Posthaste: How another Bank of Canada rate hike will affect the housing market
Good morning!
As the Bank of Canada interest rate decision approaches this week, Canadians are bracing for another hike amid the highest lending rates in 22 years.
Another 25 basis point hike Wednesday, as many predict, would put the central bank’s policy rate at 5 per cent and the prime rate at 7.2 per cent. The last time rates were this high was March of 2001.
After raising rates rapidly to 4.5 per cent over the past year, the Bank of Canada paused in March and April before adding another 25 basis points in June.
The rate pause appeared to breath new life into Canada’s spring housing market, with the speed of the recovery surprising economists. Nationally sales rose 5.1 per cent in May and average prices increased in almost every major market.
A survey by online realtor Zoocasa done in the spring appears to back this notion up with the majority of respondents saying the Bank of Canada’s decision to hold rates had a positive impact on their interest in real estate.
Early numbers for June, however, are telling a different story. After the Bank’s interest rate hike, buyers retreated in Toronto, Hamilton, Ottawa and Vancouver, said RBC assistant chief economist Robert Hogue.
Toronto home sales that soared 32 per cent in April and May, fell 6.9 per cent in June from the month before, he said.
The decline came despite more properties coming on the market when in the previous two months a rise in listings had stimulated activity, he said. For now prices continue to rise, with the MLS HPI composite benchmark price up 2.5 per cent in June from the month before.
“But more balanced conditions point to a slower pace of appreciation in the months ahead,” said Hogue. “Higher interest rates are poised to keep homeownership
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