Samuel Horsman

Canadians increasingly aware of FHSA features and benefits. Homebuyers divided over how mortgage rate changes will affect their ability to buy a home in the next two years. 23% of parents are expected to use the FHSA to help their children save for a home. BMOs 15th annual Investment Survey reveals more than half (56%) of potential first-time homebuyers are planning to use the First Home Savings Account (FHSA) to help purchase their first home, up from 52% from 2023. The annual survey also finds the understanding of FHSAs is increasing and that parents are finding the FHSA an effective way to help their adult children save for a home. Mind The Knowledge Gap The FHSA knowledge gap is narrowing, with two fifths (40%) of Canadians indicating they have at least some knowledge of the account, up from 31% from last year. Nearly half (48%) of Gen Z are knowledgeable about the FHSAs features and benefits the highest among any age group. A (Tax-Free) Gift That Keeps on Giving The BMO Investment Survey also explores how families across generations may be using the FHSA as a financial gift for their children. Nearly a quarter (23%) of parents will likely use the FHSA to help their adult children save for their first home. Younger parents are also more likely to use the FHSA to help their adult children save for a home, according to the surveys findings: Millennial Parents: 42% Gen Z Parents: 21% Boomer Parents: 7% It is encouraging to see that over half of prospective buyers plan to use the First Home Savings Account to save, and we want to see that number grow because the FHSA is such a powerful tool. Benefits including the ability to make tax-deducible contributions, tax-free growth of the investments and the ability to hold various investment types make this plan the most advantageous way to save for a home. It is like an RRSP and TFSA rolled into one for first-time homebuyers, said Nicole Ow, Vice President and Head, Retail Investments, BMO. For most, buying their first home will be part of a multi-year plan, involving several savings vehicles like the FHSA, RRSP withdrawals through the Home Buyers Plan, and may also involve multiple generations, with parents and grandparents contributing financially. https://newsroom.bmo.com/2024-12-18-BMO-Investment-Survey-Over-Half-of-First-Time-Homebuyers-Plan-to-Use-First-Home-Savings-Account-FHSA-to-Buy-a-Home

2024 is playing out largely as expected across Canadas regional landscape, with most of the Prairie and Atlantic provinces leading economic growth while Ontario, B.C., and Quebec lag. A number of regions are capping off this year displaying moderately stronger momentum in economic growth and job creation than we had envisaged in September. However, any upgrades to 2025 provincial growth forecasts reflecting this positive hand-off have been neutralized by downside growth risks on Canada owing to the imposition of tariffs by the new U.S. administration. The president-elect has threatened to impose a 25% across-the-board tariff on Canadian exports. We assume that Canada will manage to avert this outcome, partly reflecting the energy-heavy nature of its exports to the U.S. Still, this regional forecast incorporates some chill to investment and hiring due to the tariff threat that is likely to linger. Importantly, no province would escape the fallout from a Canada/U.S. trade skirmish, with U.S. export exposure ranging from about 80-90% in Alberta, New Brunswick, and Ontario to a still-lofty 50-60% in B.C and Saskatchewan. Beyond the first-order effects from tariffs on exports, provinces would also feel the hit through damage to other trading partners. PEI, Saskatchewan, and Manitoba source a comparatively large share of their imports from the U.S., potentially leaving them exposed to inflation pressures should Canada impose tariffs of its own. The countrys population growth is set to stall over the next two years through planned reductions in both the pool of non-permanent residents (NPRs) and a scaling back in its annual permanent immigration targets. Ontario, B.C. and Quebec will likely see population growth pull back the fastest. Meanwhile, ongoing affordability advantages in the Prairies and some Maritime provinces will remain a lure for interprovincial migrants. A wave of federal government stimulus is set to reach Canadian consumers in the coming months, with Ontario set to roll out its own measure in the new year. Combined with ongoing interest rate reductions, we expect consumer spending growth to pick up across the provinces despite slower population growth. Provinces with the highest debt burdens, namely B.C., Ontario, and Alberta, should disproportionately benefit from easing conditions. Housing markets across the country are also poised to benefit from supportive federal measures, and gradually falling short-term interest rates. https://economics.td.com/provincial-economic-forecast

The Bank of Canada lowered the target for the overnight rate by 50 basis points for the second straight meeting, a decision in line with consensus and market expectations. This is the fifth rate reduction in as many meetings and brings the policy rate to 3.25%, or the upper end of the BoCs estimated neutral range (2.25% to 3.25%). The move also pushes the BoCs policy rate 150 bps below the Federal Reserves upper bound target, the most since 1997 (although that gap will likely narrow next week). Meanwhile, balance sheet normalization will continue as expected. Here are additional highlights from the communique and the opening statement to the press conference: Driving the decision to cut 50 bps was inflation around 2%, excess supply and softer growth ahead relative to earlier expectations. Macklem added in the opening statement to the press conference that monetary policy no longer needs to be clearly in restrictive territory. As for forward rate guidance, the press release notes we will be evaluating the need for further reductions in the policy rate one decision at a time. In the presser, Macklem said they expect a more gradual approach to monetary policy if the economy evolves broadly as expected. Note they no longer explicitly say they expect to cut their policy rate further. The statement notes that Q3 growth was somewhat below the Banks projection and Q4 growth looks weaker than projected. Slower immigration will ease growth in 2025 while proposed fiscal measures will support demand. They will look through temporary demand effects. The press release highlights that job growth continues to grow slower than labour supply. Wage growth showed some signs of easing, but remains elevated relative to productivity. As for inflation, they still expect CPI to hover around 2% for the next couple of years. They note that the GST holiday will temporarily lower inflation but that will be unwound once the holiday ends. Therefore, watching core inflation will be critical to see underlying trends. The Bank didnt have much to say on tariff threats other than noting that these have increased uncertainty and clouded the economic outlook. \ https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/boc-policy-monitor.pdf

The Bank of Canada today reduced its target for the overnight rate to 3%, with the Bank Rate at 3% and the deposit rate at 3%. The Bank is continuing its policy of balance sheet normalization. The global economy is evolving largely as expected in the Banks October Monetary Policy Report (MPR). In the United States, the economy continues to show broad-based strength, with robust consumption and a solid labour market. US inflation has been holding steady, with some price pressures persisting. In the euro area, recent indicators point to weaker growth. In China, recent policy actions combined with strong exports are supporting growth, but household spending remains subdued. Global financial conditions have eased and the Canadian dollar has depreciated in the face of broad-based strength in the US dollar. In Canada, the economy grew by 1% in the third quarter, somewhat below the Banks October projection, and the fourth quarter also looks weaker than projected. Third-quarter GDP growth was pulled down by business investment, inventories and exports. In contrast, consumer spending and housing activity both picked up, suggesting lower interest rates are beginning to boost household spending. Historical revisions to the National Accounts have increased the level of GDP over the past three years, largely reflecting higher investment and consumption. The unemployment rate rose to 6.8% in November as employment continued to grow more slowly than the labour force. Wage growth showed some signs of easing, but remains elevated relative to productivity. https://www.bankofcanada.ca/2024/12/fad-press-release-2024-12-11/

From Scotiabank There are many uncertainties about the economic outlook as President Trump is set to take the helm of the United States. Those range from uncertainty about the policy actions he will take to uncertainty about the impact of those very policies. A case in point is the recent statement that he would implement tariffs hikes of 25% on all imports from Canada and Mexico, and 10% on imports from China. While we do not believe these tariffs will be implemented (see here), it is very likely that over the next several months, economic forecasts will need to present some alternative paths for the economy around a central scenario. Those alternative scenarios are likely to represent choices made by forecasters as to which policy assumption to include in their forecasts. Only when policy measures will actually be announced and implemented will uncertainty around the policy environment diminish. Given its critical nature to Canada and other trading partners, and to the U.S. itself of course, we thought it would be helpful to provide some rough rules of thumb for estimating the impact of trade policy changes on Canada and the U.S. These rules of thumb, derived from our macroeconometric model of the U.S. and Canadian economies, while by no means meant to be exact, are designed to help provide a quick and dirty assessment of the impact of changes in tariffs on the economy, inflation, and interest rates in both countries. Click to read more https://www.scotiabank.com/ca/en/about/economics/economics-publications/post.other-publications.insights-views.tariffs--november-28--2024-.html

Home sales activity recorded over Canadian MLS Systems increased 7.7% on a month-over-month basis in October 2024, reaching its highest level since April 2022. Rising home sales activity was broad based, with the Greater Toronto Area (GTA) and British Columbias Lower Mainland recording double-digit increases in October. The jump in home sales last month was definitely an October surprise, although with the big interest rate cut of 50 basis points announced during the last week of the month, the increase was more likely related to the surge in new listings we saw in September, said Shaun Cathcart, CREAs Senior Economist. There probably wont be another rush of new supply like that until next spring, and at that point, mortgage rates should be close to their expected lows, as well. With that in mind, you can think of the October numbers as a sort of preview for what we might expect to see next year. New listings posted a 3.5% month-over-month decline in October, although that followed on the heels of a 4.8% jump in September, so new supply remains at some of the highest levels since mid-2022. The national pullback in October was led by a drop in new supply in the GTA. With sales rising considerably in October and new listings falling, the national sales-to-new listings ratio tightened to 58%, up from 52% in September. The long-term average for the national sales-to-new listings ratio is 55%, with a sales-to-new listings ratio between 45% and 65% generally consistent with balanced housing market conditions. https://stats.crea.ca/en-CA/

Condominium apartments are the most common type of property owned by investors in census metropolitan areas (CMAs) like Toronto and Vancouver. In 2022, nearly two in five condominium apartments (38.9%) in the Toronto CMA were investment properties, while this was the case for about one in three (34.2%) in the Vancouver CMA. In these CMAs, new condominium apartment projects often rely on presales to investors to be built. Investors buy pre-construction units with the goal of making a profit when the buildings are completeeither by renting them out or by selling the unit at a higher price. These pre-construction sales are used by developers to secure financing for the projects. This dynamic means that investor preferences may have an influence on the type of buildings that get built. One concern with this process is that it may lead to the construction of more properties with smaller units. Investors are perceived to prefer these units because rent per square foot of living area tends to be higher for smaller units. This may have contributed to the shrinking size of condominium apartments in CMAs. For example, in the Toronto CMA, the median living area of condominium apartments built in the 1990s was 947 square feet, compared with 640 square feet for those built after 2016. In the Vancouver CMA, the median size also declined over the same period, from 912 square feet to 790. https://www150.statcan.gc.ca/n1/daily-quotidien/241003/dq241003a-eng.htm

HIGHLIGHTS Renewal risk remains as 1.2 million mortgages will come up for renewal in 2025. Most of these will experience higher interest rates than when their term began: 85% of those were contracted when the Bank of Canada rate was at or below 1%. The mortgage delinquency rate continued to rise from historic low levels in 2024, reaching 0.19% in the second quarter, with delinquency rates on other credit products, and allowances for expected credit losses both suggesting it will continue to increase through 2025. However, this remains below pre-pandemic levels and well below averages since 1990. Traditional lenders experienced two very different quarters to begin 2024. The first quarter showed higher risk lending compared to 2023, but in the second quarter newly extended mortgages had lower risk based on traditional risk metrics. Overall mortgage debt increased to $2.2 trillion in July 2024, which exacerbates the vulnerability of elevated household debt. This growth (3.5% year-over-year) is below recent averages, but lower interest rates could accelerate the increase. Alternative lenders saw an increase in lending during the first quarter of this year compared to the fourth quarter of 2023, indicating renewed momentum to sustain their market share from a year ago. However, their risk profile has increased compared to last year. Mortgages with terms of three or more years but less than five years are the most popular, with over half of new mortgages having terms in this range. The traditional five-year, fixed-rate mortgage and variable rate mortgage both represent a small share of the newly extended loans. https://assets.cmhc-schl.gc.ca/sites/cmhc/professional/housing-markets-data-and-research/housing-research/research-reports/housing-finance/residential-mortgage-industry-report/2024/residential-mortgage-industry-report-fall-2024-en.pdf

