2023 Housing and Mortgage Market Review

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In October, Canada's inflation rate dipped to 3.1%, slightly below the expected 3.2%, primarily due to a 6% monthly drop in gasoline prices. The economic landscape reveals sluggish GDP growth, a rising unemployment rate, and a likelihood of the Bank of Canada pausing interest rate hikes until April 2024, followed by a potential 75 basis points reduction by the end of the following year.
2023 Housing and Mortgage Market Review

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Mortgage Professionals Canada is pleased to provide a presentation of key market findings and analytics to help support Canada’s mortgage brokers. Here is a summary of “Housing and Mortgage Market Review: November 2023”. Download the full review here.

Cooling inflation reinforces a Bank of Canada rate pause

  • Inflation slows: October inflation slowed more than expected to 3.1%, signalling a potential pause in Bank of Canada rate hikes
  • Mortgage rates remain high: Despite lower bond yields fixed mortgage rates are high, but expect rates to come down another 10-20 bps over the next couple weeks if bond yields hold
  • Home sales slide across the country: Home sales were down across the country in October, led by Alberta (-8.3%)

In October, Canada’s inflation rate dipped to 3.1%, slightly below the expected 3.2%, primarily due to a 6% monthly drop in gasoline prices. The economic landscape reveals sluggish GDP growth, a rising unemployment rate, and a likelihood of the Bank of Canada pausing interest rate hikes until April 2024, followed by a potential 75 basis points reduction by the end of the following year.

Government bond yields influence fixed mortgage rates, with a recent 50 basis points drop in the 5-year Government of Canada bond yield, indicating expectations of rate cuts in 2024. Despite this, fixed mortgage rates have only slightly decreased, and further reductions are anticipated if bond yields remain stable.

Persistently high interest rates have subdued household borrowing, with loan growth at 2.9% year-over-year in September, the lowest since 1983. Mortgage growth slowed, and originations are below peak levels, expected to remain subdued until the renewal of 2020-to-early 2022 mortgages in 2025. Variable rate loans are gaining popularity, reaching around 10% in the past two months.

October saw a modest improvement in housing affordability, reflected in a $59 decrease in the monthly mortgage payment for a typical Canadian home. However, overall demand faced significant pressure, leading to the largest monthly decline in home sales nationally since June of the previous year. Major provinces, including Alberta and British Columbia, experienced substantial declines.

The real estate market is favoring buyers, with the sales-to-new listings ratio falling below 50% for the first time since 2012. House prices have faced renewed pressure, as reflected in a 0.8% monthly decline in the MLS House Price Index for October. Regional dynamics vary, with southern Ontario driving national weakness while Alberta and eastern Canada remain resilient, at least for now.

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