Takeaways from the new Housing and Mortgage market review report by Mortgage Professional Canada

On Friday, Mortgage Professionals Canada has released a report on the main market data and analysis. Here are some of the key findings.

Rate increases expected in March

It looks like the central bank will start raising its key lending rate in March. Last month, inflation reached 5.1%, marking the highest result since 1991. In addition to it, core inflation, which excludes certain more volatile price categories, is averaging 3.2%, exceeding the Bank of Canada’s target range of 1-3% for the first time in at least 20 years. Such numbers prove that the BoC will have to start raising rates.

The rate increases are of particular concern for variable-rate mortgage holders, who account for 28% of all mortgage debt outstanding and almost 55% of new mortgages.

Meanwhile, fixed mortgage rates are also going up. The 5-year Government of Canada bond yield, which affects fixed mortgage rates, is now at its highest level since 2019. Growing rates will cool down the resale market partially, but it’s necessary to remember that Canadian households are in a relatively good position to withstand at least a few rate hikes.

Real estate sales

Canada’s housing market has changed from being hot to being frenzy. In January, seasonally adjusted sales were up by another 1% and now they exceed the numbers we’ve seen at the beginning of 2020 by 33%. Home sales rose by 7.4% month-over-month in Alberta and by 5.5% in B.C. They showed a small increase by 0.5% in Ontario, but fell by 2.9% in Quebec.

However, the main factor is still a restrained supply. New listings were down by 11.0% from December, pushing the sales-new listings ratio to 89%, which is the second-highest level. Home prices growth reached 28% annually, and January alone showed a 2.9% gain – it’s the strongest monthly hike. According to the report, we’ll see a few more frenzy months in the real estate market as potential buyers hurry before the rates start going up. The second half of 2022 is expected to be calmer as growing rates will reduce the market demand.


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