The BMO Real Financial Progress Index reveals that amid growing concerns about the cost of living (54%) and their overall financial situation (36%) 79% of Canadians are planning to cut back on spending this holiday season. The surveys insights provide an outlook on Canadians holiday spending plans, including: The holiday price tag: On average, Canadians plan on spending more than $1,991 this holiday season, including travel ($1,802), holiday gifts ($519), entertaining ($295), decorations ($141) and other holiday expenses ($275). Nearly a quarter (23%) plan on spending more than $2,000 during the holidays. Making a list and checking it twice: 79% plan on buying fewer gifts this year, and over a quarter (27%) will cut down the number of people on their gift list. More than a third (36%) plan on buying less expensive gifts. Sleighing spending: 41% are spending less on fewer gifts, and 44% had cut back on spending on other occasions, including birthdays and anniversaries, throughout the year in order to spend more on holiday gifts. Nearly half (49%) admit to spending more than they know they should. https://about.bmo.com/consumers-plan-to-spend-less-this-holiday-season-heres-how-bmo-can-help-make-holiday-budgeting-easier/

Report by TD Economics Highlights On December 15th, the federal government will roll out mortgage rule changes that make it easier to purchase a home for those taking out insured mortgages. These measures should offer a lift to Canadian home sales and prices next year. However, their impact will be blunted by an array of factors, including the affordability erosion induced by their implementation. Mitigating the impacts of these policies may be positive from a financial stability perspective, as the measures will likely encourage households to take on more debt at a longer term, and insured borrowers have typically been more prone to bouts of financial stress. The federal government has recently announced two changes to Canadian mortgage rules (effective December 15th, 2024) that will make it easier to qualify for purchasing a home. As the surge in home sales early in 2024 (amid a steep drop in bond yields at the end of last year) and in the spring of 2023 (after the Bank of Canada paused its rate hiking campaign) taught us, Canadian housing market activity can be highly reactive. Yet, we dont think that these measures alone will unleash a housing boom. Instead, theyll likely offer a secondary tailwind to a market thats already gaining decent traction in 2025 on the back of lower borrowing costs and a gradually improving economy (see here). Whats more, the affordability boost offered by these measures will likely also erode as home prices are raised by their implementation, thereby limiting their effectiveness. https://economics.td.com/ca-mortgage-rule-changes

Rate Statement The rate cutting cycle was turned up a notch as the Bank of Canada lowered its target for the overnight rate by 50 basis points to 3.75%, a decision in line with consensus and market expectations. This fourth cut in as many meetings marks a cumulative rate reduction of 125 basis points and brings the policy rate to its lowest point since December 2022. The move also pushes the BoCs policy rate 125 basis points below the Federal Reserves, though an expected November Fed cut would narrow that gap. Meanwhile, balance sheet normalization will continue as expected. Here are some additional highlights from the communique and the opening statement to the press conference: Driving the decision to cut 50 bps was a desire to support economic growth and to keep inflation close to the middle of the 1% to 3% range. As for forward rate guidance, the Bank says, we expect to reduce the policy rate further if the economy evolves broadly in line with our latest forecast. As always, the timing and pace of further cuts, will be guided by incoming information. Despite recent soft data, the Bank still expects relatively solid GDP growth ahead: GDP growth is forecast to strengthen gradually over the projection horizon, supported by lower interest rates. The Bank appears to be looking the strength of the September jobs report, as the statement simply says the labour market remains soft. Still, they note that wage growth remains elevated relative to productivity growth. The Bank highlights that inflation has declined significantly thanks to excess supply in the economy. The breadth of price increases have normalized, as have inflation expectations. Policymakers now expect inflation to remain close to target over the projection horizon, with the upward and downward pressures roughly balancing out. https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/boc-policy-monitor.pdf

The Bank of Canada today reduced its target for the overnight rate to 3%, with the Bank Rate at 4% and the deposit rate at 3%. The Bank is continuing its policy of balance sheet normalization. The Bank continues to expect the global economy to expand at a rate of about 3% over the next two years. Growth in the United States is now expected to be stronger than previously forecast while the outlook for China remains subdued. Growth in the euro area has been soft but should recover modestly next year. Inflation in advanced economies has declined in recent months, and is now around central bank targets. Global financial conditions have eased since July, in part because of market expectations of lower policy interest rates. Global oil prices are about $10 lower than assumed in the July Monetary Policy Report (MPR). In Canada, the economy grew at around 2% in the first half of the year and we expect growth of 1% in the second half. Consumption has continued to grow but is declining on a per person basis. Exports have been boosted by the opening of the Trans Mountain Expansion pipeline. The labour market remains softthe unemployment rate was at 6.5% in September. Population growth has continued to expand the labour force while hiring has been modest. This has particularly affected young people and newcomers to Canada. Wage growth remains elevated relative to productivity growth. Overall, the economy continues to be in excess supply. GDP growth is forecast to strengthen gradually over the projection horizon, supported by lower interest rates. This forecast largely reflects the net effect of a gradual pick up in consumer spending per person and slower population growth. Residential investment growth is also projected to rise as strong demand for housing lifts sales and spending on renovations. Business investment is expected to strengthen as demand picks up, and exports should remain strong, supported by robust demand from the United States. Overall, the Bank forecasts GDP growth of 1.2% in 2024, 2.1% in 2025, and 2.3% in 2026. As the economy strengthens, excess supply is gradually absorbed. https://www.bankofcanada.ca/2024/10/fad-press-release-2024-10-23/

Home sales edged up 1.9% between August and September, a third increase in four months. On the supply side, new listings jumped 4.9% from August to September, the eighth advance in nine months and the largest increase since July 2023. As a result, they are now at their highest level since February 2022. Active listings edged down 0.5% in September from their highest level since March 2020, the second decrease in three months. Meanwhile, the number of months of inventory (active listings-to-sales) decreased from 4.2 to 4.1 during the month, a level roughly back in line with its pre-pandemic level. Market conditions tightened marginally in September and remained tighter than their historical average in most provinces. They were roughly balanced in B.C. and softer than average in Ontario. Housing starts increased 10.8K in September to 223.8K (seasonally adjusted and annualized), a result below the median economist forecast calling for a 235.0K print. The monthly increase was solely driven by a rise in urban starts (+11K to 210.0K), which were mainly supported by the multi-family segment (+8.6K to 163.4K) while the single-family segment was up marginally (+2.4K to 46.6K). Starts were up in Calgary (+4.4K to 24.3K) and Vancouver (+3.0K to 23.4K) but declined in Toronto (-4.2K to 20.5K) and Montral (-2.1K to 13.0K). At the provincial level, the increases in total starts were registered in British Columbia (+9.3K to 44.0K), Ontario (+4.1K to 64.6K) and Saskatchewan (+2.6K to 6.1K), while the most notable declines were seen in Alberta (-1.5K to 46.8K), and Qubec (-1.1K to 40.3K). The TeranetNational Bank Composite National House Price Index rose by 0.5% from August to September after adjustment for seasonal effects. Eight of the 11 markets in the composite index were up during the month: Montreal (+2.4%), Winnipeg (+1.8%), Victoria (+1.2%), Edmonton (+1.1%), Ottawa-Gatineau (+0.9%), Halifax (+0.8%), Calgary (+0.5%) and Toronto (+0.3%). Conversely, declines occurred in Quebec City (-0.9%), Hamilton (-0.6%) and Vancouver (-0.2%). https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/economic-news-resale-market.pdf

Following the Bank of Canadas third interest rate cut of the year, national home sales increased slightly in September compared to August. This follows a similar pattern of gains recorded in the months following the first two rate cuts. Home sales recorded over Canadian MLS Systems climbed 1.9% on a month-over-month basis in September 2024, reaching their highest level since July 2023. The national increase was led by the Greater Toronto Area and Hamilton-Burlington, Montreal and Quebec City, as well as Greater Vancouver and Victoria. Sales gains are now three for three in the months following interest rate cuts, which is a trend even though the increases werent headline-grabbing, said Shaun Cathcart, CREAs Senior Economist. That said, with the pace of rate cuts now expected to be much faster than previously thought, its possible some buyers may choose to hold off on a purchase for now. This could further boost the rebound expected in 2025 at the expense of the last few months of this year. Highlights: National home sales rose 1.9% month-over-month in September. Actual (not seasonally adjusted) monthly activity came in 6.9% above September 2023. The number of newly listed properties jumped 4.9% month-over-month. The MLS Home Price Index (HPI) inched up 0.1 % month-over-month but was still down 3.3% on a year-over-year basis. The actual (not seasonally adjusted) national average sale price was up 2.1% on a year-over-year basis in September. https://stats.crea.ca/en-CA/

Total housing starts in the 6 largest census metropolitan areas (CMAs) rose by 4% in the first half of 2024 compared to the same period in 2023. The level of new construction (68,639 units) was the second strongest since 1990. However, when adjusted for population size, combined housing starts were close to the historical average and werent enough to meet growing demographic demand. Calgary and Edmonton led the growth in housing starts due to record interprovincial migration in recent years, driven by their lower cost for housing and favourable economic conditions. In contrast, housing starts decreased in Toronto, Vancouver and Ottawa. Apartment starts in the 6 CMAs increased slightly, driven by rental construction. Nearly half of the apartments started in the first half of 2024 were purpose-built rentals the highest share on record. This trend aligns with demographic changes and declining homeownership affordability. Except for Calgary and Edmonton, condominium apartment starts fell in the first 6 months of 2024 a trend we expect will continue as developers struggle to reach the minimum pre-construction sales needed to start construction. Both investors and end users have significantly reduced their purchases of new condominiums because of the impact of higher interest rates. Developers prioritized clearing backlogs of projects under construction. As a result, apartment completions increased across the 6 CMAs, setting new records in each one except Montral and Vancouver. Municipalities and provinces are working actively to increase housing supply and variety, with policies aimed at better meeting the needs of a broad range of buyers and renters. https://www.cmhc-schl.gc.ca/professionals/housing-markets-data-and-research/market-reports/housing-market/housing-supply-report

From Scotiabank As the reduction in inflation takes hold and economic activity slows down, the Bank of Canada seems to be shifting its priority from inflation control to worries about growth. Using a monetary policy reaction function that estimates the weight on inflation and the output gap over time, we find empirically that that Bank of Canada is now putting more weight on the output gap. This is a break from the last two years in which the estimated weight on inflation dominated that placed on the output gap. Our model suggests that as of 2024Q4, the BoC will focus more on eliminating this economic slack than on fighting inflation. Our current forecast is that the Bank of Canada cuts by 25 bps at each of the two remaining meetings this year. This work suggests there is a risk that Governor Macklem will be more aggressive than that if he indeed is putting more weight on growth going forward. That would translate into a risk of a 50 bps cut at one of these meetings. https://www.scotiabank.com/ca/en/about/economics/economics-publications/post.other-publications.inflation-reports.boc-rate--october-2--2024.html

