this post was submitted on 13 Jun 2023
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The Bank of Canada (BoC) surprised the market with a rate hike last week, and BMO doesn’t think it was the last one. Canada’s economy is running so hot, the market now expects at least two more rate hikes. It’ll almost certainly lead to higher mortgage rates, which will throttle demand for housing at these prices. That’s not just a coincidence.

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[–] [email protected] 10 points 2 years ago* (last edited 2 years ago) (2 children)

It's a shitty situation all around. If BoC doesn't do this, inflation runs high and that will ruin affordability even more. If they continue increasing, that again ruins affordability by increasing mortgage costs, which is the biggest expense for majority of people.

In my naïve opinion, we probably need to slow down immigration, which will cool down housing and probably better long term. But then again, that will cause shortage of labor and output. That in turn is probably going to lead to higher prices again (I could be wayyyy wrong though)

I'm no expert, but this is my view on the whole situation. Would like someone with more knowledge to provide their insight.

[–] [email protected] 6 points 2 years ago* (last edited 2 years ago)

To cool down housing, we need to quit the insane way we build car centric cities that results into either too little housing supply or too much hyper-densification. Each Canadian city needs to become more like Montreal: triplexes and other Xplexes everywhere. Added benefit: cheaper infrastructure costs, more resilient to climate change.

[–] [email protected] 3 points 2 years ago

If they continue increasing, that again ruins affordability by increasing mortgage costs, which is the biggest expense for majority of people.

This is not quite true. Yes for the ones that have significant mortgages left and have signed / renewed recently. But that's likely not most people. For new mortgages that start in the high interest climate, the overall cost will be similar to the typical one as prices are already lower. For the whole of Ontario, there are ~200K real estate transactions per year. Over the span of 5 years, that's 1M. While inflation affects everything and everyone, outaized mortgage costs due to the affect a minority of the households.