Rate Cuts Are Coming, But There’s a Catch...

📉 Interest Rates Set to Drop, But Fixed Mortgages are Stuck

• Most major Canadian banks anticipate a 50-basis-point rate cut on October 23rd due to inflation cooling to 1.6%.

• The Bank of Canada is expected to cut interest rates by 2-2.5 percentage points over the next year, but fixed mortgage rates may only fall to around 3.5-4%.

• Bond markets have impacted fixed mortgage rates, and recent U.S. economic strength has slowed expectations of rapid rate cuts.

• Economic growth and job market concerns suggest that more aggressive rate cuts could be on the horizon to support Canada's slowing economy.

Why This Matters: Fixed mortgage rates are closely tied to bond markets rather than directly following interest rate cuts. Banks set fixed mortgage rates based on bond yields, which fluctuate according to investor expectations about the economy. Even though central banks may cut interest rates, if bond yields remain higher due to factors like strong economic performance or inflation concerns, fixed mortgage rates won't fall as much.

🧑🏼‍🤝‍🧑🏻 Shared Living Soars in Canadian Cities

• Roommate rental listings increased 48.7% across major Canadian markets in the past year

• Shared accommodations are becoming more common due to affordability issues

• The average asking rent for shared accommodations rose 6.9% year-over-year to $1,009

• Alberta saw a 5.6% increase in roommate rents, averaging $905

• BC and Ontario had the highest average rates at $1,210 and $1,102 respectively

Why it Matters: Increasing roommate rental listings matters because it reflects Canada's housing market's ongoing affordability crisis, forcing tenants and property owners to adapt. It highlights how economic pressures are changing living arrangements, with more people opting for shared accommodations to manage costs

💡 Canada’s Plan for Faster, Cheaper Housing

• The federal government will unveil its first standardized home design catalog in December to speed up housing construction.

• It will include up to 50 designs for modular and prefabricated homes.

• Permit-ready designs, compliant with regional building codes, will be available by early 2025.

• The initiative hopes to cut construction time and costs, similar to post-war "victory homes."

• Developers will build the program using pre-approved designs from architecture firms MGA and LGA Architectural Partners.

Why This Matters: The introduction of standardized home designs aims to make housing more affordable by reducing construction costs and speeding up the approval process, by offering pre-approved designs, developers can build homes faster and at lower costs, which could increase the supply of affordable housing, particularly for smaller modular units.

😣 Canada's Income Inequality Hits Record High

• Income inequality in Canada has reached a record high, with the top 20% holding over two-thirds of the country’s wealth

• The gap between the top and bottom 40% of earners widened to 47 percentage points in Q2 2024, the largest since 1999.

• While inflation has eroded purchasing power for lower-income families, wealthier households have seen substantial growth in investment returns.

Why This Matters: Lower-income Canadians, already burdened by rising living expenses, are finding it even harder to enter the housing market. This growing divide between those who can afford homes and those who cannot is worsening the housing affordability crisis nationwide

💸 Alberta Land Transfer Fees Increase

• As of October 20, 2024, Alberta's land title transfer fees and mortgage registration fees will increase by nearly 2x.

• The current fees are $2 per $5,000 of the purchase price for land transfer and $1.50 per $5,000 of the mortgage amount for mortgage registration.

• The new fees will be $5 per $5,000 for both land transfer and mortgage registration.

• Under the new rules, the total cost for a property worth $500,000 will increase from $350 to $1,000, a rise of $650. This represents an 85.7% increase in fees for homebuyers and homeowners in Alberta, effective October 20, 2024.

Why This Matters: This tax increase may not significantly impact housing sales in the short term. However, it sets a precedent for future increases and could have a cumulative effect on Alberta's homeownership affordability.

🤔 WTF of The Week

Toronto accounts for 20% of Canada’s GDP, with just 15% of the population. In perspective, the GTA's economy rivals the combined GDP of every province and territory except Ontario, BC, and Quebec.

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