Report by TD Economics The Canadian 5-year bond yield has declined over 100 bps since early May, while the Bank of Canada has cut its policy rate 3 times (with two more likely on tap this year). In short, the interest rate environment has significantly improved. Housing market activity is stirring, yet Canadian sales gains have, thus far, trailed what could typically be expected given this rush of rate relief. We chalk up the surprisingly subdued performance to two factors. The first is the continued strained affordability backdrop. Despite their recent decline, rates remain at levels last seen about 15 years ago. And, the second factor relates to the transparent messaging from central bankers that interest rates are set to fall even further. This is keeping potential buyers temporarily sidelined as they wait for additional cuts. The flat trend in Canadian average home prices since the summer means they havent really been penalized for that choice. This relative stillness will likely only last so long. Indeed, conditions are in place for a solid pickup in resale activity. Alongside a further steady decline in the BoCs overnight rate, economic growth is likely to regain some traction going forward, and the federal government will roll out meaningful changes to mortgage rules that will support homebuying at the end of the year. Now, first-time homebuyers (and those that purchase new builds) can access 30-year amortizations (instead of 25), thereby lowering their monthly mortgage obligation. Also, the cap on which a buyer can qualify for an insured mortgage has been raised from $1 million to $1.5 million. This means that, for example, a purchaser who buys a detached home in Toronto valued at $1.2 million (the median price in August) could put down about $95k as a downpayment, instead of needing $240k as before. The federal measures should help unlock powerful gains in Canadian sales and average home prices across Canada in the first half of 2025. However, part of this story will be that some activity that wouldve taken place this year is pushed into 2025, as buyers wait for the new rules to commence before purchasing. https://economics.td.com/ca-provincial-housing-outlook

From the Bank of Canada In June, we began lowering our policy interest rate. We cut the policy rate at our last three decisions, for a cumulative decline of 75 basis points to 4.25%. Our most recent decision on September 4th reflected two main considerations. First, we noted that headline and core inflation had continued to ease as expected. Second, we said that as inflation gets closer to target, we want to see economic growth pick up to absorb the slack in the economy. Since then, weve been pleased to see inflation come all the way back to the 2% target. It has been a long journey. Now we want to keep inflation close to the centre of the 1%3% inflation-control band. We need to stick the landing. What does this mean for interest rates? With the continued progress weve seen on inflation, it is reasonable to expect further cuts in our policy rate. The timing and pace will be determined by incoming data and our assessment of what those data mean for future inflation. As always, we try to be as clear as we can about what we are watching as we chart the course for monetary policy. Economic growth picked up in the first half of this year, and we want to see it strengthen further so that inflation stays close to the 2% target. Some recent indicators suggest growth may not be as strong as we expected. We will be closely watching consumer spending, as well as business hiring and investment. We will also be looking for continued easing in core inflation, which is still a little above 2%. Shelter cost inflation remains elevated but has started to come down, and we are looking for it to moderate further. Our next decision is October 23rd. And we will have a revised economic outlook at that time. https://www.bankofcanada.ca/2024/09/economic-growth-during-uncertain-times/

Report by TD Economics Were most of the way through 2024, and the data seems to be adhering to our long-held view that the Atlantic Region and Prairies would outperform, in terms of GDP growth, this year. We continue to expect Ontario, Quebec, and B.C. to trail the pack. However, the former two provinces have benefitted from growth upgrades for 2024, leaving B.C. as the laggard. Consumption has held up well across Canada so far this year, supported by resilience in Ontario and Quebec and relative strength in the Atlantic. Going forward, a downgraded profile for borrowing costs will offer more of a boost to household spending across Canada than wed previously thought. However, a chunk of highly indebted households in regions like Ontario and B.C. will have to contend with mortgage renewals at (likely much) higher rates. Housing markets are also poised to receive a lift from lower-than-expected interest rates. Indeed, weve notably upgraded our 2024 and 2025 home price forecasts across nearly all provinces except Ontario, where strained affordability and problems in the condo sector will likely weigh. Lower rates are a benefit to homebuilding as well, although we still see Canadian housing starts cooling through 2025 given low home sales levels in the past few years. At last count (Q2-2024), Canadian population growth continued to surge. Specifically, Canadas Big 4 provinces have yet to see any meaningful impact from recently announced federal policies to reduce the pool of non-permanent residents. We expect the effect of these policies to be significant and become evident beginning in Q4-2024, providing an impetus for a meaningful slowdown in population growth across the nation. Population-fueled labour force gains have outpaced employment for most of this year, driving the national unemployment rate to its highest point since mid-2021. Notably, Ontario, Alberta and Quebec have seen the most material increases in their unemployment rates. With population gains expected to cool, the jobless rate is projected to peak at the turn of the year before gently pulling back in 2025. https://economics.td.com/provincial-economic-forecast

Summary Home sales edged up 1.3% between July and August, following a 0.6% decrease the previous month. On the supply side, new listings edged up 1.1% from July to August, the seventh advance in eight months. They are now at their highest level since June 2022. Active listings edged down 1.1% in August from their highest level since March 2020, the second decrease in six months. Meanwhile, the number of months of inventory (active listings-to-sales) edged down from 4.2 to 4.1 during the month, a level roughly back in line with its pre-pandemic level. Market conditions tightened marginally in August and remained tighter than their historical average in most provinces. They were balanced in Manitoba and softer than average in B.C. and Ontario. After a surge in July, housing starts dropped 62.4K in August to 217.4K (seasonally adjusted and annualized), a result well below the median economist forecast calling for a 250.0K print and its lowest level since November 2023. Urban starts decreased by 61.6K (to 199.5K) on an important drop in the multi-family segment (-62.8K to 154.3K) while the single-family segment was up marginally (+1.2K to 45.2K). Starts were down by more than half in Toronto (-40.4K to 24.6K) and decreased more modestly in Vancouver (-9.6K to 20.5K) and Calgary (-9.2K to 19.9K). On the other hand, they increased by 6.0K in Montreal (to 15.2K) after reaching their lowest level since February 2015 (excluding April 2020) the previous month. The TeranetNational Bank Composite National House Price Index rose by 0.6% from July to August after adjustment for seasonal effects. Six of the 11 markets in the composite index were up over the month: Quebec City (+3.9%), Halifax (+3.2%), Ottawa-Gatineau (+1.9%), Vancouver (+1.7%), Montreal (+1.0%) and Toronto (+0.2%). Conversely, declines occurred in Hamilton (-0.1%), Winnipeg (-0.7%), Calgary (-1.1%) and Edmonton (-2.6%), while prices remained stable in Victoria during the month. https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/economic-news-resale-market.pdf

National home sales increased in June following the Bank of Canadas first interest rate cut since 2020, and activity posted another small gain in August on the heels of the second rate cut in late July, but the bigger picture appears to be a market mostly stuck in a holding pattern. Home sales recorded over Canadian MLS Systems edged up by 1.3% on a month-over-month basis in August 2024, reaching their highest level since January and their second highest in over a year. Despite some fledgling signs of life to kick off the long-awaited monetary policy easing cycle, Canadian housing market activity still looks to be stuck in the same holding pattern its been in all year, said Shaun Cathcart, CREAs Senior Economist. That said, with ever more friendly interest rates now all but guaranteed later this year and into 2025, it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country. Highlights: National home sales edged up 1.3% month-over-month in August. Actual (not seasonally adjusted) monthly activity came in 2.1% below August 2023. The number of newly listed properties ticked up 1.1% month-over-month. The MLS Home Price Index (HPI) was unchanged month-over-month but was down 3.9% year-over-year. The actual (not seasonally adjusted) national average sale price was almost unchanged (+0.1%) on a year-over-year basis in August. https://stats.crea.ca/en-CA/

Canadians work hard to be able to afford a home. However, the high cost of mortgage payments is a barrier to homeownership, especially for Millennials and Gen Z. To help more Canadians, particularly younger generations, buy a first home, new mortgage rules came into effect on August 1, 2024, allowing 30 year insured mortgage amortizations for first-time homebuyers purchasing new builds. The Honourable Chrystia Freeland, Deputy Prime Minister and Minister of Finance, announced a suite of reforms to mortgage rules to make mortgages more affordable for Canadians and put homeownership within reach: Increasing the $1 million price cap for insured mortgages to $1.5 million, effective December 15, 2024, to reflect current housing market realities and help more Canadians qualify for a mortgage with a downpayment below 20 per cent. Increasing the insured-mortgage capwhich has not been adjusted since 2012to $1.5 million will help more Canadians buy a home. Expanding eligibility for 30 year mortgage amortizations to all first-time homebuyers and to all buyers of new builds, effective December 15, 2024, to reduce the cost of monthly mortgage payments and help more Canadians buy a home. By helping Canadians buy new builds, including condos, the government is announcing yet another measure to incentivize more new housing construction and tackle the housing shortage. This builds on the Budget 2024 commitment, which came into effect on August 1, 2024, permitting 30 year mortgage amortizations for first-time homebuyers purchasing new builds, including condos. These new measures build on the strengthened Canadian Mortgage Charte, announced in Budget 2024, which allows all insured mortgage holders to switch lenders at renewal without being subject to another mortgage stress test. Not having to requalify when renewing with a different lender increases mortgage competition and enables more Canadians, with insured mortgages, to switch to the best, cheapest deal. https://www.canada.ca/en/department-finance/news/2024/09/government-announces-boldest-mortgage-reforms-in-decades-to-unlock-homeownership-for-more-canadians.html

From Scotiabank The Bank of Canada and Federal Reserve should cut policy rates at each meeting for the remainder of the year and well into 2025. Growth is slowing as the impact of past tightening is felt but we expect a gradual strengthening of economic activity as policy rates come down. North American central bankers seem, at this point, to have achieved a soft landing. We remain concerned about potential upside risks to household spending given high savings rates and accumulated savings, solid income growth, the massive gap between supply and demand in the housing market, and historically strong population growth. We assume a gradual improvement in spending but a larger or more rapid rebound in spending could imperil Bank of Canada cuts in mid-2025. The usual disclaimer applies: US election outcomes could lead to significant changes to this outlook. The path forward for interest rates keeps getting clearer. With inflation and growth cooling owing in part to the lagged impacts of monetary policy, central bankers in Canada and the US seem confident in their assessment that interest rates will be cut substantially in coming months. The key questioning surrounding policy rates is the speed at which rates will decline, not whether they will decline from here. Key to that assessment is a view on growth dynamics, inflation, and risks to both. Though growth is weakening in both countries, we believe economies are landing softly and will not require central banks to act in an urgent way to shore up growth. As a result, we expect a gradual pace of cuts in Canada and the US, with two more cuts in Canada this year and three cuts in the US. A multitude of risks exist and while markets and most economists appear to prioritize downside risks to the outlook and interest rates, we continue to believe there are meaningful upside risks to both. https://www.scotiabank.com/ca/en/about/economics/economics-publications/post.other-publications.global-outlook-and-forecast-tables.scotiabank%27s-forecast-tables.2024.september-10--2024.html

