Interest rate hike, new mortgage rules may trigger real estate market slowdown
TORONTO — Canada’s real estate market will hit a slow patch in 2018 as tighter mortgage stress tests apply pressure and the impact could be exacerbated if an expected interest rate hike drives buyers to put off their home purchases, economists said Monday.
The Bank of Canada will make its first interest rate announcement of the year on Wednesday. Many observers predict will boost the country’s benchmark rate by 25 points to 1.25 per cent after the economy’s strong performance last year and a particularly strong jobs report from November. If the economy keeps pace, they believe that rate may be bumped up a few more times over 2018.
The suspected hikes could heap stress onto buyers already combating stricter regulations that were introduced by the Office of the Superintendent of Financial Institutions on Jan. 1 for uninsured mortgages, and elevated five-year, fixed mortgage rates that were pushed up by the CIBC, RBC and TD banks last week.
“This is the most significant test the market has seen in recent years,” said Benjamin Tal, CIBC’s chief deputy chief economist.