Monthly Market Update - June 15, 2023
Housing market activity picked up in May, but mortgage rates are on the rise again.
The Bank of Canada surprised with another 0.25% rate increase on June 7. Variable mortgage rates are higher as a result and fixed mortgage rates also increased in the past few weeks. Housing activity increased in May but increasing mortgage rates could cool expectations.
Mortgage Market
Prime Rate - 6.95%
On June 7 2023 the Bank of Canada increased their overnight rate by 0.25% to 4.75%. Continuing strong economic numbers and stubborn inflation led them to end their rate hike pause. The banks have responded by increasing their Prime rate to 6.95%
Mortgage rates – month-over-month:
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Mortgage Market Headlines
Variable mortgage rates have increased by 0.25%. Lenders have increased their rates in response to the Prime rate increasing by 0.25% on June 7.
Fixed mortgage rates are higher by close to 0.40%, compared to the prior month. Bond yields have increased leading to higher fixed mortgage rates.
Short-term mortgage rates (2 & 3 year rates) remain higher than 5 year mortgage rates
Bank of Canada expected to hit market with two more rate hikes - BMO
In Q1 2023, new mortgage originations were down 42% compared to a year ago - Equifax
CMHC reports that over 65% of mortgage borrowers are opting for fixed rates, with close to 40% choosing shorter-term (3 years or less) fixed rate mortgages.
CMHC reports that 37% of recent homebuyers received a gift to assist with their mortgage down payment. In the 18-24 age group, that number was higher at 43%.
CMHC CEO says “No” to extended amortizations for new mortgages.
The Bank of Canada has growing concern regarding the ability of households to service their debt. They also say existing mortgage holders could face payment increases of up to 40% at renewal but expect that to be manageable.
Housing Market
The MLS Home Price Index (HPI) was up 2.1% month-over-month in May 2023, but still down 8.6% compared to May 2022.
Housing Sales were up 5.1% month-over-month in May 2023. Actual sales were also up by 1.4% over the prior year, May 2022.
Housing Market Headlines
New listing activity in May rose 6.8% month-over-month.
House prices increased year-over-year for the first time in a year, with May 2023 prices up 3.2% versus May 2022
In a recent survey by IG Wealth Management, 78% of Canadians believe home ownership is the most important part of their financial plan.
According to recent survey by Sagen MI, “First-Time Homebuyers (43%) and future home buying intenders (36%) are far more optimistic than the general population respondents (13%) in Canada in thinking that this is a good time to buy a home given the state of their local real estate market.”
26% of Canadians intend to purchase an investment property within the next half-decade – Royal LePage
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