From National Bank of Canada Summary Some forecasters, including the Bank of Canada, had high hopes of an economic recovery and a stabilization of the unemployment rate in the second half of the year, in the wake of interest rate cuts. For several months now, we have been arguing that, although interest rates are starting to come down, monetary policy is far too restrictive for this recovery and stabilization to occur, and recent economic data bears this out. With the Canadian economy stagnating in June and July, the 2.8% growth expected in Q3 by the Bank of Canada is now virtually unattainable. As a result, GDP per capita continues its downward trend that began in 2022, illustrating the fact that the economy continues to grow below potential and that excess supply continues to increase. Not only do companies seem to have an excess of inventories, they also seem to have an excess of workers. For now, this is limited to a hiring freeze at the macro level, as evidenced by average job gains of just 6K per month over the past three months. Those trying to enter the job market - young people and newcomers - are the main victims of Canadas weak hiring climate. With widespread inflation a thing of the past in Canada, we believe the door is wide open for the Bank of Canada to return its policy rate to neutral (between 2.5% and 3.0%) as soon as possible. In the meantime, the damage to the labour market could be greater than necessary. We anticipate economic growth of just 0.9% in 2024 and 1.3% in 2025, which would translate into an unemployment rate of around 7.4% by mid-2025. https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/mensuel/monthly-economic-monitor-canada.pdf

From National Bank of Canada For the third time in as many meetings, the Bank of Canada lowered the target for the overnight rate by 25 basis points, a decision in line with the consensus and market expectations. The rate reduction brings the policy rate to 4.25%, the lowest since January 2023. The move also pushes the BoCs policy rate 125 bps below the Federal Reserves (based on their upper bound target), the most since 2000 (although that gap will narrow in September). Meanwhile, balance sheet normalization will continue as expected. Here are additional highlights from the communique and the opening statement to the press conference: Driving the decision to cut was continued easing in broad inflationary pressures and excess supply in the economy [putting] downward pressure on inflation. Once again, forward rate guidance in the press release was vague but the opening statement to the presser reiterated that it is reasonable to expect further cuts if inflation eases in line with their forecast. The statement notes that Q2 growth was stronger than expected but preliminary indicators suggest that economic activity was soft through June and July. Macklem added they want to see economic growth pick up to absorb slack. The press release highlights that the labour market continues to slow, with little change in employment in recent months. However, wage growth remains elevated relative to productivity. In the opening statement to the presser, Macklem added they still expect slack in the labour market to slow wage growth. As for inflation there has been continued easing in broad inflationary pressures, with inflation breadth back to historical norms. Although shelter is holding inflation up, it is starting to slow. Reflecting base effects, Macklem added that inflation may bump up later in the year. However, they need to need to increasingly guard against the risk that the economy is too weak, and inflation falls too much.. Bottom Line: With a 25 basis point rate cut all but assured, the focus of todays decision was always going to be on the Banks guidance/stance. Overall, there was very little changed relative to July as Macklem reiterated it is still reasonable to expect further rate cuts (as long as inflation cooperates). At the margin, there appears to be a bit more confidence on the inflation outlook as shelter prices are seen as starting to slow. And as we got a sense of in July, they increasingly want to guard against too much slack and inflation undershooting over the projection horizon. They therefore need growth to pick up. What does it mean for the meetings ahead? To us, the BoCs base case outlook is for continued 25 basis points cuts at each of the remaining meetings in 2024 (and likely well into 2025 too). However, there is a growing focus on downside inflation/economic risks which should keep markets pricing some probability of a larger-than-25 basis point cut. Thats appropriate in our view given the balance of risks in the labour market and on the growth outlook. The intermeeting period will offer a wealth of information to inform the near-term rate path as were due to receive two employment reports (including one on Friday), two CPI reports, a read on July GDP and a Business Outlook Survey. Undoubtedly, it will be jobs and inflation data that will be most influential. https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/boc-policy-monitor.pdf

The Bank of Canada today reduced its target for the overnight rate to 4%, with the Bank Rate at 4% and the deposit rate at 4%. The Bank is continuing its policy of balance sheet normalization. The global economy expanded by about 2% in the second quarter, consistent with projections in the Banks July Monetary Policy Report (MPR). In the United States, economic growth was stronger than expected, led by consumption, but the labour market has slowed. Euro-area growth has been boosted by tourism and other services, while manufacturing has been soft. Inflation in both regions continues to moderate. In China, weak domestic demand weighed on economic growth. Global financial conditions have eased further since July, with declines in bond yields. The Canadian dollar has appreciated modestly, largely reflecting a lower US dollar. Oil prices are lower than assumed in the July MPR. In Canada, the economy grew by 2.1% in the second quarter, led by government spending and business investment. This was slightly stronger than forecast in July, but preliminary indicators suggest that economic activity was soft through June and July. The labour market continues to slow, with little change in employment in recent months. Wage growth, however, remains elevated relative to productivity. As expected, inflation slowed further to 2.5% in July. The Banks preferred measures of core inflation averaged around 2 % and the share of components of the consumer price index growing above 3% is roughly at its historical norm. High shelter price inflation is still the biggest contributor to total inflation but is starting to slow. Inflation also remains elevated in some other services. https://www.bankofcanada.ca/2024/09/fad-press-release-2024-09-04/

Report by TD Economics Highlights The Fed is finally ready to cut interest rates, but questions remain on the speed and magnitude. We penciled in 25 basis points per meeting, with over 250 bps in cuts over this year and next. However, now that the Fed is confident that inflation will return to target, it will prioritize a little more of the other side of its dual mandate developments in the job market to ultimately determine the speed and size of rate cuts. The BoC has moved earlier, established a pace of 25 basis points per meeting, and already gapped 100 basis points to its U.S. counterpart. The economic bar will be higher to deliver on larger cuts than the current pace. The Federal Reserve is just under three weeks away from delivering its first interest rate cut in four years. While at times it felt like the day would never come, inflation has finally stabilized close to the 2% target alongside a noticeable cooling in the labor market. The Feds focus has now pivoted away from just fighting inflation, to striking the right balance on its dual mandate to ensure the economic landing remains a soft one. This is the stage where markets typically get nervous on whether the Fed has got the timing right, evidenced by recent bouts of financial volatility. The emphasis will be on downside misses in the data given that the Feds policy rate is sitting at a lofty level of 5.50%. And with that, we can expect to see pricing jump around between a Fed that needs to act urgently to one that can move in a measured way. But in all circumstances, one prediction will hold firm: the Fed will cut interest rates in September, kicking off a prolonged cycle. This is not a one-and-done deal. https://economics.td.com/ca-dollar-and-sense

Home sales edged down 0.7% between June and July, a decline that follows a 3.4% pick up in the previous month which was due to the beginning of easing monetary policy by the Bank of Canada. On the supply side, new listings edged up 0.9% from June to July, the sixth advance in seven months. Active listings edged down 0.7% in July from their highest level since March 2020, the first decrease in five months. Meanwhile, the number of months of inventory (active listings-to-sales) remained stable at 4.2 during the month, a level back in line with its pre-pandemic level. Market conditions were unchanged in July and remained tighter than their historical average in most provinces. They were balanced in Manitoba and B.C., and softer than average in Ontario. After a slowdown in June, housing starts increased 37.9K in July to 279.5K (seasonally adjusted and annualized), a result well above the median economist forecast calling for a 245.0K print and its highest level since June 2023. Urban starts increased by 38.8K (to 261.1K) on an important gain in the multi-family segment (+38.1K to 217.3K) while the single-family segment was up marginally (+0.7K to 43.8). Starts practically doubled in Toronto (+30.7K to 65.1K), and also grew in Vancouver (+9.6K to 30.1K) and Calgary (+6.6K to 29.1K). On the other hand, they dropped significantly in Montreal (-26.0K to 9.0K) to their lowest level since February 2015 (excluding April 2020). The TeranetNational Bank Composite National House Price Index remained virtually stable from June to July, with a marginal increase of 0.2% after adjustment for seasonal effects. Six of the 11 markets in the composite index were up over the month: Hamilton (+2.3%), Victoria (+1.0%), Halifax (+0.8%), Calgary (+0.7%), Toronto (+0.3%) and Quebec City (+0.2%). Conversely, prices fell in Ottawa-Gatineau (-0.4%), Winnipeg (-0.1%), Vancouver (-0.1%) and Montreal (-0.1%), while they remained stable in Edmonton. https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/economic-news-resale-market.pdf

National housing resale conditions softened from June to July as reflected by the modest decline in the sales-to-new listings ratio. Over this period, national sales declined by 0.7% (sa m/m) while new listings increased 0.9%. In July, sales were higher by 4.8% (nsa) compared to the same month in 2023. After increasing from May to June, the sales-to-new listings ratiowhich reflects how tight resale conditions areedged down to 52.7% from June to July, essentially back to its May level, and still within the range for balanced national resale market conditions (of between 45% to 65%). Months of inventory remained unchanged over this period at 4.2, still below its long-term (pre-pandemic) average of 5.3. And since the national market aggregates very different regional markets, there are wide variations in terms of how this indicator compares to its long-term average across provinces, ranging from less than 2 weeks above average in Ontario and British Colombia and Ontario to 5.7 months below in New Brunswick. About 2/3 of the markets witnessed a decline in their sales-to-new listings ratio from June to July. Consequently, the number of sellers favouring markets declined from 10 in June to 5 in July while the number of balanced markets increased from 16 to 22. https://www.scotiabank.com/ca/en/about/economics/economics-publications/post.other-publications.housing.housing-news-flash.august-15--2024.html

From National Bank of Canada Q2 2024 marked a second, albeit smaller, improvement in affordability. The amelioration was relatively widespread with 8 of the ten markets covered experiencing a decline in mortgage payment as a percentage of income (MPPI). The most significant improvement occurred in Hamilton, where a home price decline compounded on the broader trend of lower interest rates and rising incomes. On the flip side, Edmonton and Calgary saw rising home prices largely offset any relief. Overall, the composite improved with slightly higher prices not enough to offset the decline in mortgage interest rates and higher incomes. Still, the housing market remains unaffordable with the latest progress bringing the MPPI to 57.9%. Looking ahead, falling mortgage interest rates will likely be the main driver for improvements in affordability. So far, the decline in mortgage interest rates was precipitated by both expectations of rate cuts and the materialization of easing by the Bank of Canada. Given the deterioration in the growth outlook and the weakening in inflation and the labour market, we expect further central bank easing of 150bps over the next 12 months. Although the policy rate and mortgage interest rates do not always follow in lockstep, this development would provide a significant alleviation of the financing burden. At current income and home price levels, it would bring affordability halfway back to pre-pandemic levels. There is the risk, however, that lower interest rates could lift home prices, especially considering the current population boom. That said, between the payment shock from upcoming renewals and the rising unemployment rate, we do not expect much vigour in home prices for the next 12 months. HIGHLIGHTS: Canadian housing affordability posted a second consecutive improvement in Q224. The mortgage payment on a representative home as a percentage of income (MPPI) fell 1.1 percentage points. Seasonally adjusted home prices increased 0.4% in Q224 from Q124; the benchmark mortgage rate (5-year term) declined 11 basis points, while median household income rose 1.2%. Affordability improved in 8 of the ten markets covered in Q2. On a sliding scale of markets from best progression to least: Hamilton, Toronto, Victoria, Ottawa-Gatineau, Vancouver, Quebec, Montreal, Winnipeg. On the flip side, Edmonton and Calgary deteriorated. Countrywide, affordability enhanced 1.1 pp in the condo portion and in the non-condo segment. https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/housing-affordability.pdf

