The big banks have all weighed in on the housing market following CREA’s monthly report and there is a consensus among them: Expect the market to slow down in the coming 12 months.
“We believe that much of the strength in recent months reflected the unwinding of earlier restraint associated with the tightening of mortgage insurance rules last year and, in August, a likely rush to lock-in lower mortgage rates,” an RBC report stated. “We expect home re-sales to stabilize near the current levels, although some modest pullback may occur later this year or early next as payback for sales that may have been advanced during the rush to lock-in lower rates.”
The Canadian housing market recorded a hot summer, with many clients rushing the market to cash in on pre-approvals before rate hikes took effect.
“The recent increase in 5-year mortgage rates (of about 70 basis points) that began in June of this year will likely temper housing activity in the coming months,” a report issued by TD Bank stated. “In large part, some of the strength experienced over the summer months can likely be attributed to households jumping into the market to get ahead of interest rate increases and we anticipate some payback in the coming months.”
And the banks agree that homebuyers will still take advantage of low rates before the market cools once those pre-approvals dry up.
“Buyers continue to taking advantage of low borrowing costs, though recent increases in fixed mortgage rates are expected to slow the housing market’s momentum later this year and into 2014,” according to a report issued by ScotiaBank. “With posted rates having bottomed around late spring, the window of ultra-low preapproved mortgages is expiring.”
And while the days of historically low interest rates may be behind us, TD Bank believes rates will stay low enough to encourage slight growth through next year.
However, mortgages rates at all maturities remain historically low, keeping affordability decent and supporting modest growth in both sales and prices until the end of 2014 when the Bank of Canada starts lifting short term interest rates.