With its fifth rate hike of the year under its belt, the Bank of Canada is urging Canadians to tighten theirs..While rate increases since March have attacked inflation as a whole, its biggest impact has been on once red-hot housing markets, especially in Ontario’s Golden Horse area and BC’s Lower Mainland..To get a handle on what effect the latest hike, and future ones, will have on inflation, the chance of a recession and housing markets, Finder.com assembled a group of 19 of Canada’s top economists for their opinions..Discussing inflation, 18 of the 19 panellists believe inflation peaked at 8.1% in June. July’s rate of inflation lowered to 7.6%..In terms of a recession, there was division about timing, but notably, 78% agree a recession will happen, compared to just 69% in July and just 50% in June..Further, 11% believe Canada is already in a recession, 6% see it happening in Q4 2022 and 22% see a recession being confirmed in Q1 2023. ."A recession in the US will spill over the border,” says Angelo Melino, professor at University of Toronto. “Not much we can do to stop it. If inflation cools rapidly, we can at least try to mitigate the recession.".Sherry S. Cooper, chief economist at Dominion Lending Centres believes the only way to avert a recession in Canada would be to "let inflation remain high, but the bank won't do that."."A confidence boost at this point is the only thing that is going to shift the momentum away from a downturn,” says Carl Gomez, chief economist and head of market analytics at CoStar Canada, adding it would almost take a miracle to avert a recession. “That comes by seeing a sharper reduction in inflation, an end in sight to rate hikes, a productivity miracle or some combination of these.”.Finder.com asked the panellists where they thought Canadian house prices would be at the end of 2022 compared to the end of Q1 2022..Again, 18 of the 19 members see price decreases over the period, with 14% of the majority calling for a 5% decrease, and 36% targeting a 10% decrease by year end..The second most popular opinion, from 29% of the panelists, is a 15% decrease, with another 14% going deeper with a 20% decrease in average Canadian home prices..The panel was asked “Will lower prices help first-time homebuyers enter the market?”.The majority, 71%, don't believe price reductions will provide enough impetus for first-time buyers to get off the sidelines..The balance, 29%, are optimistic the downturn will provide an opportunity for some Canadians..Those in the 71% cite rising rates as a concern.."Affordability is much less with inflation and rate hikes,” says Atif Kubursi, president and emeritus professor, at Econometric Research and McMaster University. “If employment levels are affected, it will put an additional dent in the ability of first-time buyers to enter the market." .Murshed Chowdhury, associate professor at the University of New Brunswick says, "The house prices are still high compared to the pre-pandemic level. At the same time, the high-interest rate is making it difficult for first-time home buyers to access the housing market."."The depressive effect of interest rates is outweighing the effect of reduced prices. Affordability is now the worst in a generation," says Will Dunning owner of Will Dunning Inc..Derek Holt, vice president and head of Capital Markets Economics for Scotiabank, is more optimistic about housing affordability, but he doesn't necessarily see it as a positive for the economy.."I'm more concerned that improved affordability conditions won't persist. Supply remains tight, Canada's immigration policy is importing almost the population sizes of Edmonton or Ottawa every couple of years,” says Holt. “OSFI's mortgage stress test has already positioned mortgage markets for much of the rate shock that has been delivered.”.“The repeated pattern is that house prices weaken enough to ignite another upward sales cycle that could spawn renewed inflationary pressures.".Tony Stillo, director of Canada Economics at Oxford Economics, believes better affordability will help first-time home buyers, providing specific details around the timing and pricing of this market correction.."The housing correction we had forecast back in March is well underway. The decline has been faster than expected primarily due to more aggressive interest rate hikes and a rapid deterioration in price expectations,” says Stillo. “Nationally, average home prices were already down 17% in July from their February peak, and we see much more room for prices to fall.” .“We forecast home prices will decline 27% by the end of 2023. Still, affordability will worsen further in the very near term as higher mortgage rates weigh on household borrowing capacity.".See the entire report here https://www.finder.com/ca/bank-of-canada-interest-rate-forecast