While there were early signs of renewed momentum in June following the Bank of Canadas first interest rate cut since 2020, activity in Canadas housing market took a pause in July. Home sales activity recorded over Canadian MLS Systems edged back by 0.7% on a month-over-month basis in July 2024, giving back a small portion of Junes post-first rate cut gain. With another rate cut announced on July 24, weve now seen two rate cuts in a row, and the expected pace of future policy easing has steepened considerably, with markets now anticipating rate cuts at every remaining Bank of Canada decision this year, said Shaun Cathcart, CREAs Senior Economist. Combine that with a record amount of demand waiting in the wings, and the forecast for a rekindling of Canadian housing activity going into 2025 has just gone from a layup to a slam dunk. Highlights: National home sales edged back 0.7% month-over-month in July. Actual (not seasonally adjusted) monthly activity came in 4.8% above July 2023. The number of newly listed properties ticked up 0.9% month-over-month. The MLS Home Price Index (HPI) edged up 0.2% month-over-month but was down 3.9% year-over-year. The actual (not seasonally adjusted) national average sale price was almost unchanged (-0.2%) on a year-over-year basis in July. https://stats.crea.ca/en-CA/

Non-mortgage loans are above the levels seen before the pandemic Non-mortgage loans have increased from the first quarter of 2019 and edged up in the first quarter of 2020. Over the next two quarters, non-mortgage debt levels declined as lockdowns came into full effect. Canadians were able to build up savings, reduce debt and reduce spending to bolster their finances against uncertainty as non-essential businesses closed and travel restrictions were imposed. Despite this reduction, since 2022, debt levels have risen, ultimately wiping out the previous effects. This increase in debt levels can be attributed to several factors, including inflation that peaked at 8.1% year over year in June 2022, making everyday goods and services more costly. Uninsured mortgage loans grow faster than insured ones as house prices increase Since 2017, uninsured mortgages have predominated in Canada, overtaking insured ones for the first time that year. From 2012 to 2019, the outstanding value of uninsured mortgages grew quarterly by 3.0% on average, while insured mortgages declined by 0.4%. This disparity widened during the pandemic as house prices soared due to lower borrowing costs and increased demand, with the quarterly growth of outstanding value of uninsured mortgages reaching 3.4% from 2020 to 2022, while insured mortgages declined by 0.5%. Rising interest rates from early 2022 through the third quarter of 2023 cooled housing market activity, decelerating the quarterly growth of uninsured mortgages to 2.0%, compared with a decline of 1.0% for insured mortgages during the same period. Arrears for non-mortgage loans are trending upward Households with loans in arrears, defined as those late on debt payments by 90 days or more, saw a slight increase during the first two quarters of 2020 owing to economic closures. Government support during the pandemic helped reduce arrears by increasing household disposable income. However, as interest rates rose and pandemic-related support diminished, non-mortgage loan arrears climbed again in 2022. Passenger vehicle loans (+0.18%) and credit card loans (+0.07%) saw the largest arrears increases by the third quarter of 2023 compared with the first quarter of 2019. Mortgage loan arrears have not seen a similar rise despite increasing interest rates. By the third quarter of 2023, mortgage arrears were still below pre-pandemic levels, down 0.08% from the first quarter of 2019. Most households have yet to feel the full impact of higher interest rates, as many mortgage renewals are due in the coming years. According to the Canada Mortgage and Housing Corporation, around 2.2 million mortgages, or 45% of all outstanding mortgages in Canada (over $675 billion), will face an interest rate shock in 2024 and 2025. https://www150.statcan.gc.ca/n1/daily-quotidien/240814/dq240814d-eng.htm

This study uses several demographic scenarios to illustrate how Canadas labour force could evolve from 2023 to 2041. This projection exercise produced a number of findings. Despite the baby boomer cohorts retiring, the size of Canadas labour force is likely to increase over the next few years because of migratory increase. The scenarios show that the size of the labour force is sensitive to both immigration levels and above all, the participation rate of the Canadian population. If labour force participation in Canada in 2041 reached the same intensity as in Japan, the size of the Canadian labour force would increase in a similar way to the scenario in which 750,000 permanent immigrants are admitted annually. The increase in the overall participation rate would be five times higher in the scenario where participation rates in Canada converge toward those currently observed in Japan, compared with the increase observed in the scenario in which Canada admits 750,000 immigrants annually. The scenario in which participation rates converge toward those observed in Japan, while unlikely given the significant differences between the two societies, nevertheless illustrates the potential impact of an increase in Canadians participation rate on the growth and demographic weight of the labour force. Canadas strong population growth, driven by large-scale immigration, brings both opportunities and challenges. While it increases the size of the labour force, it has a limited impact on the overall labour force participation rate and on the aging and renewal of the labour force. Beyond its purely demographic impact, immigration also exerts pressure on housing supply, infrastructure construction and the provision of services to the population, while also addressing unfilled job demands in certain employment sectors. The results of this population projection exercise show that immigration is not the only lever for influencing the evolution of the Canadian labour force. According to the projections, various processes will stabilize at the start of the 2030s, when the last baby boomers turn 65. Furthermore, the projections show that immigration levels would not significantly influence the aging or rejuvenation of the future labour force if they remained relatively constant over time. https://www150.statcan.gc.ca/n1/pub/75-006-x/2024001/article/00005-eng.htm

The role of short-term rentals (STRs) in Canadas housing challenges remains a subject of ongoing policy debate in many Canadian cities. While there is a widespread notion that such rentals limit the availability of long-term housing, empirical analysis of their impacts has produced mixed results. This paper provides an overview of STR activity across Canada. The paper focuses on the subset of STRs that could potentially serve as long-term housing. This subset of STRs, referred to as potential long-term dwellings (PLTDs), is intended to capture STR units that are not serving as anyones primary residence, but could potentially function as long-term housing (either as owner-occupied or rental units). The PLTD subset comprises entire units listed for more than 180 days a year, excluding vacation-type properties. Previous research indicates that STR activity plays an increasingly significant role in the Canadian accommodation services subsector, with its share of revenues rising from an estimated 7.0% in 2017 to 15.2% in 2021. However, in the housing market, STRs still account for a small proportion of total housing units. In 2023, the estimated number of PLTDs in Canada was 107,266, a figure that represents less than 1% of total housing units in Canada. PLTDs also accounted for a small share of total housing units in Canadas largest census metropolitan areas (CMAs). However, the share of PLTDs was higher in tourist areas, particularly around ski hills. In Whistler, they constituted 35.0% of all housing units, while in Mont-Tremblant, their share was 16.4%. https://www150.statcan.gc.ca/n1/pub/11-621-m/11-621-m2024010-eng.htm

For the second time in as many meetings, the Bank of Canada lowered the target for the overnight rate by 25 basis points, a decision in line with the consensus and market expectations. The rate reduction brings the policy rate to 4.50%, fully unwinding the two rate hikes delivered in June and July 2023. This move also pushes the BoCs policy rate 100 bps below the Federal Reserves (based on the upper bound target), marking the largest negative gap since the late 1990s. Despite the consecutive cuts and upward pressure on CORRA, balance sheet normalization will continue (as expected). Here are additional highlights from the communique and the opening statement to the press conference: Driving the decision to cut was broad price pressures continuing to ease and ongoing excess supply lowering inflationary pressures. Once again, there wasnt really any forward rate guidance in the press release but the opening statement to the presser reiterated that it is reasonable to expect further cuts if inflation eases in line with their forecast. He added that downside risks are taking on increased weight in our monetary policy deliberations. Note that the statement dropped the focus items that theyd previously been referring to (i.e., the balance between demand and supply, inflation expectations, wage growth, and corporate pricing behaviour). Instead, incoming information will guide future decisions. The statement notes that excess supply is growing: With robust population growth of about 3%, the economys potential output is still growing faster than GDP, which means excess supply has increased. On the labour market, they highlight that there are signs of slack with labour force growth outpacing employment and job seekers having more trouble finding work. Wage growth is showing some signs of moderating but remains elevated. As for inflation, the statement notes that broad inflationary pressures are easing although shelter and some services inflation remains elevated. Governing Council is carefully assessing these opposing forces on inflation. https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/boc-policy-monitor.pdf

Artificial Intelligence (AI) has had many breakthroughs in the past few years, and more and more households are beginning to incorporate it in their daily routines. The BMO Real Financial Progress Index reveals a growing number of Canadians, notably Gen Z, are using artificial intelligence (AI) to help manage their finances and investments. Among the 33% of Canadians using AI to help manage their finances, the most common uses include: Learning more about personal finance topics (45%), Creating and/or updating household budgets (43%), Identifying new investment strategies (42%), Building savings (40%), and Creating and/or updating their financial plans (40%). While AI is helping Canadians manage some aspects of finances, over two thirds (68%) say AI cannot understand how emotions influence financial planning. AI is a transformative technology that can instantly analyze information and generate ideas, but peoples relationship with money is complex, personal and emotional. By making it easier to help manage finances, AI is proving a powerful tool to build financial literacy and make informed financial decisions, and together with guidance from a professional advisor, more Canadians can be empowered to conveniently manage their money, achieve their goals and make real financial progress. https://about.bmo.com/artificial-intelligence-has-taken-the-world-by-storm-heres-how-canadians-are-using-it-to-help-with-their-finances/

From Scotiabank Further rate cuts in Canada this year a certainty while we continue to believe that the Federal Reserve will cut in September. Economic data have come in largely as expected so our forecasts remain largely unchanged. Lower interest rates will provide a mild boost to economic growth later this year, but the full impact of rate cuts will take time to materialize given the lags of monetary policy. Clarity on interest rates and the outlook over the next few months may be fleeting. The results of the US election risk muddying the outlook substantially. The long-awaited rate cuts are finally underway in Canada and are likely to start in the United States in September. These will eventually provide relief to the interest rate sensitive parts of the economy and may also lift business and household sentiment. These rate cuts are occurring in the context of slow, but still-positive growth, and solid progress on inflation management even though there remain substantial risks of higher inflation (linked to the sharp rise in global shipping costs and rapid wage growth and low productivity in Canada). We remain comfortable with our view that policy rates will fall by another 75 basis points in Canada this year and that the Federal Reserve will cut its policy rate by at least 50 basis points starting in September. Moreover, economic data have come in roughly as expected over the last several months, leading to only minor tweaks to the outlook for growth. All told, this forecast update is largely similar to our previous forecast. In this sense, the stability in our forecast combined with more certainty on the interest rate path suggest greater clarity in the outlook for the next several months. https://www.scotiabank.com/ca/en/about/economics/economics-publications/post.other-publications.global-outlook-and-forecast-tables.scotiabank%27s-forecast-tables.2024.july-18--2024.html

The Bank of Canada today reduced its target for the overnight rate to 4%, with the Bank Rate at 4% and the deposit rate at 4%. The Bank is continuing its policy of balance sheet normalization. The global economy is expected to continue expanding at an annual rate of about 3% through 2026. While inflation is still above central bank targets in most advanced economies, it is forecast to ease gradually. In the United States, the anticipated economic slowdown is materializing, with consumption growth moderating. US inflation looks to have resumed its downward path. In the euro area, growth is picking up following a weak 2023. Chinas economy is growing modestly, with weak domestic demand partially offset by strong exports. Global financial conditions have eased, with lower bond yields, buoyant equity prices, and robust corporate debt issuance. The Canadian dollar has been relatively stable and oil prices are around the levels assumed in Aprils Monetary Policy Report (MPR). In Canada, economic growth likely picked up to about 1% through the first half of this year. However, with robust population growth of about 3%, the economys potential output is still growing faster than GDP, which means excess supply has increased. Household spending, including both consumer purchases and housing, has been weak. There are signs of slack in the labour market. The unemployment rate has risen to 6.4%, with employment continuing to grow more slowly than the labour force and job seekers taking longer to find work. Wage growth is showing some signs of moderating, but remains elevated. GDP growth is forecast to increase in the second half of 2024 and through 2025. This reflects stronger exports and a recovery in household spending and business investment as borrowing costs ease. Residential investment is expected to grow robustly. With new government limits on admissions of non-permanent residents, population growth should slow in 2025. https://www.bankofcanada.ca/2024/07/fad-press-release-2024-07-24/

