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.
NEW GLASGOW, N.S. – Police in New Glasgow, N.S., say a 44-year-old woman faces fraud charges after funds went missing from the Pictou East Progressive Conservative Association.
New Glasgow Regional Police began the investigation on Oct. 7, after Nova Scotia Premier Tim Houston reported that an undisclosed amount of money had gone missing from his riding association’s account.
Police allege that a volunteer who was acting as treasurer had withdrawn funds from the association’s account between 2016 and 2024.
The force says it arrested Tara Amanda Cohoon at her Pictou County, N.S., residence on Oct. 11.
They say investigators seized mobile electronic devices, bank records and cash during a search of the home.
Cohoon has since been released and is to appear in Pictou provincial court on Dec. 2 to face charges of forgery, uttering a forged document, theft over $5,000 and fraud over $5,000.
Police say their investigation remains ongoing.
Houston revealed the investigation to reporters on Oct. 9, saying he felt an “incredible level of betrayal” over the matter.
The premier also said a volunteer he had known for many years had been dismissed from the association and the party.
This report by The Canadian Press was first published Oct. 23, 2024.
PICTOU, N.S. – A Nova Scotia excavation company has been fined $80,000 after a worker died when scaffolding collapsed on one of its job sites.
In a decision released Wednesday, a Nova Scotia provincial court judge in Pictou, N.S., found the failure by Blaine MacLane Excavation Ltd. to ensure scaffolding was properly installed led to the 2020 death of Jeff MacDonald, a self-employed electrician.
The sentence was delivered after the excavation company was earlier found guilty of an infraction under the province’s Occupational Health and Safety Act.
Judge Bryna Hatt said in her decision she found the company “failed in its duty” to ensure that pins essential to the scaffolding’s stability were present at the work site.
Her decision said MacDonald was near the top of the structure when it collapsed on Dec. 9, 2020, though the exact height is unknown.
The judge said that though the excavation company did not own the scaffolding present on its job site, there was no evidence the company took steps to prevent injury, which is required under legislation.
MacDonald’s widow testified during the trial that she found her husband’s body at the job site after he didn’t pick up their children as planned and she couldn’t get in touch with him over the phone.
Julie MacDonald described in her testimony how she knew her husband had died upon finding him due to her nursing training, and that she waited alone in the dark for emergency responders to arrive after calling for help.
“My words cannot express how tragic this accident was for her, the children, and their extended family,” Hatt wrote in the sentencing decision.
“No financial penalty will undo the damage and harm that has been done, or adequately represent the loss of Mr. MacDonald to his family, friends, and our community.”
In addition to the $80,000 fine, the New Glasgow-based company must also pay a victim-fine surcharge of $12,000 and provide $8,000 worth of community service to non-profits in Pictou County.
This report by The Canadian Press was first published Oct. 23, 2024.
ST. JOHN’S, N.L. – Investigators found the remains of a 77-year-old American man on Wednesday at the scene of a fire that destroyed a hotel in western Newfoundland on the weekend.
Eugene Earl Spoon, a guest at the hotel, was visiting Newfoundland from Kansas. His remains were found Wednesday morning during a search of the debris left behind after the fire tore through the Driftwood Inn in Deer Lake, N.L., on Saturday, the RCMP said in a news release.
“RCMP (Newfoundland and Labrador) extends condolences to the family and friends of the missing man,” the news release said.
Spoon was last seen Friday evening in the community of about 4,800 people in western Newfoundland. The fire broke out early Saturday morning, the day Spoon was reported missing.
Several crews from the area fought the flames for about 16 hours before the final hot spot was put out, and police said Wednesday that investigators are still going through the debris.
Meanwhile, the provincial Progressive Conservative Opposition reiterated its call for a wider review of what happened.
“Serious questions have been raised about the fire, and the people deserve answers,” Tony Wakeham, the party’s leader, said in a news release Wednesday. “A thorough investigation must be conducted to determine the cause and prevent such tragedies in the future.”
The party has said it spoke to people who escaped the burning hotel, and they said alarm and sprinkler systems did not seem to have been activated during the fire. However, Stephen Rowsell, the Deer Lake fire chief, has said there were alarms going off when crews first arrived.
This report by The Canadian Press was first published Oct. 23, 2024.
