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USA Real Estate Blog

Three Charts You NEED to See From the Bank of Canada

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Okay maybe four charts.

As expected, the Bank of Canada (BoC) has raised interest rates to 1.75%, off the back of lower concerns of household debt, trade prospects and positive economic outlook.

“The outlook for global economic growth remains solid.. Output is expected to grow at about 2 per cent over the second half of 2018”

The central bank has hinted at more future rises, which is crippling for the housing market.

Over the past two years, credit has tightened for new mortgage lending. In addition, the Office of the Superintendent of Financial Institutions (OSFI) introduced a stress-test (B-20) in 2017 that put a screeching halt to reckless lending.

According to the report: “These measures, along with higher interest rates, have worked together to reduce vulnerabilities associated with elevated household indebtedness.”

The drop in loan-to-income ratio borrowers exceeding 450% says it all (talk about over leveraging):

Which has improved the quality of mortgage lending..?

And this chart is a good depiction of the trend the housing market will follow:

The number of sales, growth in house prices, mortgage credit and housing starts have all slowed in recent months. The BoC continues to monitor these activity levels as there is a risk of a sharp decline in house prices, especially in the Vancouver and Toronto markets, “which could dampen consumption, housing demand and construction activity.”

Hedge Accordingly.

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