Summary Home sales edged up 3.7% between May and June, the first increase in five months following the beginning of the monetary easing cycle by the Bank of Canada in June. On the supply side, new listings increased 1.5% from May to June, the fifth advance in six months. Active listings rose by 1.2% in June, the third consecutive month of growth and the highest level since March 2020. Meanwhile, the number of months of inventory (active listings-to-sales) decreased from 4.3 in May to 4.2 in June, a level back in line with its pre-pandemic level. Market conditions tightened slightly during the month and remained tighter than their historical average in most provinces. They were balanced in Manitoba and B.C., and softer than average in Ontario. Housing starts decreased 23.5K in June to 241.7K (seasonally adjusted and annualized), a result below the median economist forecast calling for a 254.1K print. Urban starts decreased by 23.2K (to 223.2K) on a decline in the multi-family segment (+23.9K to 180.2K) while the single-family segment was up marginally (+0.7K to 43.0). Starts decreased in Vancouver (-3.0K to 20.6K), Toronto (-19.9K to 34.3K), and Calgary (-1.0K to 22.5K), while they increased in Montreal (+6.6K to 35.0K). At the provincial level, the most pronounced decreases in total starts were registered in Ontario (-19.1K to 67.6K), Alberta (-6.0K to 42.3K), and B.C. (-5.3K to 40.8K). Meanwhile, notable increases were seen in Manitoba (+6.3K to 10.3K), Nova Scotia (+3.2K to 12.1K), and Saskatchewan (+2.8K to 4.6K). The Teranet-National Bank Composite National House Price Index remained stable from May to June, after seasonal adjustments. Five of the 11 markets in the composite index were up during the month: Winnipeg (+3.9%), Edmonton (+2.3%), Quebec City (+1.1%), Calgary (+0.1%) and Toronto (+0.1%). Conversely, prices fell in Hamilton (-2.2%), Halifax (-0.8%), Ottawa-Gatineau (-0.8%), Vancouver (-0.3%) and Montreal (-0.3%), while they remained stable in Victoria. https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/economic-news-resale-market.pdf

Key Takeaways for 2024 Overall, the Canadian mortgage landscape in 2024 was relatively similar to 2023. The rate of mortgages contracted in the last 18 months were stable. Renewing vs buying. Consumers renewing their mortgage increased (62% vs 58% in 2023) whereas repeat buyers and first-time buyers decreased. Significantly more mortgage consumers were impacted this year by rising interest rates (65% vs 50% in 2023). However, most consumers had strategies in place to avoid defaulting on their mortgage. It took an average of 4.2 years for consumers to save for a down payment, with 30% of buyers receiving a gift to help with the cost. While consumers continue to have concerns or uncertainty during the home buying process, the majority (79%) still believe it is a good long-term financial investment. Nearly three times as many buyers this year said high interest rates made them delay buying a home (13% vs 5% in 2023). First-time homebuyers and newcomers were the most likely to postpone. The vast majority of consumers did research before their most recent mortgage transaction, with 52% of consumers researching exclusively online, compared to just 34% in 2023. Going green. Among homeowners who did energy efficient renovations, 93% are satisfied with the results of their renovations and 68% saw savings in their energy/electricity bills. https://assets.cmhc-schl.gc.ca/sites/cmhc/professional/housing-markets-data-and-research/housing-research/surveys/mortgage-consumer-surveys/survey-results-2024/2024-cmhc-mortgage-consumer-survey-en.pdf

From TD Economics As we had anticipated, its been a quiet spring selling season. Elevated borrowing costs and Bank of Canada uncertainty have kept buyers on the sidelines through May, leaving Canadian home sales at the lower end of their pre-Covid levels. Canadian average home prices have managed to grind higher so far this spring, but largely due to a shift to more expensive homes being sold. In contrast, benchmark prices (which are a more like for like measure) have declined. The resale market is still projected to gain traction in the second half of 2024, although weve dialed back the expected pace of gains in sales and prices relative to our March forecast. This is because borrowing costs are unlikely to fall as much as previously thought, with one fewer cut expected by the Bank of Canada this year. Whats more, the U.S. central bank is now likely to begin cutting its policy rate late in 2024, instead of the summer, which has spilled over to more limited declines in Canadian bond yields over the remainder of this year. 2025 growth forecasts for Canadian home sales and average home prices have been lifted, however, as downgraded activity in 2024 yields additional pent-up demand waiting to be unleashed, and more meaningful rate relief is delivered. Were retaining our view that price growth will outperform in the Prairies going forward, lifted by tight markets, historically strong population growth, solid affordability conditions, and economic outperformance. Elsewhere, relatively tight supply/demand balances should keep prices on the rise in Quebec and the Atlantic, although notable affordability deteriorations will prevent even stronger gains. Interprovincial migration has also begun to slow in the Atlantic, weighing on what is likely a key source of ownership demand in the region. In Ontario and B.C., average home price growth should benefit from the strongest sales gains in the country moving forward, with pent-up demand driving a recovery in activity from low levels in these two markets. In the near-term, price growth will be restrained by loose supply/demand conditions, although compositional forces could offer some offset in Ontario, as theyve done in recent months. Thereafter, historically challenging affordability backdrops should cap the pace of gains taking place in the two regions. https://economics.td.com/ca-provincial-housing-outlook

Nearly half (48%) admit to spending more than they know they should. 15% believe impulse shopping is preventing them from making real financial progress. A special report from the BMO Real Financial Progress Index reveals Canadians plan to spend more on vacations and/or travel (20%), home renovations (15%), weddings for family and/or friends (10%) and special events such as graduations and showers (9%) this summer compared to 2023. Household spending continues to be a primary driver of economic growth. According to BMO Economics, consumer confidence will likely improve following the Bank of Canadas first rate cut in four years, with expectations for another two rate cuts for the rest of 2024 and several more in 2025. Inflation is showing continued signs of calming, opening the door for further rate cuts by the Bank of Canada, said Sal Guatieri, Senior Economist, BMO. Lower borrowing costs and slower-rising living costs should provide sufficient relief to support moderate two per cent growth in consumer spending this year and next. The BMO Real Financial Progress Index explores Canadians summer spending plans and forecasts: Sizzling Summer Travels: One-in-five Canadians (20%) plan to spend more on summer travel, while 38% plan on spending the same as in 2023. 15% plan on spending less than last year. Overcast Conditions for Celebrating Milestones: Nearly a tenth of Canadians plan to spend more on weddings (9%) and special events such as graduations and showers (9%) for family and friends. More than a fifth (22%) plan to spend the same on weddings for family and/or friends and more than a quarter intend to spend the same as last year on special events (27%). Ramping Up Home Renovations: 15% plan to spend more on home renovations, while nearly a quarter (24%) will spend the same as last year. 13% intend to spend less on home renovations in 2024. Summer Splurges: For those planning on making a large purchase, including buying a car, 18% plan to spend the same and 10% plan to spend more than they did in 2023. Climbing Summer Camp Costs: 15% of parents with children under the age of 18 plan to spend more on summer camps and/or childcare and 36% intend to spend the same as last year. https://newsroom.bmo.com/2024-06-18-BMO-Survey-Canadian-Summer-Spending-Heats-Up

Canadas population surpassed 41 million for the first time on April 1, marking an increase of nearly a quarter-million people from the previous quarter. The yearly rise of 1.27 million set a new record, while the 3.2 per cent growth rate was the highest since 1958 and more than twice the historical average, says Sal Guatieri, BMO Senior Economist and Director of Economics in a recent report. Net international migration of 1.24 million drove almost all the rise, with two-thirds (828,000) propelled by temporary immigration. If, as planned, the federal government slashes the number of temporary immigrants from 6.8% of the population to 5% within three years, then overall growth will slow to around 1%. A growing population propelled by permanent immigration targets of half a million per year will still support the housing market, but in a much more sustainable manner. Builders will have a decent chance of keeping up with household formation, reducing the risk of markets overheating and prices overshooting income growth. Poor affordability, namely in B.C. and Ontario, is not (yet) having a serious effect on international migration. Ontarios population grew 3.5% in the past year and B.C.s rose 3.3%, both much faster than usual and still leading all provinces except for Alberta, whose population exploded 4.4%, the most since 1981. Ontario and Albertas population growth is about double the long-run norm. All provinces are attracting more international migrants than usual, even pricey Ontario (net 93,000) and B.C. (40,000), with Alberta (33,000) punching above its weight. But regional affordability differences are influencing where migrants, including longtime residents, eventually end up.The biggest increases in population relative to historical norms are in Saskatchewan, Manitoba, Quebec, and three Atlantic Provinces. What do all six regions have in common? Still-decent affordability. The sole exception is Newfoundland Labrador with still subdued population growth of 1.0%, though thats twice the norm. A total 356,000 people moved between provinces in the past year, also more than usual. This is where differences in housing costs come to the fore. Ontario had a net outflow of 32,000 people, trending at the worst levels on record, while B.C. lost 10,000 folks to other provinces. The hands-down winner of the interprovincial migration sweepstakes is Alberta with a net gain of 53,000, tracking the most on record. And its no coincidence that the biggest contributor to this gain is people leaving B.C. and Ontario. More Canadians are also moving to Atlantic Canada. While NL did see a small net outflow, this followed a rare inflow in the prior two years. Quebec, Saskatchewan and Manitoba also lost residents to other provinces, but Quebecs net outflow was much smaller than usual. Source: https://economics.bmo.com/en/publications/detail/0aa3f8dd-43d3-4167-ac05-682ddb7765be/

TD Provincial Economic Forecast Provincial economies are performing broadly as expected. Activity is likely to remain subpar across most of Canada, as regional economies continue to absorb the impact of elevated rates. We still see scope for growth outperformances in the Atlantic Region and Prairies, with somewhat weaker expansions likely in Ontario, B.C and Quebec. The Bank of Canada has begun to normalize its policy rate. However, the process will be gradual, with more significant progress in 2025. By late this year, the U.S. central bank should also be trimming its policy rate, downwardly pressuring Canadian yields and setting the stage for meaningful rate relief. All provinces will benefit, particularly those with the most highly indebted households such as Ontario, B.C., and Alberta. Falling borrowing costs will also deliver a shot in the arm to Canadian housing markets later in the year, changing the momentum from a spring market that has been subdued. Home sales growth should be particularly sturdy in B.C. and Ontario given pent-up demand, although affordability pressures will limit price gains. In contrast, markets in the Prairies should continue to outperform. Population growth across the nation continued to balloon over the first quarter of 2024, notably in Alberta, Ontario, and PEI. This may be the last surge before we see population growth rates slowly taper as a result of recently announced policies by the federal government. For now, decent employment gains have not been able to keep pace with the quickly growing labour force, leading to higher unemployment rates across most jurisdictions. We see jobless rates generally peaking by the end of this year before gently pulling back in 2025. https://economics.td.com/provincial-economic-forecast

