4 July 2018

“Why do it now?” – Marion asks, pointing to weak inflation and net employment declines this year. “Especially, when there could be a trade war growing, and not between Canada and the U.S., but between the U.S. and China”.

In addition to it, the recent report by RBC Economic Research shows that rate hikes affect the affordability level negatively.

It turned out that higher rates are taking away the affordability gains reported at the end of 2017.

The BoC’s aggregate affordability measure went up to 48.4%, which means the Canadian’s expenses for homeownership rose.

“Mortgage rate increases are the main reason why RBC’s measure returned to its multi-decade high level. It’s not the first rate hike in many tears, there were more during the previous two quarters,” – the report’s authors Craig Wright and Robert Hogue wrote. “Nevertheless, home prices decline (focused in the GTA) offset the growth in Q4”.

Meanwhile, the drop in Toronto real estate prices remained at the beginning of this year, with Toronto and Winnipeg being the only large Canadian markets showing improved affordability in the first quarter of this year.