Housing Activity a ‘Source of Resilience’ for the Canadian Economy: Bank of Canada
The BOC interest rate is staying at 1.75% for another month thanks to several “sources of resilience” in the Canadian economy — including housing activity.
“Housing investment was also a source of strength, supported by population growth and low mortgage rates,” the Bank of Canada (BOC) stated in its December 4, 2019 interest rate announcement.
Although the Canadian real estate market faced some challenges in 2019 — notably housing affordability, adapting to the mortgage stress test, and more difficulty for first-time homebuyers to enter the market — there have been some positive developments in the second half of 2019.
The Teranet-National Bank House Price Index has seen an underlying uptrend: https://www2.geowarehouse.ca/vancouvers-index-finally-up-in-october/ And home affordability improved in 2019 Q3: https://housepriceindex.ca/wp-content/uploads/2019/11/NBFM-Housing-Affordability-Monitor-Q3_2019-Eng.pdf.
During the December 4 announcement, the BOC interest rate remained at the 1.75% mark. This decision officially means that there have been no interest rate changes in Canada in 2019.
While other countries have decreased their interest rates — such as the U.S. Federal Reserve — Canada has stayed the same for more than a full year. The 1.75% rate was set in October of 2018.
Several factors went into Canadian interest rate decisions in 2019. Global trade conflicts and uncertainty held a notable risk and continue to do so as we enter 2020, according to the BOC.
However, in Canada consumer spending, wage growth, and housing activity played a big part in driving the economy and will continue to do so into 2020.
“Future interest rate decisions will be guided by the Bank’s continuing assessment of the adverse impact of trade conflicts against the sources of resilience in the Canadian economy – notably consumer spending and housing activity,” the BOC said.
Read the full text of the December 4 BOC interest rate decision: https://www.bankofcanada.ca/2019/12/fad-press-release-2019-12-04/
The next BOC rate announcement is scheduled for January 22, 2020.
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