Summary Home sales edged down 0.6% between April and May, a fourth consecutive monthly decline. On the supply side, new listings increased 0.5% from April to May, the fourth advance in five months. Active listings rose by 4.2% in May, the second consecutive month of growth and the highest level since March 2020. Meanwhile, the number of months of inventory (active listings-to-sales) increased from 4.2 in April to 4.4 in May, a level now back in line with its pre-pandemic level. Market conditions loosened during the month but remained tighter than their historical average in most provinces. They were balanced in Manitoba and B.C., and softer than average in Ontario. Housing starts jumped 23.4K in May to 264.5K (seasonally adjusted and annualized), a result well above the median economist forecast calling for a 245.1K print. Urban starts increased by 24.7K (to 246.1K) withs gains in both the multi-family segment (+24.0K to 203.1K) and the single-family segment (+0.8K to 43.0K). Starts increased in Montreal (+14.4K to 28.3K), Toronto (+17.3K to 54.3K), and Calgary (+1.4K to 23.4K), while they decreased in Vancouver (-11.1K to 23.5K). At the provincial level, the most pronounced increases in total starts were registered in Qubec (+19.4K to 59.6K), Ontario (+12.4K to 86.3K), and New Brunswick (+3.5K to 7.0K). Meanwhile, notable decreases were seen in British Columbia (-8.4K to 46.5K) and Manitoba (-4.8K to 3.5K). The Teranet-National Bank Composite National House Price Index rose by 0.5% from April to May, after seasonal adjustments. Seven of the 11 markets in the composite index were up during the month: Halifax (+1.5%), Hamilton (+1.1%), Calgary (+1.0%), Vancouver (+1.0%), Victoria (+0.8%), Toronto (+0.5%) and Quebec City (+0.5%). Conversely, prices fell in Edmonton (0.7%), Winnipeg (-0.6%) and Ottawa-Gatineau (-0.2%), while they remained stable in Montreal. https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/economic-news-resale-market.pdf

ON TRACK IN SOME AREAS, A BUMPY ROAD AHEAD IN OTHERS Population growth continues to surge. Mays Labour Force Survey data reported a 3.6% (S.A.A.R.) increase in the 15 year old+ population compared to April. This 97,600 increase since the release of last months report maintained the trend of robust population growth through 2024 so far, with the last three months averaging growth of 3.7% (S.A.A.R.). Compared to May of last year, Canadas 15+ population is up by almost 1.1 million. The increase in the labour force population is down by roughly half when compared to Aprils explosive growth numbers, although m/m growth of 3% (S.A.A.R.) is still significantly high, especially when compared to pre-pandemic levels. A quarter of the year recorded, a quarter of the goal reached. Canada admitted another 34,785 permanent residents among its major categories in March, totalling 121,620 admissions for the year so far, approximately 25% of the annual goal of 485,000 the federal government set for 2024. https://www.scotiabank.com/ca/en/about/economics/economics-publications/post.other-publications.canada-and-us-economics-.economic-commentary.population-growth.-june-10--2024-.html

From Scotiabank We expect the Bank of Canada to cut by 25bps at each of the next three meetings. Inflation is on a good downward path though growth in the interest rate-sensitive parts of the economy remains surprisingly strong. Positive risks to the outlook for growth and inflation remain as interest rates come down. We are particularly mindful of the response in real estate markets and household spending. Any materialization of upside risks would imperil future rate cuts. Rate cuts have finally begun in Canada. With inflation hopefully on a sustained downward path despite the interest rate-sensitive parts of our economy performing surprisingly well, it is now clear that the Bank of Canada has decided rate relief is necessary. That is great news for borrowers if the Bank of Canada follows through with additional cuts. We think they will, though we remain concerned about upside risks to inflation given rising wages and falling productivity, the surprising strength in consumption, the serial over-stimulation by the federal and provincial governments, and the potential for a housing market rebound. As a result of the latest decision and the communications around that we are changing our Bank of Canada view and now expect that Governor Macklem will cut the policy rate at each of the next three meetings, for a total of 100bps of cuts this year. https://www.scotiabank.com/ca/en/about/economics/economics-publications/post.other-publications.global-outlook-and-forecast-tables.scotiabank%27s-forecast-tables.2024.june-6--2024.html

From National Bank of Canada In the first rate decision with material uncertainty in a year, the BoC opted lower the target for the overnight rate by 25 basis points, a decision in line with market expectations and the consensus forecast. This makes the BoC the first G7 central bank to ease policy this year, though the ECB is widely expected to follow suit tomorrow. Citing clear progress in core inflation, in addition to ongoing sub-potential growth and a rebalancing labour market, the press release noted monetary policy no longer needs to be as restrictive. The focus now turns to the pacing of cuts in this nascent easing cycle. In the opening statement to the presser, Macklem said its reasonable to expect further easing as long as inflation continues to ease. That puts a July cut squarely in focus and wed be inclined to bet they will ease again at the next meeting. At the same time, wed note that earlier BoC communications indicated that monetary policy easing this year would be gradual. Macklem confirmed this view in the press conference. So although back-to-back cuts may be instituted to start, were skeptical theyll continue at the same pace thereafter. We agree with market expectations that 50 basis points of additional rate relief is appropriate in 2024. In contrast, the consensus sees this marking the start of a more aggressive easing campaign. The median expectation is for a 4% policy rate by year-end. Three more cuts over the last four decisions of the year, isnt a pace of cuts we would characterize as gradual and isnt as likely to materialize barring a more material slowdown in the economy. The Banks next decision will take place on July 24th. The Summary of Deliberations for todays decision will be released on June 19th. https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/boc-policy-monitor.pdf

The Bank of Canada today reduced its target for the overnight rate to 4%, with the Bank Rate at 5% and the deposit rate at 4%. The Bank is continuing its policy of balance sheet normalization. The global economy grew by about 3% in the first quarter of 2024, broadly in line with the Banks April Monetary Policy Report (MPR) projection. In the United States, the economy expanded more slowly than was expected, as weakness in exports and inventories weighed on activity. Growth in private domestic demand remained strong but eased. In the euro area, activity picked up in the first quarter of 2024. Chinas economy was also stronger in the first quarter, buoyed by exports and industrial production, although domestic demand remained weak. Inflation in most advanced economies continues to ease, although progress towards price stability is bumpy and is proceeding at different speeds across regions. Oil prices have averaged close to the MPR assumptions, and financial conditions are little changed since April. In Canada, economic growth resumed in the first quarter of 2024 after stalling in the second half of last year. At 1.7%, first-quarter GDP growth was slower than forecast in the MPR. Weaker inventory investment dampened activity. Consumption growth was solid at about 3%, and business investment and housing activity also increased. Labour market data show businesses continue to hire, although employment has been growing at a slower pace than the working-age population. Wage pressures remain but look to be moderating gradually. Overall, recent data suggest the economy is still operating in excess supply. CPI inflation eased further in April, to 2.7%. The Banks preferred measures of core inflation also slowed and three-month measures suggest continued downward momentum. Indicators of the breadth of price increases across components of the CPI have moved down further and are near their historical average. However, shelter price inflation remains high. With continued evidence that underlying inflation is easing, Governing Council agreed that monetary policy no longer needs to be as restrictive and reduced the policy interest rate by 25 basis points. Recent data has increased our confidence that inflation will continue to move towards the 2% target. Nonetheless, risks to the inflation outlook remain. Governing Council is closely watching the evolution of core inflation and remains particularly focused on the balance between demand and supply in the economy, inflation expectations, wage growth, and corporate pricing behaviour. The Bank remains resolute in its commitment to restoring price stability for Canadians. https://www.bankofcanada.ca/2024/06/fad-press-release-2024-06-05/

Canadian new home prices increase slightly in April The national index rose by 0.2% monthly in April on the strength of increases in large urban centres such as Edmonton, Calgary, and Vancouver. Overall, prices increased in 5 of the 27 census metropolitan areas (CMAs) surveyed, were unchanged in 15 CMAs and declined in 7. The largest price gains are reported by cities in Alberta The largest month-over-month increases in April were reported in Edmonton (+1.1%) and Calgary (+ 0.9%). Builders attributed the price gains to construction costs along with favourable market conditions. In Alberta, the rapidly growing population is fuelling demand for new housing. According to the latest population estimates of Canada, Alberta (+4.4%) recorded the fastest year-over-year rise in population in Canada in the first quarter of 2024. The largest monthly declines in April were seen in KitchenerCambridgeWaterloo (-0.4%) and Winnipeg (-0.4%), where builders linked the decreases to weak market conditions. National new home prices edge down year over year in April Nationally, the prices of new homes edged down (-0.1%) in April compared with the same month last year. This was less than the year-over-year decline seen in March 2024 (-0.4%). The largest year-over-year declines in April were registered in Ottawa (-4.4%) and Saskatoon (-2.5%), while the largest increases were in Calgary (+3.9%), Vancouver (+1.3%) and Qubec (+1.2%). https://www150.statcan.gc.ca/n1/daily-quotidien/240523/dq240523c-eng.htm

HIGHLIGHTS: Canadian housing affordability posted a first improvement in three quarters in Q124. The mortgage payment on a representative home as a percentage of income (MPPI) fell 3.1 percentage points, the largest one quarter improvement since the second quarter of 2019. Seasonally adjusted home prices decreased 0.6% in Q124 from Q423; the benchmark mortgage rate (5-year term) slumped 32 basis points, while median household income rose 1.2%. Affordability improved in all ten markets covered in Q1. On a sliding scale of markets from best progression to least: Vancouver, Victoria, Toronto, Hamilton, Montreal, Winnipeg, Ottawa-Gatineau, Edmonton, Quebec, Calgary. Countrywide, affordability enhanced 2.2 pp in the condo portion vs. a 3.4 pp betterment in the non-condo segment. https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/housing-affordability.pdf

Key Highlights Even with a record-high 650,000 construction workers in 2023, Canadas housing production of 240,267 units was below the potential of over 400,000 homes per year. While more human and financial resources have been committed to residential construction over the past several years, housing starts have not kept the pace. Meeting the Governments Housing Plan of achieving the goal of 3.87 million new homes by 2031 demands both regulatory reforms and industry consolidation to increase efficiency and productivity. The Housing Accelerator Fund is a huge step in achieving this outcome. https://www.cmhc-schl.gc.ca/blog/2024/what-canada-potential-capacity-housing-construction

Summary Home sales edged down 1.7% between March and April, a second monthly decrease in five months. On the supply side, new listings increased 2.8% from March to April, the third advance in four months. Active listings jumped 5.8% in April, following stabilization the previous month. Overall, the number of months of inventory (active listings-to-sales) increased from 3.9 in March to 4.2 in April. Market conditions loosened during the month but remained tighter than their historical average in most provinces. They were balanced in Manitoba and B.C., and softer than average in Ontario. Housing starts remained relatively stable in April as they edged down 2.0K to 240.2K (seasonally adjusted and annualized), a result in line with the median economist forecast calling for a 240.0K print. Urban starts decreased by 0.2K (to 220.1K) as a decline for the multi-family segment (-1.2K to 178.5K) was almost fully offset by an increase in the single-family segment (+0.9K to 41.7K). Starts increased in Montreal (+4.0K to 13.9K) and Calgary (+0.1K to 21.9K), while they decreased in Vancouver (-7.1K to 34.6K) and Toronto (-5.0K to 37.0K). At the provincial level, the most pronounced increases in total starts were registered in Alberta (+5.8K to 45.9K), Manitoba (+2.7K to 8.2K) and New Brunswick (+1.4K to 3.6K). Meanwhile, notable decreases were seen in Qubec (-6.7K to 39.9K) and British Columbia (-6.0K to 54.8K). The Teranet-National Bank Composite National House Price Indexremained stable from March to April, after seasonal adjustments. Seven of the 11 markets in the composite index were up during the month: Edmonton (+2.3%), Montreal (+1.9%), Calgary (+1.9%), Ottawa-Gatineau (+0.5%), Vancouver (+0.4%), Hamilton (+0.4%) and Winnipeg (+0.3%). Conversely, declines occurred in Halifax (-0.7%), Toronto (-1.2%), Victoria (-1.9%) and Quebec City (-2.1%). https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/economic-news-resale-market.pdf

