Mortgage renewal wave to weigh on economic growth: Manulife

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Lapointe pointed to a Bank of Canada survey that showed most homeowners believe they have at least some capacity to handle the impact of larger mortgage payments. “Consequently, we don’t expect widespread mortgage defaults under our base-case scenario,” he said.

“Nonetheless, higher mortgage rates will increasingly pressure housing demand in the context of rising inventories since June 2023. Therefore, we anticipate that the first half of 2024 will mark a rare occasion when home prices decline.”

Residential construction could also be hampered by tepid demand and higher financing rates for builders, he said, potentially putting further pressure on the country’s economic growth.

All eyes on Bank of Canada approach to rates

A “modest contraction” on real GDP in Canada is likely on the way, Lapointe said, with lower consumer spending and a subdued housing market among the key factors behind that probable slowdown.

Still, the economy could begin to spark back to life in the second half of the year – providing the Bank of Canada starts to trim its benchmark interest rate around that time as currently expected.

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