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Mortgage rates predicted not to come down says David Macdonald, Senior Economist at the Canadian Centre for Policy Alternatives and my opinion… what’s yours?
๐ด๐กFor those of you who watched my LAST Reel, you saw the previous Economist, David Macdonald, Senior Economist at the Canadian Centre for Policy Alternatives, make the argument for why interest rates will be higher for longer and that we won’t see the ultra low interest rates of the past for perhaps ever. He was very concerned about the renewals based on this major underlying assumption.
๐ด I also shared why I agree with this forecasting and Echo the very same concerns of renewals happening between now and 2026 being at far higher interest rates than previously paid. I also think, like he, that this will be very devastating for Canadians especially given the fact that prices have already been falling dramatically since July and sales ratios are in record breaking lows In many areas. (single digits in many places). When combining the current trajectory with the fact that we know it just seems far more likely that things are going to get a lot worse before they get better and I think the only question is when and how bad.
๐ด This Economist David Rosenberg, Rosenberg Research & Associates, however makes the argument that the Bank of Canada will be too concerned that the nearly 1 trillion dollars in renewals by 2026 could stress and shock the market too hard he thinks they will DECREASE rates in a hurry! He even goes as far to say that this looming mortgage renewal Cliff is common knowledge in Canada but nobody else is doing the macroeconomic math to see it through to the ugly conclusion. David combines data from the bank of Canada’s most recent Financial stability review with the Canada mortgage and housing data on average balances and confirm that around 2/3 of mortgages by value, will renew by 2026. This is 6% off what the previous reporting was but the truth is probably somewhere in this range. This math of average monthly payments to income when extrapolated across all of Canadian mortgage holders David argues is horrifying to the point that he thinks the Bank of Canada is going to really need to lower their interest rates sooner and faster before mortgage defaults rise and the economy takes an even bigger hit!
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