of a Bank of Canada policy decision and other key events this week. The S&P/TSX composite index (.GSPTSE), opens new tab ended up 134.46 points, or 0.5%, at 27,539.88, eclipsing Friday's record closing high. "Optimism still seems to be pervading the market but we're entering the most interesting part of the week," said Michael Sprung, president at Sprung Investment Management. The Federal Reserve and the Bank of Canada are due to make policy decisions on Wednesday, while a deadline for Canada to reach a trade deal with the U.S., or face a 35% tariff on its goods, is set for Friday. The BoC is likely to keep its benchmark rate unchanged at 2.75% for the third straight meeting, economists and market analysts predict, as firm core inflation and robust job growth offset trade uncertainty. U.S. ambassador to Canada Pete Hoekstra said he hoped a trade deal between Canada and the U.S. would be reached "very soon." "I think the market has risen on euphoria and I don't know what it will take to break that euphoria, but I think at some point people are going to have to look hard at valuations and decide what intrinsic value really is and that could cause some setback going forward," Sprung said. Technology (.SPTTTK), opens new tab rose 2.2%, with shares of Celestica ( opens new tab climbing 16.9% after the electronics firm reported stronger-than-expected second-quarter results. Real estate (.GSPTTRE), opens new tab was up 1.7% as bond yields fell. The Canadian 10-year yield eased 4.5 basis points to 3.484%. The materials group (.GSPTTMT), opens new tab, which includes metal mining shares, added 1.2% as the price of gold rose. Energy (.SPTTEN), opens new tab also ended higher, rising 1%, as the price of oil settled up 3.8% at $69.21 a barrel. [O/R] Air Canada ( opens new tab was a drag, with its shares tumbling 12.3% after the company reported lower second-quarter profit.
Yahoo
5 hours ago
- Business
- Yahoo
Young families are shrinking their mortgages. But does this mean they are priced out?
Younger Canadian families are bucking the national trend and reducing their overall mortgage debt, figures from Statistics Canada suggest, but the decrease may not be all good news. After hitting a peak in the third quarter of 2022, average mortgage balances among families where the primary income earner is aged 35 or younger have fallen by about $15,500, according to a report out Tuesday from Toronto-Dominion Bank citing data from Statistics Canada. Even accounting for any seasonal variation, when comparing the first quarter of 2023 to this first quarter of 2025, there was an 8.5 per cent decline (or about $10,400 less on average) in mortgage balances among younger Canadians, said Maria Solovieva, TD economist and author of the report. All other age groups have seen a steady increase in household mortgage debt since the second quarter of 2020, Statistics Canada data show. It is likely many younger households are unable to access the housing market altogether due to affordability challenges, Solovieva said. After home prices hit their peak in March 2022, following the frenzy of homebuying amid lower interest rates during the COVID-19 pandemic, the Bank of Canada started raising interest rates and home sales began to soften. Solovieva said younger Canadians have been prioritizing reducing their debt obligations in the face of rising borrowing costs. About 35 per cent of young adults are likely to rent, compared with less than a quarter of older age groups, according to Statistics Canada's 2024 Canadian Social Survey. There may also be other reasons for the drop in mortgage balances among young people. It is possible some younger Canadians are purchasing cheaper homes or own their homes outright, especially if they have received financial gifts from their parents, Solovieva said. Since the total value of real estate assets for younger Canadians has grown since the third quarter of 2022, it suggests more people in this age group are receiving financial help to buy homes than those who may be buying less expensive homes, Solovieva said. In the meantime, older Canadians are taking on more debt, although there is no sign they are taking on more investment properties or renovations to account for this, she said. In fact, Statistics Canada reported recently that households aged 55 to 64 years increased their mortgage balances by more than eight per cent from the first quarter of 2024 to the same period in 2025, while those aged 65 years and older increased their mortgage balances by nearly nine per cent. Older Canadians are expected to pass down $1 trillion to their heirs over the next few years, according to the most recent data from the Chartered Professional Accountants Canada. Many wealth advisers have reported these wealth transfers are already arriving in the form of early inheritances; in most cases to help adult children purchase their first homes. A 2024 Bank of Canada report also found more than 20 per cent of first-time home buyers received gifts to help make their down payments. Younger first-time home buyers were even more likely to receive gifts when purchasing their homes. This could exacerbate an existing trend, Solovieva said. Data show the lowest-income young households have seen their debt-to-income ratio balloon from 244 per cent before the pandemic to 446 per cent in Q1 2025. 'A lot of wealth (is) built through real estate, (so) somebody who is not in the market is left out,' said Solovieva, noting existing homeowners have largely benefited from rising real estate values over time. 'It's basically going to continue on as long as we still have this dynamic of unaffordability.' The best mortgage rates in Canada right now The best reverse mortgage rates in Canada right now Solovieva does not expect this trend of waning mortgage balances to entirely reverse in the near future but does anticipate it to level off as immigration levels decline, which could cool growth in housing prices. The latest report from the Canadian Real Estate Association revealed the national average sale price was down 1.3 per cent year-over-year to hit $691,643 in June. • Email: slouis@ Error while retrieving data Sign in to access your portfolio Error while retrieving data Error while retrieving data Error while retrieving data Error while retrieving data
Calgary Herald
5 hours ago
- Business
- Calgary Herald
Young families are shrinking their mortgages. But does this mean they are priced out?
