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Chris Stewart Sr. Mortgage Professional

Chris Stewart

Sr. Mortgage Professional


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Inflation Slowed in July BUT Rate Hikes Still Expected as Affordability Index Gets Worse

8/16/2022

NEWS

Has inflation hit its peak in Canada? According to Statistics Canada, it appears it has as they have reported growth of 7.6% for the month of July. Huray!!! That is the first month-over-month decline in the past twelve months as June had brought a 40 year record of 8.1%. Analysis of the CPI Index brings good news to Alberta as the June numbers had the province over the Canadian average of 8.1% to being at 7.4% for July, just below the country’s 7.5%. Further details and analysis can be found on the Stats Canada site: Click Here

Not everything is rosy though, as the Bank of Canada is still expected to raise their Overnight Rate during their next announcement, September 7, 2022. The rate increase seems to be anticipated at 75 basis-points to 100 basis-points. Another 1% increase in the central bank’s rate would be even more significant historically and could be a final dagger to many Canadians in the house buying market, especially those First-Time Home Buyers. The consolation in this type of increase is that some economists believe that may be it for the year and the Bank of Canada will then allow the economy to adjust between then and the end of the year.

Regardless of the details of the expected rate hike in September, it won’t improve the central bank’s Housing Affordability Index (HAI) that was released last week. According to their first quarter numbers, housing affordability decayed to its worst level in over thirty years. Their report provides data that households must devote 42.8% of disposable income to housing related expenses, an increase from 39.7% in Q4 of 2021 and 34.7% a year earlier. The data used to calculate these numbers does not include property taxes which are also on the rise for most Canadians so housing carrying-costs are really higher than the numbers reported.

Home Prices are expected to continue to fall into 2023 and rents continue to increase across the country except maybe in some specific pockets. Will locations in Alberta be in some of those pockets? Well, it is hard to say but provincial numbers in either category are not falling or rising as significantly as in most other places in Canada. Alberta is trending to match these rises and declines but with much lower percentages. Oil prices have been keeping the Alberta economy propped up but they are falling once again as WCS is priced at 67.63 and WTI is 86.78, so the Province of Alberta is now taking a bit hit on revenue compared to what they were generating just a few months ago.

Pressure remains across the economy and it will force us to dip into our wallets a little deeper as we all try to find our way through the ups and downs.

Sources: Statistics Canada, Storeys, Canadian Mortgage Trends, BNN Bloomberg

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