Housing and Affordability
Good news for Canada’s latest inflation figures announced on Tuesday. We saw a modest improvement over last month. Most of the improvement was with our ‘core’ inflation which strips out the more volatile components. Interest rates are expected to ease as soon as the next Bank of Canada’s announcement in June. Our inflation has been moderating but housing affordability, not so much. And it’s a hot topic. So hot in fact that all levels of government seem to be taking some sort of action and the latest action on housing coming from our Federal Government’s budget.
Some highlights are as follows:
Extending amortization for Insured mortgages to 30 years.
Increased limits on withdrawing/using RRSPs for downpayment for first-time buyers.
Introduction of a Canadian Renter’s bill of Rights.
Provide more Federal land for housing developments.
Increased capital gains tax.
Increased spending to get homes built.
The probability of lower borrowing rates here in Canada is looking good, but this is not the case in the US. Their economy appears to be exceptionally resilient, and the Federal Reserve will be reluctant to drop rates as quickly as we do. This has been reflected in the Bond markets, which has an effect on our mortgage lending rates. This will likely keep our fixed rates higher for longer. The good news though is that lenders are getting very competitive, and we are seeing some great rate deals with some fixed-term rates being offered under 5%.