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Bank of Canada not seeing ‘alarm bells’ in housing market despite mortgage pain

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The Bank of Canada is not yet concerned about the impact of rapidly rising mortgage rates on the overall health of the country’s housing market.

That was the message from governor Tiff Macklem when he was asked after a speech to the Toronto Region Board of Trade on Thursday about how the central bank is thinking about the future of Canada’s housing market.

Macklem said the bank’s rapid increase in interest rates since March 2022 — the policy rate stands at 4.5 per cent following two consecutive decisions to hold — has effectively cooled housing activity and driven double-digit declines in home prices across many markets.

He told the crowd that the central bank sees the housing correction continuing in the months to come, though some markets are already stabilizing and even seeing prices and activity tick back up.

Macklem acknowledged, however, that the cost of slowing the economy by raising the cost of borrowing — a sustained effort to get inflation back to the Bank of Canada’s two per cent target — has made life harder for many homeowners.

Those with variable rate mortgages who purchased homes at the peak of prices during the pandemic, for instance, as well as those renewing their fixed mortgages in today’s higher interest rate environment, are in many cases facing much higher monthly payments.

“We are acutely aware that some Canadians have been very squeezed by the interest rate increases,” Macklem said Thursday.

The central bank head also flagged that mortgage delinquencies, which were quite low during the pandemic, are starting to tick back up again, though he said this was more a normalization than a cause for concern.

“They are coming up, but they’re still only just getting back to pre-pandemic levels. So that is something to watch,” he says.

Despite the current weakness in the real estate industry, Macklem also said that Canada’s housing market has “strong underlying fundamentals” that will sustain demand in the sector longer-term.

Strong levels of immigration, in particular, will help to keep Canada’s housing sector afloat through the current period of higher interest rates, he said.

Even if there is a surge in Canadians who are unable to make mortgage payments on their homes, Macklem sought to assuage concerns that it would spur a domino effect through the economy.

“I don’t want to say that there aren’t some individuals who are really feeling the pain,” he said.

“But if you look at the household sector overall, we’re not seeing alarm bells.”

 

Bank of Canada monitoring global banking stress

Meanwhile, Macklem said the central bank is ready to step in if stress in the global banking system affects Canada, but emphasized it won’t back off from its inflation fight as it works to bring inflation down to its two per cent target.

Macklem addressed the recent stress in the global banking system that was set off by the collapse of Silicon Valley Bank in the United States.

“Here in Canada the spillover effects have been muted, reflecting the financial stability we are known for internationally,” he said. “But financial stability risks remain.”

Macklem concedes that financial instability raises the odds of a sharper economic downturn but says achieving both financial stability and price stability is important and that the two are related.

The governor says the central bank has separate tools to address both mandates and that the Bank of Canada will take into consideration the interacting effects between financial stress and inflation.

If financial stress leads to tighter borrowing conditions that make loans more expensive and harder to get, he says the governing council would take this into consideration when setting the policy rate.

“In the current environment, monetary policy has already tightened financial conditions,” Macklem said.

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“But if financial stress were to lead to more tightening than expected and if this were to persist, we would need to take this into consideration as we set the policy rate to achieve our inflation target.”

Though inflation has fallen significantly from its peak of 8.1 per cent last summer, Macklem stresses that the Bank of Canada’s job is not done just yet and there is work to do before it can move below three per cent.

The Bank of Canada paused its aggressive rate hiking cycle earlier this year to monitor the effects of its previous rate hikes on price growth. So far, inflation has been falling fast enough to keep the Bank of Canada on the sidelines, but the central bank is keeping the door open to more rate hikes if needed.

“If we start to see signs that inflation is likely to get stuck materially above our two per cent target, we are prepared to raise rates further,” Macklem said.

— with files from The Canadian Press

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B.C. Conservatives promise to end stumpage fees, review fire management if elected

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VANDERHOOF, B.C. – British Columbia Conservatives are promising changes they say will bring more stability to the province’s struggling forest industry.

Leader John Rustad announced his plan for the sector a week before the official launch of the provincial election campaign, saying a Conservative government would do away with stumpage fees paid when timber is harvested and instead put a tax on the final products that are produced.

Rustad said Saturday that under a provincial Conservative government, a small fee may be charged upfront, but the bulk would come at the end of the process, depending on what type of product is created.

He also promised to review how wildfires are managed, as well as streamline the permit process and review what he calls the province’s “uncompetitive cost structure.”

“British Columbia is by far the highest cost producers of any jurisdiction in North America. We need to be able to drive down those costs, so that our forest sector can actually be able to do the reinvestment, to be able to create the jobs and make sure that they’re still there to be able to support our communities,” he said.

The governing New Democrats meanwhile, say eliminating stumpage fees would inflame the softwood lumber dispute with the United States and hurt forestry workers.

In a statement issued by the NDP, Andrew Mercier, the party’s candidate in Langley-Willowbrook, said Rustad failed to support the industry when he was in government under the former BC Liberals.

