would benefit from higher home prices, while younger Canadians with big mortgages and other debts would suffer.Until last week,appeared to be doing a slow fade that would permit interest rate cuts by late this year or early 2023. But the inflation report for April showed the cost of living was up 4.4 per cent on a year-over-year basis, compared to 4.3 per cent in March. This interrupted a nine-month stretch where the inflation rate was declining or flat.
Previously, the consensus was that inflation would decline enough by year’s end for the Bank of Canada to start cutting its benchmark overnight rate. Now, economists are speculating about rate increases, rather than cuts. The next opportunities for the Bank of Canadaits benchmark overnight rate are June 7 and July 12. A rate increase could come that soon.
After last year’s interest rate hikes, housing looked down and out. But national resale home prices are now up more than $100,000 since January and have risen for four straight months. “Spring 2023 increasingly looks like the turnaround point for Canada’s housing market after a year-long slump,” RBC EconomicsThe housing market was always going to rebound from the price declines of the past year or so, in large part because of.
What a gift it would have been for this housing-mad country if home prices had stayed down for a year or two. Priced-out buyers would have had a chance to save and possibly find affordable homes, and the timetable for interest rate cuts would have been sped up in a way that helped borrowers. Resurgent home prices will ease the anxieties of recent buyers who have seen big drops in their equity, and boomers hoping to exit their family homes at optimum prices. But there are drawbacks, too.