The Vancouver Life Real Estate Podcast Government Protects Home Owners
Market Update:
The latest consumer price index report released by Statistics Canada on Tuesday, April 19th, revealed that inflation in Canada has dropped to 4.3% in March, a decrease from 5.2% in February. Higher mortgage interest costs were offset by lower energy prices, resulting in the easing of the headline rate. However, the country's annual inflation rate is mostly tracking along the Bank of Canada's forecast of reaching 3% by mid-year. The central bank's preferred measures of core inflation, which are used to look through volatility in prices, also trended downward in March. The central bank is particularly concerned that getting from 3% to 2% might take a while. According to its latest forecasts, the Bank of Canada is expecting inflation to return to its 2% target by the end of 2024. While it will take just over a year to go from 8.1% down to 4.3%, the hard part is ahead as it could take another year to get from 3% to 2% inflation. This episode will explore the potential of a soft landing, the impact on homeowners, and the recent increase in Canadian home prices.
Potential for an Economic Soft Landing:
The decrease in inflation in Canada has brought some relief, but it may not be enough to stabilize prices in the short term. The energy, services, and shelter sectors have all shown a decrease in prices, but this may only result in stabilization before prices
begin to come down at the end of the year. The Bank of Canada's concern about “sticky" inflation largely stems from persistently high wage growth and service price inflation, which may cause prices to remain elevated for longer than expected. While the central bank's forecast suggests that inflation will return to its 2% target by the end of 2024, the challenge lies in getting from 3% to 2%, as it may take another year. A potential soft landing in the housing market may be difficult to achieve given the persistent wage growth and service price inflation, but the central bank is taking steps to protect Canadians and ensure that banks provide fair and equitable access to relief measures.
Impact on Homeowners:
The decrease in inflation has not brought much relief to homeowners with new mortgages or those renewing their mortgages at high interest rates. Mortgage interest costs rose at the fastest pace on record last month, up 26.4% from a year ago. The federal budget aimed to codify assistance for distressed mortgage borrowers, with new guidelines now proposed by the Financial Consumer Agency of Canada (FCAC). The government is taking steps to protect Canadians and ensure that banks provide fair and equitable access to relief measures that are appropriate for the circumstances they are facing. This includes extending amortizations, adjusting payment schedules, or authorizing lump-sum payments. Existing mortgage regulations may also allow lenders to provide a temporary mortgage amortization extension, even past 25 years. While this may be seen as government intervention in the housing market, it signals that regulators and policymakers are willing to do everything possible to soften the blow.
If you have more questions about what this means for you and your home, reach out to us at anytime to discuss your unique situation.
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