Employment increased by 90,000 (+0.4%) in April, and the unemployment rate was unchanged at 6.1%. The employment rate held steady at 61.4%, following six consecutive monthly declines. In April, employment rose among core-aged men (25 to 54 years old) (+41,000; +0.6%) and women (+27,000; +0.4%) as well as for male youth aged 15 to 24 (+39,000; +2.8%). There were fewer women aged 55 and older employed (-16,000; -0.8%), while employment was little changed among men aged 55 and older and female youth (aged 15 to 24). Employment gains in April were driven by part-time employment (+50,000; +1.4%). Employment increased in April in professional, scientific and technical services (+26,000; +1.3%), accommodation and food services (+24,000; +2.2%), health care and social assistance (+17,000; +0.6%) and natural resources (+7,700; +2.3%), while it fell in utilities (-5,000; -3.1%). Employment increased in Ontario (+25,000; +0.3%), British Columbia (+23,000; +0.8%), Quebec (+19,000 +0.4%) and New Brunswick (+7,800; +2.0%) in April. It was little changed in the other provinces. Total hours worked rose 0.8% in April and were up 1.2% compared with 12 months earlier. Average hourly wages among employees increased 4.7% (+$1.57 to $34.95) on a year-over-year basis in April, following growth of 5.1% in March (not seasonally adjusted). In the spotlight: Over one in four workers (28.4%) have to come into work or connect to a work device at short notice at least several times a month. https://www150.statcan.gc.ca/n1/daily-quotidien/240510/dq240510a-eng.htm

Following sharp declines during the COVID‑19 pandemic, many indicators of financial stress have now returned to more normal levels. Signs of stress are concentrated primarily among households without a mortgage and survey data suggest that, of these households, renters are most affected. In contrast, indicators of stress among mortgage holders are largely unchanged, remaining at levels lower than their historical averages. Factors such as income growth, accumulated savings and reduced discretionary spending are supporting households ability to deal with higher debt payments. Over the coming years, more mortgage holders will be renewing at higher interest rates. Based on market expectations for interest rates, payment increases will generally be larger for these mortgage holders than for borrowers who renewed over the past two years. Higher debt-servicing costs reduce financial flexibility for households and businesses and make them more vulnerable in the event of an economic downturn. Signs of financial stress have risen primarily among households without a mortgage The combination of higher inflation and higher interest rates continues to put pressure on household finances. Many indicators of financial stress, which had declined during the pandemic, are now close to pre-pandemic levels. Signs of increased financial stress appear mainly concentrated among renters. The rates of arrears on credit cards and auto loans for households without a mortgagewhich includes renters and outright homeownersare back to pre-pandemic levels and continue to grow. In contrast, arrears on these products for households with a mortgage have remained low and stable. https://www.bankofcanada.ca/2024/05/financial-stability-report-2024/

Key takeaways Canadas financial system remains resilient. Over the past year, financial system participantsincluding households, businesses, banks and non-bank financial institutionshave continued to proactively adjust to higher interest rates. However, risks to financial stability remain. The Bank sees two key risks to stability, related to: Debt serviceabilityBusinesses and households continue to adjust to higher interest rates. Indicators of financial stress in both sectors were below historical averages through the COVID-19 pandemic but have been normalizing. Some indicators look to be increasing more sharply and warrant monitoring. Higher debt-servicing costs reduce financial flexibility for households and businesses and make them more vulnerable in the event of an economic downturn. Asset valuationsThe valuations of some financial assets appear to have become stretched, which increases the risk of a sharp correction that can generate system-wide stress. The recent rise in leverage in the non-bank financial intermediation sector could amplify the effects of such a correction. The financial system is highly interconnected. Stress in one sector can spread to others. Participants should continue to be proactive, including planning for more adverse conditions or outcomes. https://www.bankofcanada.ca/2024/05/financial-stability-report-2024/

The Canadian Real Estate Association (CREA) has updated its forecast for home sales activity and average home prices via Multiple Listing Service (MLS) Systems of Canadian real estate boards and associations for 2023 and 2024. As expected, national home sales came flying out of the gates in April 2023. Buyers who had been sitting on the fence responded to the twin signals of interest rates looking like they were at a top and property values hitting bottom. With the Bank of Canada unexpectedly ending its pause on rate hikes in June and hiking again in July, a major source of uncertainty has returned to the housing market. That said, even before the resumption of rate hikes, the recent sales rally had already shown signs of losing steam. The biggest month-over-month increase in sales activity was back in April, followed by an increase only half as big in May, then by a small 1.5% gain in June. This was likely because new listings had fallen to a 20-year low, which was reflected in month-over-month price gains in April, May, and June that were only bested by those seen during the COVID-19 pandemic. New listings are now catching up to sales, although this isnt expected to translate into further big gains in activity as some buyers will likely be moving back to the sidelines, as they did in 2022, to wait for additional signals from the Bank of Canada and the data it bases policy on. Looking further out, theres also a growing consensus that rates will not just be higher, but likely for longer well into 2024. As a result, CREA has downgraded its forecast for home sales in 2023 and 2024 compared to its April 2023 outlook, along with the trajectory for prices. Thats not to say either are necessarily expected to return to declines on a month-to-month basis, but rather to stabilize or rise at a slower pace than they have in recent months. https://www.crea.ca/housing-market-stats/canadian-housing-market-stats/quarterly-forecasts/

Choosing the right mortgage is a significant decision that can impact your financial well-being for years to come. With the plethora of mortgage products available in the Canadian market, navigating the options and finding the best fit for your needs can be overwhelming. This is where a mortgage broker can be your ally, providing valuable expertise, access to a wide range of mortgage products, and personalized solutions tailored to your unique needs. In this article, we will explore the top 5 reasons to use a mortgage broker in Canada and how they can help you make an informed decision when it comes to your mortgage. Access to a Wide Range of Mortgage Products The mortgage market in Canada can be complex, with various traditional lenders and financial institutions offering different mortgage products with varying terms and conditions. As a borrower, it can be challenging to explore all the options independently and determine which mortgage product best suits your needs. This is where a mortgage broker can be a game-changer. Unlike traditional lenders, who typically offer their own mortgage products, mortgage brokers have access to a wide range of mortgage products from multiple lenders. They act as intermediaries, connecting borrowers with lenders and mortgage products that may not be readily available to the general public. This means that mortgage brokers can provide you with access to diverse mortgage options that you may not have been aware of or may not have qualified for on your own. Having a wide range of mortgage products to choose from can be a significant advantage for borrowers. It allows you to compare different mortgage options and select the one that best fits your financial goals, budget, and lifestyle. Whether you are a first-time homebuyer, a self-employed borrower, or someone with unique financial circumstances, a mortgage broker can help you find a mortgage product that is tailored to your needs. Expertise in Mortgage Market The mortgage market in Canada is constantly evolving, with changes in interest rates, government regulations, and lender policies. Staying updated with the latest market trends and understanding the intricacies of the mortgage market can be challenging for borrowers. This iis where the expertise of a mortgage broker comes in handy. Mortgage brokers are market experts who have in-depth knowledge of the mortgage industry and stay updated with the latest changes and trends. Mortgage brokers undergo extensive training and have a thorough understanding of the different types of mortgages, interest rates, lender policies, and government regulations. They use their expertise to assess your financial situation, understand your needs and goals, and then recommend mortgage products that align with your requirements. They can provide valuable insights and advice on the pros and cons of different mortgage options, helping you make informed decisions. Relying on the expertise of a mortgage broker can save you time and effort in researching and understanding the complex mortgage market. You can trust their knowledge and experience to guide you through the mortgage process and ensure that you are aware of all the available options. Tailored Mortgage Solutions Every borrower has unique financial circumstances, goals, and preferences. A one-size-fits-all mortgage may not be suitable for everyone. This is where a mortgage broker can shine by providing tailored mortgage solutions. Mortgage brokers take the time to understand your financial situation, future plans, and mortgage requirements. They assess factors such as your credit score, income, expenses, and financial goals to recommend mortgage products that are tailored to your needs. They can help you explore different mortgage options, such as fixed-rate mortgages, variable-rate mortgages, or hybrid mortgages, and suggest the one that aligns with your financial objectives. Mortgage brokers also have access to niche mortgage products that cater to specific borrower profiles, such as self-employed individuals or those with low credit scores. They can help you find specialized mortgage solutions that may not be available through traditional lenders, ensuring that you have the best possible mortgage fit for your unique situation. Time and Effort Savings The mortgage application process can be time-consuming and labor-intensive. Gathering all the necessary documents, submitting applications, and negotiating with lenders can be overwhelming, especially if you are not familiar with the process. This is where a mortgage broker can save you significant time and effort. Mortgage brokers handle the entire mortgage application process on your behalf, from gathering all the required documentation to submitting applications to different lenders. They have the experience and knowledge to navigate the complexities of the mortgage process efficiently, streamlining the application process for you. They can save you the hassle of dealing with multiple lenders, filling out numerous forms, and following up on the progress of your applications. Moreover, mortgage brokers can also help you expedite the mortgage approval process. They understand the requirements of different lenders and can ensure that your application meets their criteria, increasing the chances of getting approved. Their expertise can help you save time and effort in the mortgage application process, allowing you to focus on other important aspects of buying a home or refinancing your mortgage. Cost Savings The financial implications of a mortgage go beyond the interest rate. There can be hidden costs associated with mortgages, such as closing costs, prepayment penalties, or other fees. Without proper knowledge and understanding of the mortgage terms and conditions, you may end up paying more than you anticipated. This is where a mortgage broker can help you save costs. Mortgage brokers can provide you with a clear understanding of the total cost of your mortgage, including all the associated fees and charges. They can explain the mortgage terms and conditions fine print and help you identify potential hidden costs. They can also negotiate with lenders on your behalf to get the best possible mortgage rates and terms, potentially saving you thousands of dollars over the life of your mortgage. In addition, mortgage brokers can help you explore different mortgage options and assess the long-term costs of each option. For example, they can help you understand the pros and cons of a fixed-rate mortgage versus a variable-rate mortgage and guide you in choosing the one that aligns with your financial goals and budget. Their expertise can help you make informed decisions that can save you money in the long run. Furthermore, mortgage brokers can also help you avoid potentially costly mistakes in the mortgage process. They can review loan offers and agreements to ensure that there are no hidden fees or unfavorable terms that may cost you more in the future. They can also provide valuable advice on strategies to pay off your mortgage faster or save on interest costs. Conclusion In summary, using a mortgage broker in Canada can provide you with numerous benefits. From their market expertise and tailored mortgage solutions to time and effort savings, cost savings, access to a wide network of lenders, and personalized guidance, mortgage brokers can simplify the mortgage process and help you make informed decisions. Whether you are a first-time homebuyer or looking to refinance your mortgage, a mortgage broker can be a valuable resource in your journey toward homeownership. Consider working with a mortgage broker to ensure that you get the best mortgage deal that suits your unique financial needs and goals.