From rising inflation and falling consumer confidence to changing lifestyle choices, Canada’s mortgage market impacts from multiple fronts.
Ben Rabidoux, a real estate analyst and founder of Edge Realty Analytics, recently participated in a webinar hosted by Mortgage Professionals Canada where he outlined some of the key trends that could impact mortgage rates.
Below is a summary of part of that discussion.
An “inflation scare” is coming
Inflation is running hot right now, with the latest reading from July at 3.7% , according to data released by Statistics Canada, well above the Bank of Canada’s (BoC) target of 2%.
Despite the Bank’s insistence that inflation pressures should prove “transitory” and dissipate as supply chains ease up, Rabidoux believes an “inflation scare is coming.”
That’s partially based on a survey by the Canadian Federation of Independent Business, which measures price expectations among Canadian businesses. The percentage of businesses anticipating price increases of more than 5% this year has spiked to nearly 45%, up from 24% at the start of the year.
“We know that businesses are seeing a lot of price pressure. That’s going to translate into higher inflation and I have a suspicion it’s going to end up being a little stickier than central banks will have us believe,” Rabidoux said.
If that comes to pass and inflation remains high, markets would likely see a rise in the 5-year bond yield, which is the leading indicator for 50year fixed mortgage rates.
“If people get nervous that inflation’s going to stick around, you could see this rate tick up, and that would be bad news for fixed-rate mortgages,” Rabidoux added.