Home News This Week’s Top Stories: Canada’s Real Estate Bubble Is Popping & BoC Warns It Won’t Be Pain Free

This Week’s Top Stories: Canada’s Real Estate Bubble Is Popping & BoC Warns It Won’t Be Pain Free

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It’s time for this week’s top stories cheat sheet.

Canadian real estate

Canadian Property Prices Fall 30%, Early Recession Begins: Ox Econ

Macroeconomics Oxford Economics has warned clients that Canada’s recession is here. Most stimulus undermines central bank attempts to curb high inflation, so don’t expect money printers to surge.

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Canadian Mortgage Borrowers Take The Bait And Now Costs Are Higher

Canadian mortgage borrowers are opting for variable rate mortgages with unusual interest rates. In September, about two-fifths (39.8%) of uninsured mortgages had floating rates. A significant rise from just 19.1% in March 2020, households and investors sought to get the lowest possible rate. That’s been proven wrong now that their variable interest expense rises in one of the fastest times ever.

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Most of Canada’s peak homebuyers with minimal down payments are submerged

Many Canadian homebuyers who bought at the peak of the bubble are now submerged. Typical home prices he fell to $735,400 in October, down 15.3% (-$132,900) from the peak reached in March 2022. A typical buyer in this scenario would have a minimum down payment of 9.7% ($71,100). In other words, not only is the down payment gone, but it must be replenished to reach zero. For long-term owners this is less of a concern, but investors with shorter timelines may feel differently.

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Canada needs lower house prices, economic stability needs ‘pain’: Bank of Canada

The Bank of Canada warns that restoring financial stability will not be easy. The central bank’s deputy governor warned this week that aggressive action is needed. Interest rates must rise sharply to curb excessive inflation. This undoubtedly means lower house prices, but it is the least risky path to stability.

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Canada Mortgage Credit Stopped, Slowest September in 20 Years

After nearly reaching the size of Canada’s GDP, mortgage debt is rapidly coming to a halt. Outstanding balances in September he reached $2.1 trillion, up 0.3% ($6.4 billion) over the month. Growth was the slowest in almost a decade in September as high interest rates eroded purchasing power. It’s hard to imagine that it’s a drag on the economy now that it’s reached such a large scale.

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