Bank of Canada Hikes

The Bank of Canada dropped a hammer to the real estate market with a 0.25% rate hike. After a 4 month pause to rates, the BoC took the 33% rate hike prediction from economists, and flipped odds betters with another increase.

Our overnight rate is at a 22 year high.

Now, the Canada’s 5 year government yield has jumped to +3.7%. Fixed rates are on the way up, and fast, with all rates back into the 5% range again. We are back to the 2022 highs. Clients who are not pre-approved, should do so now.

Highlights from the Bank of Canada’s statement include;

• “Underlying inflation remains stubbornly high.”

• “Consumption growth was surprisingly strong and broad-based”

• “Housing market activity has picked up”

• “The labour market remains tight”

• “CPI inflation ticked up in April to 4.4%”

Note, for every 0.20% bump in rates, borrower mortgage power drops by just under 2%.

This may be the final nail in the coffin for many borrowers.

Prices Continue to Climb

May data sets are in, and home prices are up 3.50% from April and down just 1.20% from last year. Sales are up 24.70% year over year, while new listings are down 18.70%.  

• Lower mainland Vancouver is up 1.6% last month and 5.7% in 3 months 

• Toronto it up 2.9% and 7.5% in 3 months 

• Calgary condo prices are up 10.9% year over year  

As prices continue to rise, so do average mortgage balances. The below chart is from TransUnion and Canada’s average mortgage balance is now just shy of $350,000.

Infrastructure and supply vs demand constraints continue to rank Canada as one of the most unaffordable countries in the world to live. Below is the comparison of house prices vs increases to the population.  

Landlords Underwater?

A recent report from Urbanation has found that most rental property owners are cash flow negative. Less that half of all condo investors are cash flow positive. This should come as no surprise with the average price per square foot pushing over $1,000 in most markets along with condo fees & property taxes.  

Investors account for more than 50% of condo purchase in Toronto and Vancouver.  

Having said this, demand has never been higher. In the first four months of 2023 alone, Canada saw a 270,000 increase to the working-age population.

Current Interest Rates

CONVENTIONAL

• 5 year fixed, 30 yr amortization – 5.44%

• 3 year fixed, 30 yr amortization – 5.64%

• 5 year variable, 30 yr amortization – Prime – 0.60% = 6.10%

• 5 year fixed, 25 yr amortization – 5.34%

• 3 year fixed, 25 yr amortization – 5.54%

• 5 year variable, 25 yr amortization – Prime – 0.70% = 6.00%

INSURED

• 5 year fixed, 25 yr amortization – 5.09%

• 4 year fixed, 25 yr amortization – 5.09%

• 3 year fixed, 25 yr amortization – 5.44%

• 5 year variable, 25 yr amortization – Prime – .90% = 5.80%

Fast Facts

• 14 – That’s the number of eggs found with a female crocodile in Costa Rica who had been isolated in an enclosure for 16 years. Scientists are deeming this a “virgin birth”.

• $675,000 USD – The price a collector paid for the bar set from TV sitcom ‘Cheers’ – a centrepiece of the 11-season hit show.