Bank: rate hike looming

Bank: rate hike looming

Bank: rate hike looming Another major bank has joined the chorus of pundits forecasting a cooling period for Canada’s housing market as well as a hike to record-low mortgage rates.

“A slowdown in the housing market is also expected to be a drag on spending over the next two years. In the near-term, the impact of the prior decline in mortgage rates and a pick-up in listings after the severe winter should see existing home sales activity improve,” TD Bank’s quarterly economic forecast, released Monday states. “But, the acceleration should prove short-lived as higher fixed mortgage rates (reflecting higher bond yields) start to weigh on activity in home sales in 2015, constraining expenditures on housing-related purchases.”

Residential investment, on the other hand is expected to provide a short-term boost to the economy due to strong housing price increases.

“As for residential investment – which includes construction of new homes, renovations of existing homes and ownership transfer costs – positive knock-on effects from renewed momentum in the existing home market will likely lead to higher residential investment in the near term,” the report states. “Renovation spending will also likely provide a boost through the rest of 2014, due to the positive wealth affect from stronger- than-expected home price growth.”

Overall, Canada’s GDP growth is expected to be modest throughout the rest of the year.

“A particularly harsh winter held back growth in North America in Q1, and an inventory correction is likely to keep Canada’s rebound in the second quarter quite modest,” the report states. “As a result, Canada’s real GDP growth forecast has been downgraded slightly to 2.2 per cent this year.”
 
13 Comments
  • Brian Lambert 2014-06-24 1:08:24 PM
    The US 10 year bond rate, acts as something of a "price setter"for the Canadian market and is watched closely by the Bank of Canada. The Us 10 year bond is at 2.6% from a year low of 2.4% and has been falling over the past year from a 3.044% high. With the Feds quantitative easing and the Taper still going on I can't see interest rates going up any time soon. Also the stock market is at an all time high and tends to run in 5 - 7 year cycles and we are due for a major correction. With major unrest in Iraq and the chance of a full blown sectarian war this also puts pressure on world markets. A 20 -30% correction in the market could send world markets into a tail spin as we are still trying to work our way out of the great recession. Nothing is fixed yet and we could see rates come down if the world markets unravel.
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  • Bay Street 2014-06-24 1:25:19 PM
    Brian. What are you talking about?? the US 10 year bond has nothing to do with Canadian market place and no one watches that!
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  • Brian Lambert 2014-06-24 1:48:03 PM
    @ Bay Street: Whether you like it or not the US recovery has everything to do with rates rising in Canada and the Bank of Canada will not move in raising rates until the US does. US quantitative easing and the taper have effect our rates and the the Bank of Canada does watch the US 10 year bond as an indicator to were rates are heading. We ride on the US shirt Tails, being our largest trading partner, when they suffer, so do we. Google is a good source of information, maybe you should get informed.
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