A recent survey of financial experts shows that there has been a shift in recession expectations, reducing the likelihood of an impending economic downturn. However, there is increasing uncertainty about the timing and magnitude of expected interest rate cuts by the Bank of Canada.
This is evident from the Bank of Canada’s latest quarterly report Survey of market participantswhich consists of a questionnaire sent to 27 influential financial market participants.
Based on the median of the results, respondents think there is a 35% chance that the economy will be in recession in the next six months, compared to 48% in the previous quarter. However, expectations that the country could enter a recession within six to 12 months remained unchanged at 40%.
The experts now also see real GDP growth of 1% in 2024, compared to 0.8% in the Q4 survey.
A larger number of respondents have also met their expectations for a rate cut by the Bank of Canada. The consensus is that overnight rates will fall from the current level of 5.00% to 4.00% by the end of 2024, unchanged from the previous survey. However, in the fourth quarter, a quarter of respondents (the 25th percentile) believed that the benchmark interest rate would fall to 3.50%. From the first quarter, the 25th percentile has increased to 4.00%.
The consensus is then that the overnight interest rate will fall to 3.00% by the end of 2025.
A greater number of experts also believe that the balance of risks to the policy rate path has shifted higher: 44.% of respondents in the first quarter, up from 18.5% in the fourth quarter.
HomeEquity Bank President and CEO Steven Ranson is retiring
HomeEquity Bank has announced that President and CEO Steven Ranson will retire this summer after 27 years at the helm.
Ranson joined the bank in 1997, when it had just 36 employees and $100 million in mortgages under management. Since then, he has overseen the growth that has brought HomeEquity to more than 300 employees and a mortgage portfolio of nearly $8 billion.
“We have achieved what I wanted to achieve years ago; to establish reverse mortgages and HomeEquity Bank as a respected choice for older Canadians,” Ranson said in a statement. “I am confident that this is the right time to pass the torch to a new leader who will continue to build on our long track record.”
Katherine Dudtschak will take over the role of president and CEO starting July 1. Dudtschak was previously Executive Vice President of Regional Banking at RBC, where she led a team of more than 25,000 advisors. Previously, she was CEO of RBC’s Caribbean bank, where she oversaw operations in 19 countries.
Ourboro surpasses 100 co-invested homes
Toronto-based Ourboro, which provides access to homeownership through co-ownership, has announced it has surpassed the milestone of 100 co-invested homes.
The company co-invests up to $250,000 toward a buyer’s down payment in exchange for a share in the home’s future value.
The company said it has seen the total number of homes purchased in the Greater Toronto Area increase by 220% and received more than 1,000 qualified applications in the past year.
Total investments amount to almost $15 million, which has helped buyers purchase more than $80 million worth of properties to date.
Mortgage arrears remain stable
Canada’s national delinquency rate was unchanged in January, according to data from the Canadian Bankers Association.
The delinquency rate, which tracks mortgages with payments in arrears of three months or more, was 0.18%, unchanged from December. This amounts to only 9,247 mortgages in arrears out of a total of more than 5.03 million.
Despite trending upward from a low of 0.14% in 2022, the national average delinquency rate remains well below its highs during the pandemic, when it peaked at 0.27% in June 2020.
The delinquency rate is highest in Saskatchewan (0.60%; +0.01% month-on-month) and Alberta (0.33%; unchanged), and lowest in British Columbia (0.15%; + 0.01%) and Ontario (0.13%; +0.01%).
By 2030, 1.3 million additional homes are needed, PBO says
According to a report from The Parliamentary Budget Officer (PBO), Canada needs an additional 1.3 million homes by 2030 to close the housing shortage.
The report, which does not take into account recent measures announced in the 2024 budget to strengthen housing supply, finds that a total of 3.1 million homes will be needed between now and 2030.
By comparison, the Canada Mortgage and Housing Corporation (CMHC) estimates that Canada’s housing shortage – the number of additional homes needed above baseline projections – will reach 3.5 million homes by 2030. CIBC’s Ben Tal has said this number could even be as high. like five million.
Despite its more conservative estimates, the PBO recognizes the challenges in achieving the level of housing construction needed to return vacancy rates to the long-term historical average.
The housing shortage “translates into an average of 436,000 homes per year between 2024 and 2030,” wrote Yves Giroux, PBO. “This pace of home completions would represent an 80% increase over the record level of completions in 2023, which would be sustained for seven years.”
Actual construction starts in 2023 in centers with 10,000 inhabitants and more fell by 7%, to a total of 223,513 registered units, compared to 240,590 in 2022.
As part of the 2024 budget, the federal government released its Canada Housing Plan, which promises to increase the supply of new housing by a total of 3.87 million additional units by 2031.