“Not only will Rustad’s old thinking and recycled ideas fail to deliver, his proposal to eliminate stumpage would inflame the softwood lumber dispute — punishing forestry workers and communities,” Mercier said, accusing Rustad of ignoring the complexity of the challenges facing the industry.

The softwood lumber dispute between the U.S. and Canada stretches back decades. In August, the U.S. Department of Commerce nearly doubled duties on softwood lumber.

International Trade Minister Mary Ng has said Canada has taken steps to launch two legal challenges under the Canada-United States-Mexico Agreement.

Rustad said a provincial Conservative government would push hard to get a deal with the United States over the ongoing dispute “whether it’s with the rest of Canada or by itself.”

He said his party’s proposed changes are in the name of bringing “stability” and “hope” to the industry that has seen multiple closures of mills in rural communities over the last several years.

Most recently, Canfor Corp. decided to shutter two northern British Columbia sawmills earlier this month, leaving hundreds of workers unemployed by the end of the year.

According to the United Steelworkers union, Canfor has closed 10 mills in the province since November 2011, including nine in northern B.C.

Jeff Bromley, chair of the United Steelworkers wood council, said Saturday the idea of changes in favour of taxing the final product has been floated in the past.

He said the finer details of the Conservative plan will be important, but that the system needs to be improved and “new ideas are certainly something I’d be willing to entertain.”

“Something needs to happen, or the industry is just going to bleed and wither away and be a shadow of its former self,” Bromley said.

“Politics aside, if (Rustad) can come up with a policy that enables my members to work, then I would be supportive of that. But then I’m supportive of any government that would come up with policies and fibre for our mills to run. Period.”

When Canfor announced its latest closures, Forests Minister Bruce Ralston said the sector was a “foundational part” of the province and the current NDP government would work to support both local jobs and wood manufacturing operations.

This report by The Canadian Press was first published Sept. 14, 2024

The Canadian Press. All rights reserved.



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Christian McCaffrey is placed on injured reserve for the 49ers and will miss at least 4 more games

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SANTA CLARA, Calif. (AP) — The San Francisco 49ers placed All-Pro running back Christian McCaffrey on injured reserve because of his lingering calf and Achilles tendon injuries.

The move made Saturday means McCaffrey will miss at least four more games after already sitting out the season opener. He is eligible to return for a Thursday night game in Seattle on Oct. 10.

McCaffrey got hurt early in training camp and missed four weeks of practice before returning to the field on a limited basis last week. He was a late scratch for the opener on Monday night against the Jets and now is sidelined again after experiencing pain following practice on Thursday.

McCaffrey led the NFL last season with 2,023 yards from scrimmage and was tied for the league lead with 21 touchdowns, winning AP Offensive Player of the Year.

The Niners made up for McCaffrey’s absence thanks to a strong performance from backup Jordan Mason, who had 28 carries for 147 yards and a touchdown in San Francisco’s 32-19 victory over the New York Jets. Mason is set to start again Sunday at Minnesota.

After missing 23 games because of injuries in his final two full seasons with Carolina, McCaffrey had been healthy the past two seasons.

He missed only one game combined in 2022-23 — a meaningless Week 18 game last season for San Francisco when he had a sore calf. His 798 combined touches from scrimmage in the regular season and playoffs were the third most for any player in a two-year span in the past 10 years.

Now San Francisco will likely rely heavily on Mason, a former undrafted free agent out of Georgia Tech who had 83 carries his first two seasons. He had at least 10 touches just twice before the season opener, when his 28 carries were the most by a 49ers player in a regular-season game since Frank Gore had 31 against Seattle on Oct. 30, 2011.

The Niners also have fourth-round rookie Isaac Guerendo and Patrick Taylor Jr. on the active roster. Guerendo played three offensive snaps with no touches in the opener. Taylor had 65 carries for Green Bay from 2021-23.

San Francisco also elevated safety Tracy Walker III from the practice squad for Sunday’s game against Minnesota.

___

AP NFL:

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Canada’s Newman, Arop secure third-place finishes at Diamond League track event

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BRUSSELS – Canada walked away with some hardware at the Diamond League track and field competition Saturday.

Alysha Newman finished third in women’s pole vault, while Marco Arop did the same in the men’s 800-metre race.

Newman won a bronze medal in her event at the recent Paris Olympics. Arop grabbed silver at the same distance in France last month.

Australia’s Nina Kennedy, who captured gold at the Summer Games, again finished atop the podium. Sandi Morris of the United States was second.

Newman set a national record when she secured Canada’s first-ever pole vault medal with a bronze at the Olympics with a height of 4.85 metres. The 30-year-old from London, Ont., cleared 4.80 metres in her second attempt Saturday, but was unable conquer 4.88 metres on three attempts.

Arop, a 25-year-old from Edmonton, finished the men’s 800 metres with a time of one minute 43.25 seconds. Olympic gold medallist Emmanuel Wanyonyi of Kenya was first with a time of 1:42.70.

Djamel Sedjati, edged out by Arop for silver in Paris last month, was second 1:42.87

This report by The Canadian Press was first published Sept. 14, 2024.

The Canadian Press. All rights reserved.



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