All eyes are on the Bank of Canada after a flurry of intriguing economic data
Canada’s latest inflation data may have nudged the headline figure higher – but it’s still unlikely to spur the Bank of Canada into an interest rate hike next month, with most experts viewing a prolonged rate hold as the likeliest scenario.
The consumer price index (CPI) hit the 3% mark last month, according to Statistics Canada, as rising oil prices continued to put upward pressure on the overall inflation figure.
For the housing market, that at least means variable mortgage and home equity line of credit (HELOC) rates aren’t likely to jump anytime soon, although a bumpy bond market means it’s less clear what’s in store for fixed rates.
Haventree Bank president and chief executive officer Fern Glowinsky (pictured top) told Canadian Mortgage Professional she still sees the Bank keeping rates steady in September and giving welcome news to homebuyers and owners.
“I would expect a hold,” she said. “In addition to the inflation data, we saw a bit of GDP growth, which was good. We saw unemployment come down, which is sort of good in terms of the economy signalling that things are looking a little bit better.
“Home sales are up nationally and the HPI [home price index] is up as well – so those are all pointing to a more positive outlook going forward.”
That comes with a caveat: much will depend on the duration of the Iran conflict, with no sign that a ceasefire in that months-long war is within sight.
Bank of Canada governor Tiff Macklem has already suggested rates could need to move higher if oil price shocks prove long-lasting, and with an eye on possible 2027 rate hikes Glowinsky said the window for mortgage shoppers could be closing.
“Now is probably a good time to have a conversation and explore options as a borrower to have some certainty and some security in terms of what your mortgage payments might look like over the next while,” she said.
Rumoured trade deal signals possible boost to consumer confidence
Other causes of economic uncertainty have weighed against Canada’s housing market over the past year and a half – including the tariff war waged by the Trump administration against key trading partners including Canada, a blitz that fuelled fears of a big hit to the Canadian economy.
On Wednesday, further cause for optimism emerged when Donald Trump revealed that he had reached a trade deal with Canada and would postpone a fresh round of tariffs, although no details were clear at time of writing on what shape the agreement would actually take.
Still, news of a lasting deal between the US and Canada could bring more confidence back to Canada’s housing market and convince potential homebuyers that the economic climate is now calm enough to make a move.
As sales inch higher, is the national housing market recovering?
The national market received a quiet boost this week with the news that home sales increased for the fourth month in a row, a trend that Royal Bank of Canada (RBC) says could signal something of a turning point for the housing outlook even if the recovery still has some way to run.
Glowinsky also sees the news as a sign that the national market is well poised for a gradual turnaround. “From a housing standpoint seeing prices stabilize, in some cases increase, and seeing some more purchase activity, I think is overall positive news,” she said.
“And for those who’ve been sitting on the sidelines, now there’s maybe perhaps a greater willingness to enter [the market] – if you’re a first-time buyer with great credit, the relief on HST for a period of time may be spurring some incremental activity. There are some positive incentives that are helping.”
The prospect of a less turbulent trade relationship ahead between the US and Canada, meanwhile, is further good news for Glowinsky.
“Overall, if the trade noise turns out to be less noisy and the water’s calm, I think that will continue to spur more activity in the housing market,” she said.
Make sure to get all the latest news to your inbox on Canada’s mortgage and housing markets by signing up for our free daily newsletter here.
