First National Financial LP

Market Memo: A little good news - September 2024

  • First National Financial LP

The past few weeks have brought good news for people who are hoping for lower interest rates or are looking to buy a home.

Inflation Rate Slows

Probably the best news has come in the latest inflation report from Statistics Canada.  It shows the annual inflation rate slowed to 2.0% in August.  That hits the target the Bank of Canada has been aiming for since April of 2022, when it started aggressively hiking interest rates in an effort to rein-in galloping price increases. 

The Bank’s preferred measures of core inflation are also down. 

The August rate dropped 50 basis points from July, largely based on lower gasoline prices.  Unfortunately, the key drivers of inflation continue to be mortgage interest and rental costs.  Both are residual effects of the BoC’s high interest rate policy.  That, combined with inflation hitting the 2.0% target, have increased speculation that the Bank could cut 0.5% off its trend-setting policy rate at its next setting on October 23.

Interest Rate Cuts

The Bank of Canada, which has been leading the charge on rate cuts, is finally getting some support from the U.S. central bank.  At long last the Federal Reserve has cut its policy rate, trimming a surprising 0.5% off its policy rate on September 18.  That gives the BoC room for further and bigger cuts, without having to worry about devaluing the Loonie.

Stable Housing Market

For those actively house hunting, both the market and the government have some encouraging news.   

The Canadian Real Estate Association’s latest numbers show sales and prices remain rather lazy while supply continues build.  New listings ticked up 1.1% in August.  Total listings are up nearly 19% compared to a year ago and there is about four months of inventory.

Relaxing Mortgage Rules

As the prospect of a federal election looms ever larger the Liberal government is loosening up some of the programs designed to make home ownership more attainable. 

By the end of the year Ottawa will increase the cap on insured mortgages to $1.5-million from $1-million, making high ratio mortgages available on more homes for more buyers.   

Previously, buyers who did not have a 20% down payment needed to take out mortgage insurance, but that insurance was limited to homes priced at $1-million or less. That limit will be upped to $1.5-million. 

Eligibility for 30-year mortgages will also be expanded to include all first-time buyers and anyone buying a newly built house.  The program had originally been limited to first-time buyers purchasing a new build.