Article content In fact, Statistics Canada reported recently that households aged 55 to 64 years increased their mortgage balances by more than eight per cent from the first quarter of 2024 to the same period in 2025, while those aged 65 years and older increased their mortgage balances by nearly nine per cent. Article content Older Canadians are expected to pass down $1 trillion to their heirs over the next few years, according to the most recent data from the Chartered Professional Accountants Canada. Many wealth advisers have reported these wealth transfers are already arriving in the form of early inheritances; in most cases to help adult children purchase their first homes. Article content A 2024 Bank of Canada report also found more than 20 per cent of first-time home buyers received gifts to help make their down payments. Younger first-time home buyers were even more likely to receive gifts when purchasing their homes. Article content Article content This could exacerbate an existing trend, Solovieva said. Data show the lowest-income young households have seen their debt-to-income ratio balloon from 244 per cent before the pandemic to 446 per cent in Q1 2025. Article content 'A lot of wealth (is) built through real estate, (so) somebody who is not in the market is left out,' said Solovieva, noting existing homeowners have largely benefited from rising real estate values over time. 'It's basically going to continue on as long as we still have this dynamic of unaffordability.' Article content Solovieva does not expect this trend of waning mortgage balances to entirely reverse in the near future but does anticipate it to level off as immigration levels decline, which could cool growth in housing prices.
Yahoo
14 hours ago
- Business
- Yahoo
Homebuyers need a psychological reset even as BoC rates plateau
With few — or no — further Bank of Canada (BoC) rate cuts expected this year, the country's housing market is facing a stark reality: a recovery hinges less on borrowing costs and more on a psychological reset. For activity to resume, experts say buyers and sellers must abandon hopes of a return to super-low rates and accept that current conditions are the new normal. 'As long as they expect things to be better for them if they wait, they're going to wait,' said Tsur Somerville, a professor of real estate finance at the University of British Columbia. Confidence is the main issue, not interest rates, says CIBC economist Benjamin Tal. He argues that the economic uncertainty is profound, driven by weak investment, slowing consumer demand and unresolved trade tensions. 'We are basically very close to a recession. I suggest we are in a recession in Ontario already,' Tal said. That lack of confidence is keeping the market in a deep freeze, even as economists widely expect the Bank of Canada to hold its policy rate steady on Wednesday. While CIBC is calling for two potential cuts later this year, Tal admits it's a 'tough call,' with stubborn core inflation and surprising employment data. By next year, he says, 'you have to start thinking about the Bank of Canada hiking rates, not cutting rates.' This reality is trickling down to buyers, but creating two very different reactions. For some, stability is enough. In May and June, activity picked up in 'hot pockets' of Toronto and Vancouver as some buyers took the central bank's steady tone as a sign of certainty. 'Buyers are using that as, 'That's the confidence I need,'' said Samantha Villiard, a regional vice-president at ReMax Canada. For many others though, the pressure has long been nearly unbearable. Ron Butler, a mortgage broker at Butler Mortgage, says that for middle-class families, the half-a-percent rise in fixed mortgage rates in recent weeks was another deflating moment. Clients tell him: "It's not just this increasing rate. It's everything,' he said. 'It's just an endless kind of crushing affordability context that, you know, you can tell from the sound of their voice that this is like a grievance against them." I believe that higher rates, namely relative to what they were a few years ago, are here to Tal, economist, CIBC Should fixed rates, which have moved into the "low to mid-fours," start heading back towards five per cent, Butler warns the effect would be devastating. 'It will literally crush everyone's dreams.' For those with mortgages renewing, Butler's advice is urgent. 'Go back to every email, every touch point you've ever had from your bank and see if they did offer you a rate that started with a three ... You have to make absolutely sure you might have access to those low rates.' Still, some experts argue that an era of higher rates is a necessary correction. Tal says Canadians were 'spoiled' by historically low rates during the pandemic, which overheated demand. 'I believe that higher rates, namely relative to what they were a few years ago, are here to stay,' he said. 'And that's actually a very healthy situation, because if there was something that was mispriced in the market for a long period of time, it was cash.' If rates hold steady, housing prices might not fall much further — except in the condo segment, which Tal describes as being in a 'deep recession' where pre-sale activity is 'basically dead." Instead, affordability might improve gradually, led by rising wages. 'Every homebuyer is willing to spend up to the maximum they can spend,' said UBC's Somerville. 'So if interest rates stay at this level, then prices will adjust relative to incomes in such a way over time to make housing plausible... The most likely way is prices stay flat while incomes catch up.' Villiard says Toronto's stirring market (outside of condos) has both buyers and sellers 'coming to the table being reasonable,' but a sustained rebound likely depends on macroeconomic clarity — especially on the trade front. 'The catalyst? A decision on the trade negotiations. That is really what we're all waiting to see,' she said. Tal agrees, noting that the Bank of Canada is playing it safe until there's more certainty on tariffs. 'They don't want to take any chances with Trump,' he said. 'They need more information to make a decision.' John MacFarlane is a senior reporter at Yahoo Finance Canada. Follow him on X @jmacf. Download the Yahoo Finance app, available for Apple and Android. Error while retrieving data Sign in to access your portfolio Error while retrieving data Error while retrieving data Error while retrieving data Error while retrieving data