With its fifth rate hike of the year under its belt, the Bank of Canada is urging Canadians to tighten theirs..While rate increases since March have attacked inflation as a whole, its biggest impact has been on once red-hot housing markets, especially in Ontario’s Golden Horse area and BC’s Lower Mainland..To get a handle on what effect the latest hike, and future ones, will have on inflation, the chance of a recession and housing markets, Finder.com assembled a group of 19 of Canada’s top economists for their opinions..Discussing inflation, 18 of the 19 panellists believe inflation peaked at 8.1% in June. July’s rate of inflation lowered to 7.6%..In terms of a recession, there was division about timing, but notably, 78% agree a recession will happen, compared to just 69% in July and just 50% in June..Further, 11% believe Canada is already in a recession, 6% see it happening in Q4 2022 and 22% see a recession being confirmed in Q1 2023. ."A recession in the US will spill over the border,” says Angelo Melino, professor at University of Toronto. “Not much we can do to stop it. If inflation cools rapidly, we can at least try to mitigate the recession.".Sherry S. Cooper, chief economist at Dominion Lending Centres believes the only way to avert a recession in Canada would be to "let inflation remain high, but the bank won't do that."."A confidence boost at this point is the only thing that is going to shift the momentum away from a downturn,” says Carl Gomez, chief economist and head of market analytics at CoStar Canada, adding it would almost take a miracle to avert a recession. “That comes by seeing a sharper reduction in inflation, an end in sight to rate hikes, a productivity miracle or some combination of these.”.Finder.com asked the panellists where they thought Canadian house prices would be at the end of 2022 compared to the end of Q1 2022..Again, 18 of the 19 members see price decreases over the period, with 14% of the majority calling for a 5% decrease, and 36% targeting a 10% decrease by year end..The second most popular opinion, from 29% of the panelists, is a 15% decrease, with another 14% going deeper with a 20% decrease in average Canadian home prices..The panel was asked “Will lower prices help first-time homebuyers enter the market?”.The majority, 71%, don't believe price reductions will provide enough impetus for first-time buyers to get off the sidelines..The balance, 29%, are optimistic the downturn will provide an opportunity for some Canadians..Those in the 71% cite rising rates as a concern.."Affordability is much less with inflation and rate hikes,” says Atif Kubursi, president and emeritus professor, at Econometric Research and McMaster University. “If employment levels are affected, it will put an additional dent in the ability of first-time buyers to enter the market." .Murshed Chowdhury, associate professor at the University of New Brunswick says, "The house prices are still high compared to the pre-pandemic level. At the same time, the high-interest rate is making it difficult for first-time home buyers to access the housing market."."The depressive effect of interest rates is outweighing the effect of reduced prices. Affordability is now the worst in a generation," says Will Dunning owner of Will Dunning Inc..Derek Holt, vice president and head of Capital Markets Economics for Scotiabank, is more optimistic about housing affordability, but he doesn't necessarily see it as a positive for the economy.."I'm more concerned that improved affordability conditions won't persist. Supply remains tight, Canada's immigration policy is importing almost the population sizes of Edmonton or Ottawa every couple of years,” says Holt. “OSFI's mortgage stress test has already positioned mortgage markets for much of the rate shock that has been delivered.”.“The repeated pattern is that house prices weaken enough to ignite another upward sales cycle that could spawn renewed inflationary pressures.".Tony Stillo, director of Canada Economics at Oxford Economics, believes better affordability will help first-time home buyers, providing specific details around the timing and pricing of this market correction.."The housing correction we had forecast back in March is well underway. The decline has been faster than expected primarily due to more aggressive interest rate hikes and a rapid deterioration in price expectations,” says Stillo. “Nationally, average home prices were already down 17% in July from their February peak, and we see much more room for prices to fall.” .“We forecast home prices will decline 27% by the end of 2023. Still, affordability will worsen further in the very near term as higher mortgage rates weigh on household borrowing capacity.".See the entire report here https://www.finder.com/ca/bank-of-canada-interest-rate-forecast
